Feds To Let 10 Banks Repay $68B Of Bailout

Treasury Deems Some Big Financial Institutions Stable Enough To Payback TARP Funds, Avoid Accompanying Restrictions

(CBS/AP)  Last updated at 6:45 p.m. EDT

Ten of the nation's biggest financial companies got a green light Tuesday to return $68 billion in federal bailout money - freeing the banks from limits on executive pay and leaving the government with a small gain on the rescue cash.

While the paybacks could be a signal that the banking industry is stabilizing, analysts say it is far from a clean bill of health, and some said it was too soon to let the banks give back the money.

Presidential spokesman Robert Gibbs said the returned money would go "back into general revenue" and could even be used to bail out banks again.

Still, the government has collected $1.8 billion from dividends on shares of preferred stock it received in exchange for bailout money, he said. And the government still holds warrants to buy shares of bank stock at cut-rate prices in the future.

The $68 billion in paybacks would be the largest since the $700 billion Troubled Asset Relief Program took effect eight months ago at the peak of the financial crisis. Specifically, the money comes from a $250 billion slice of the $700 billion bailout package.

Other chunks of the $700 billion will be harder, if not impossible, to recover. Some of it, such as $70 billion funneled to failed insurer American International Group Inc., ended up in the pockets of healthier banks that did deals with AIG.

And even the banks getting out from under the TARP still rely on government support, including debt guarantees from the Federal Deposit Insurance Corp. and credit lines from the Federal Reserve.

Most banks are anxious to shake off the restrictions that have come with TARP funds, including limits on executive pay, reports CBS News correspondent Anthony Mason.

The banks chafed under the restrictions, arguing they were losing top talent to other firms because they couldn't dole out competitive enough renumeration. The administration is expected to roll out new executive pay rules Wednesday that would apply to banks that still have TARP money.

"It's our obvious hope that additional money is not going to have to be used to stabilize banks," Gibbs said. "I certainly wouldn't rule it out."

Indeed, banking experts stressed that the payments do not signal an end to the financial crisis. In fact, they say, most banks approved to pay the money back never needed it in the first place.

And three major banks that have not been approved by the government to pay the money back - Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. - could need federal help for years to come.

"When a troubled bank is capable of repaying, that would be significant," said Barry Ritholtz, head of the financial research firm FusionIQ. "But we're not going to see that anytime soon because they can't afford it."

Among the banks approved to pay back their bailout cash are eight that passed the government "stress test" earlier this year: JPMorgan Chase & Co., American Express Co., Goldman Sachs Group Inc., U.S. Bancorp, Capital One Financial Corp., Bank of New York Mellon Corp., State Street Corp. and BB&T Corp.

Those banks had to show they could raise private capital without federal guarantees before getting permission to pay back TARP money.

Morgan Stanley did not pass the test, but got approval to return its bailout money after quickly raising enough capital. And Northern Trust Corp. did not undergo the "stress test" but said it also had received permission to repay its bailout money.

President Barack Obama welcomed the news but said: "This is not a sign that our troubles are over - far from it."

Indeed, the repayments carry risk. Some say it could create a banking system of winners and losers, with weaker banks stuck with federal restrictions and finding it harder to compete for customers and talent against rivals that operate more freely.

Others say the repayments could conceal problems in the banking industry. Smaller banks are still saddled with billions in risky commercial real estate loans. And large banks still hold the toxic mortgage-backed assets at the heart of the financial crisis.

Paying the government back leaves banks with less protection against future losses, said Christopher Whalen, managing director of the consulting firm Institutional Risk Analytics. And with less capital on hand, they may have to scale back lending.

Other critics said it was dangerous to allow the money to be paid back before the administration overhauls the regulatory framework that governs banks.

"The credit crisis made it clear that the banks acted in irrational and greedy ways. I don't believe that enough changes have really happened yet," said Donald Thomas, an independent research analyst.

Adding to the concerns, in a report released Tuesday, the Congressional Oversight Panel for the government's $700 billion financial rescue effort says the test should be repeated, and that the initial results may have been too rosy.

That raises the troubling possibility that even raising enough capital to satisfy the government won't guarantee banks can withstand a deeper recession. And that means the banks might have to seek more federal aid.

Citi and Bank of America, two of the most troubled financial institutions, have taken $45 billion each in bailout money. Wells Fargo said it has not asked for permission to pay back $25 billion in TARP money.

Banking analyst Bert Ely said it could be years before those banks disentangle themselves from the government.

More than 600 banks have received a total of almost $200 billion from the TARP, and 22 smaller banks have already paid the money back. The $1.8 billion in dividend money includes stock the government owned in these smaller banks.

Besides the preferred-stock dividends, the banks that took bailout money issued warrants that give the government the right to buy bank stock at a fixed price later. Bank stocks have been battered but are expected to rise as the economy recovers, so the warrants could deliver substantial profits to taxpayers.

Or the government could sell the warrants back to the banks "at fair market value," the Treasury Department said - presumably also locking in profits for the taxpayers.

