When tallying the financial companies opting out of government rescue programs, be sure to include Morgan Stanley (MS). Tomorrow, it will repay the $10 billion in balance-sheet strengthening capital it received from the government's bank rescue program.
Morgan will also stop issuing bonds backed by the Federal Deposit Insurance Corp. The FDIC's debt guarantee program hasn't gotten as much attention as the Troubled Asset Relief Program (TARP) and its billion-dollar investments financial companies' preferred stock. But it has been a big help to banks that found it difficult to issue debt in the midst of the credit crisis.
Reuters reported Morgan Stanley would redeem the government's investment, citing "a person familiar with the situation." JPMorgan Chase (JPM), which received $25 billion, and American Express (AXP), which got $3.4 billion, are expected to begin repayment tomorrow as well.
Morgan Stanley will exit the FDIC's debt guarantee program after selling some $24 billion in government-backed debt, according to Bloomberg News. A company spokesman confirmed the move to Bloomberg. JPMorgan has also said it will stop selling debt under the FDIC program.
All told, banks will pay $3.88 billion in interest and dividends in the second quarter as they buy back the preferred shares they issued to the government under TARP, according to Rochdale Securities banking analyst Richard Bove. JPMorgan will pay $1.48 billon and Morgan Stanley will pay $1.02 billion, Bove wrote in a note to clients.
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