April 20th, 2009
06:35 PM ET
13 years ago

Banks: Let us return the money

(CNN) - One might think the government would automatically embrace requests from several of the nation's largest banks to return the bailout money they received last fall. Not so fast. JPMorgan Chase, Morgan Stanley and at least four other others have indicated they would like to return the almost $95 billion they jointly get in TARP (Troubled Assets Relief Program) funds.

The Treasury Department will have to give the OK to their requests. And before that happens the government will look at the financial health of the companies to make sure they can afford to give it back. Specifically, an administration official tells CNN regulators will want to make sure the bank is stable; returning the money would not cause any ripple effects which would deepen the recession; and to make sure the institutions have enough capital to keep loans going.

The TARP program has never been popular with the many of the banks or with the American public. Just last week Treasury reported participating banks have not increased their lending. However, experts believe it has helped stabilize the banking industry at a key time of uncertainty last year.

Now showcasing healthy profits for the first quarters the banks are stepping up their efforts to give back the loans. Jamie Dimon, the CEO and Chairman of JPMorgan Chase, last week called the program "a scarlet letter" and said on a conference call with investment analysts "We're...certainly not going to borrow from the federal government because we've learned our lesson about that."

Many of the banks believe keeping the bailout money will hurt business marking their banks as weak.

Also executives are eager to rid themselves of the restrictions attached, such as limits on executive compensation.

"Tarp investments have taken on more and more negatives as the federal government have changed the rules that apply to these companies," banking consultant Bert Ely told CNN.

Don't expect any major announcements regarding this until after the government finishes its "stress tests" looking at the financial health of the nation's largest banks. Those examinations are expected to be completed early next month.

Already, Treasury has given the go ahead to seven smaller banks to return just over $800 million.

The administration official conservatively estimates at least $25 billion will be given back. The government will make a profit on the returned funds because banks have to pay back the government more than the original amount.

One concern for the government will there be a stigma attached to the banks who can't return the money.

Filed under: Economy • TARP • Treasury
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