Chillin' out till it needs to be funded
Decision day may be close at hand for big banks seeking to exit the government’s $700 billion Troubled Asset Relief Program.
A number of financial institutions, including Goldman Sachs, JPMorgan Chase and Morgan Stanley have made no secret of their desire to leave TARP and its restrictions on dividends and compensation. Now, there are indications that the Treasury Department is getting ready to announce — perhaps as early as Tuesday — which big banks will be the first to go.
There was no official word from the Treasury on Monday night about a decision on TARP, but Wall Street has been expecting some of the better-capitalized banks to get approval this month to pay back the government’s bailout money.
The Federal Reserve did say Monday evening that 10 financial institutions had submitted plans to build up their capital to deal with what government stress tests said their needs would be in a deeper recession.
“The 10 banking organizations required by the Supervisory Capital Assessment Program to bolster their capital buffers have all submitted capital plans that, if implemented, would provide sufficient capital to meet the required buffer under the assessment’s more-adverse scenario,” the Fed said in a statement.
“As supervisors,” the Fed said, “we will be working with the institutions to ensure their plans are implemented quickly and effectively.”
The stress tests of 19 big banks found that more capital was needed by Bank of America, Citigroup, Fifth Third Bancorp, GMAC, KeyCorp, Morgan Stanley, the PNC Financial Services Group, Regions Financial, SunTrust Banks and Wells Fargo.
So far, 16 of the 19 banks have raised more than $75 billion, mostly by selling common stock, according to The Associated Press, either because they were required to do so or were seeking money in order to return government bailout funds.
JPMorgan Chase said last week that it expected to reimburse $25 billion in TARP money later this month. Goldman Sachs also said it aimed to repay $10 billion in government money this month.
Along with Goldman Sachs and JPMorgan Chase, the financial institutions that had adequate capital under the government’s stress tests included American Express, Bank of New York Mellon, BB&T, Capital One, MetLife, State Street and U.S. Bancorp.
So far, about a dozen small banks have already exited TARP.