Testifying before a Senate panel, Treasury Secretary Timothy Geithner said the value of the warrants for banks permitted to repay TARP funds are in the "several billion dollar range."

[whitemale08]

Karl Marx was a follower of the British idiot Adam Smith and his 'invisible hand', someone who Republicans quote and worship all the time.

Google: Adam Smith's favorite fan was Karl Marx

[NY-Joe-10]

Posted by BENNINGSSCHOOLFORBOYS at 8:11 AM : Jun 10, 2009

Schoolboy, check on the Definition of Marxism, there is a picture of the Democrats smiling : )

[reasoned1955]

Mental Midgets. Either that, or you're just re-typing the talking points from Rush...
Posted by gravyboat3000 at 6:30 AM : Jun 10, 2009
================
Gee...doesn't this extract from the article itself contradict your post?

Morgan Stanley did not pass the test, but got approval to return its bailout money after quickly raising enough capital. And Northern Trust Corp. did not undergo the "stress test" but said it also had received permission to repay its bailout money.

[reasoned1955]

An interesting read, although admittedly one person's perspective:

http://www.snopes.com/politics/soapbox/youscareme.asp

[whitemale08]

If this was really true why are Republicans, the Chinese and everybody worried about defecits?

...and why is Obama proposing MASSIVE MASSIVE AUSTERITY CUTS and Nazi-style healh-care cut backs?

[NY-Joe-10]

Posted by enriquieGonzales
================================================
Wow you drank the whole vat of that Kool-aid the Rethugs gave you.
Posted by Livinontheedge at 5:09 AM : Jun 10, 2009

What you really mean, is that he HASN'T drank the Barry-Berry Hater-aid, and actually thinks for himself, and isn't fooled by a slick S-whistling community organizer.

[gravyboat3000]

"Feds To Let 10 Banks Repay $68B Of Bailout"

how nice of the imperial federal gov
Posted by mjvwsr

Didn't read the story, and doesn't know what in the heck he/she's talking about.

Any bank that has recieved bailout money has to pass a ,"stress test", to make sure that the problems that led to them needing the money in the first place have been solved, and that they won't be needing further bailouts in the future.

I know, it's REAL HARD TO UNDERSTAND, right?

Mental Midgets. Either that, or you're just re-typing the talking points from Rush...

[truthseeker60]

Now that Congressional bill HR1207, calling for an audit of the Fed Reserve, is gaining momentum the Banks are jumping to return the money. This money was supposed to be used to bolster lines of credit used for construction companies and the like. These lines of credit allow smaller companies to order materials and pay workers as the jobs progress. Without funding, these companies can not start new jobs. Workers, suppliers, manufacturing companies that make hardware, building supplies, Etc. all fall down. This coupled up with all the other economic factors with wall street and crooked investment companies build up to the mess we see today. Why did the Banks chose to shut down our economy? There seems to be a lot more going on than we are being told. No wonder there are so many conspiracy theories surfacing, probably more truth then people are willing to accept. The money was supposed to use for us! I guess we dont mater anymore so its time for us to stand up and fight for survival. God Speed USA

[mjvwsr]

"Feds To Let 10 Banks Repay $68B Of Bailout"

how nice of the imperial federal gov

[Dgunner]

When sme in the banking industry say theyy can't dole out the funds to keep or gain top talent. They should be patient the so called top firms have to crutch on the consumer and soon will be at the bottom of the swing cycle . So TOP TALENT don't unpack your brief case yet . The banking system is still purging and hopefully you will flow with splurge right out on your un american as-es

[Livinontheedge]

We all know Bush was unpopular and a Republican. But Bush was only one Man. We need someone to save us from Obama and his draconian socialist policys. I for one will welcome the republican party any day over what Obama is doing. I hope it is not too late to reverse the damage Obama has caused.

By the way even Europe is starting to see the light....they are all electing conservatives.

Hope its not too late for America.
Posted by enriquieGonzales
================================================
Wow you drank the whole vat of that Kool-aid the Rethugs gave you.

[Livinontheedge]

Why don't you go over to MSNBC.com and see what the top head line is today.
-------------------------------------------------------------------------------------------------------
LMFAO - Are you referring to the Obama Personal News Media. The same Leftist Media that wouldnt report on William Ayers, Rev Wright or anything that was news worthy. Are talking about the same news organization the ran weeks of storys on Sarah Palins Trooper Gate. It turned out to be nothing. Just like your anti-american website MSNBC.
Next youll ask me to take a look at the Huffington Post. LOL.
Posted by enriquieGonzales
====================================================
This was a New your times piece. Not NBC. NBC just ran it also.. Too bad it comes to the same conclusion that most of america came to last year. This man took what should have been a budget surplus of 800 billion per year in 2009-2012 and turned it into a 1.2 trillion deficit for those same years. This was all caused by his tax and spending policies and his failures to ramp up medicare prescription drug program among other failures on the republican administration to control spending.

