As expected, the Treasury Department said today that 10 of the nation's largest banks would be allowed to begin repaying funds borrowed under the Troubled Asset Relief Program. A total of $68 billion of taxpayer money will be repaid, relieving the banks of what some saw as onerous restrictions that gave government officials power over many corporate decisions, including executive pay and foreign hiring practices.
According to CNBC, the banks began announcing the amount of TARP funds they intend to pay back ahead of the Treasury's formal announcement. JP Morgan Chase (JPM) says it will repay $25 billion, Goldman Sachs (GS) $10 billion, Morgan Stanley (MS) $10 billion, U.S. Bancorp (USB) $6.6 billion, Capital One (COF) $3.55 billion, American Express (AXP) $3.39 billion, BB&T Corp. (BBT) $3.134 billion, Bank of New York Mellon (BK) $3 billion, State Street Corp. (STT) $2 billion and Northern Trust (NTRS) $1.576 billion.
"This is an important achievement for BB&T," said Chief Executive Officer Kelly S. King in a statement. "Repaying the government's investment will give us greater flexibility to benefit significantly from future opportunities that will be available as we emerge from this recession."
Showing distaste for the program, King also said getting out of TARP would allow his bank to focus on business "rather than dealing with government distractions."
Northern Trust, which was not subjected to government stress tests, but was one of the first banks to inquire about returning TARP funds, said that it was happy to repay the funds, estimating that it will have provided the government with a five percent annualized return on the money once the government's preferred shares are redeemed.
"We supported the Capital Purchase Program as an important element in restoring stability to the U.S. financial system and acknowledge the taxpayers' support of the financial system during these difficult times," said Northern Trust President and Chief Executive Officer Frederick H. Waddell in a statement.
While the return of $68 billion to the government is generally seen as a positive step, it may carry some negative consequences for some of the banks. U.S. Bancorp noted that repaying the government will reduce its second quarter earnings by about $153 million.
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