[Livinontheedge]

........You still are spewing the same recon lies you always have. Show us proof from one major poll that shows the republicans are trusted more on economic issues.
----------------------------------------------------------------------------------------------------------------
I understand you would try to call someone a lier or even racist. Therefore here is a link.
Oh by the way not only do more voters trust Republicans on the Economy but out of 10 major issues, they get 6 and the socialist democrats only 4. Read , but please dont weep..it should be a cause for celebration. Time to take back our country from the socialist and Obamunism.

http://www.rasmussenreports.com/public_content/politics/mood_of_america/congressional_ballot/generic_congressional_ballot

Democrats held a six- or seven-point lead over the GOP for the first several weeks of 2009. That began to slip in early February, and the Republicans actually took a two-point lead for a single week in the middle of March. Since mid-April, the parties have been roughly even.

For the first time in years, voters now trust Republicans more than Democrats on economic issues. This comes following the unpopular bailout and takeover of General Motors. Regular Rasmussen tracking shows that the economy remains the top issue among voters in terms of importance.
Posted by enriquieGonzales
------------------------------------------------------------------------------------
Why don't you go over to MSNBC.com and see what the top head line is today. A congression budget study was done and they blame bush for the 1.2 trillion yearly deficit that we will incur come 2009-2012. They say that Obamas policy will contribute just a sliver of that total.
By the way Screw rassmussin. They are a right leaning hack poll. Why don't you use an Honest poll that has meant something in the political world for over 70 years like Gallup.

[Livinontheedge]

Bush did this to our country. Thats the plain truth.
----------------------------------------------------------------
When all else is failing , blame Bush. I wonder how long they can soak this for.
Funny in your rant , you didnt mention that the Democrats have been in control for 3 years.
And nothing about the socialist democrats forcing banks to give loans to the unqualified or face lawsuits. Didnt mention any of this did you?
Posted by enriquieGonzales
==========================================
Why don't you come back when you know what you are talking about. While the democrats had the majority in congress from Jan 2007 to jan. 2009 thay still did not have enough votes to pass any type of legislation to screw things up. They did not have total control until Jan. 2009.
You can try to spin it how you like but facts are facts and from Jaqn 2007 to jan, 2009 there was record settting fillabusters in congress by the republicans blocking democratic policy.

[Livinontheedge]

IN FACT, ONLY AN IDIOT WOULD TRUST A REPUBLI'''CON'''
-------------------------------------------------------------------------------------------
Take comfort you will be surrounded by so call Idiots.

For the first time in years, voters now trust Republicans more than Democrats on economic issues. This comes following the unpopular bailout and takeover of General Motors. Regular Rasmussen tracking shows that the economy remains the top issue among voters in terms of importance.
Posted by enriquieGonzales
=================================================
I have not see na post from you in a while and guess what ........You still are spewing the same recon lies you always have. Show us proof from one major poll that shows the republicans are trusted more on economic issues. This is pure fabrication and does not exist after what they have shown us when they crashed the economy last year.

[Kuei1248]

"well you guys gave us gw bush/cheney and the war in Iraq

you tell us how stupid you can be? "

BINGO!!!

[whitemale08]

For all you gloaters out there who think bailing out the criminals was ok, Bloomberg is reporting that these crooks like JP Morgan wants to payback their warrants on .20cents on the dollar....talk 'bout reniging on contracts.

I wonder how Druggie Limbaugh is going to defend that one.

...and benningsgood, I'm not a Republican, I'm a ex-Obama supporter...your partisanship shows how dumb and stupid you are; believing in one of the 2 puppets attached to the same Wall Street/City of London intrests.

[bajajohn1]

UBrew is right on with his comment. Revisionist Republicans are trying hard to stop crying and whining. The economy is getting better.

[CapitalOneCustomer]

Now I get it! I been trying to figure out why, for the past month, I've had transactions disappear off my bank account (increasing my balance) just to return 24 to 48 hours later (decreasing it back to what it should be.) It never happened before TARP. It seems to me like they are "creating capital" out of thin air by floating transactions a little longer.

[ubrew12]

BornFreeorDie said: "Bush did not do this to our country. People having too much credit and borrowing too much. The good times had to end."

Bush was in charge of the executive branch of government when Wall Street banksters asked realtors to pursue predatory mortgage lending because the banksters had a way of leveraging those unsustainable mortgages into collateralized debt obligations and short-term profits by bribing the credit-rating agencies into calling them 'good as cash'. Like it or not, the executive branch of government, in charge of overseeing our financial sector among others, did nothing, kinda like their response to Hurricane Katrina. Bush didn't believe in government oversight or regulation, so there was none. And this is the outcome.

You can try to repackage in any way you like, but there's little doubt who was there when this bubble inflated. Who refused to enforce the existing laws, or put tax dollars into the SEC for enforcement, at a time when Wall Street went into rampant gambling. And there are just TOO many voices from that time who were warning about the unsustainability of that bubble, for the lack of government response to have been an 'oversight'. As with the Katrina response, the Bush administrations lack of concern over a catastrophe in the making is, in the end, a judgment on the man himself and his politics.

Bush did this to our country. Thats the plain truth.