Big US banks to repay bailout money (2nd Roundup)

By Mike McCarthy Jun 9, 2009, 17:24 GMT

Washington - Ten of the largest US banks which received emergency government bail-out funds at the height of the financial crisis last year have been authorized to repay the money, the US Treasury Department announced Tuesday.

The Treasury Department will receive as much as 68 billion dollars as the financial institutions begin buying back government holdings in the firms. The department's decision is cautiously seen as an indication the financial sector has begun to stabilize.

'This is not a sign that our troubles are over - far from it,' President Barack Obama said. 'The financial crisis this administration inherited is still creating painful challenges for businesses and families alike. But it is a positive sign.'

Congress in October authorized 700-billion dollars in government funds to help faltering finance institutions under the Troubled Asset Relief Programme, or TARP. The Treasury Department established criteria, or 'stress tests,' to ensure the companies were sufficiently healthy to begin returning the money.

'These repayments are an encouraging sign of financial repair, but we still have work to do,' Treasury Secretary Tim Geithner said.

JPMorgan Chase was among the banks which confirmed Tuesday it had been granted approval to repay 25 billion dollars in TARP funds. Morgan Stanley and Goldman Sachs announced repayments of 10 billion dollars each. US Bancorp said it was repaying 6.6 billion dollars.

American Express, Bank of New York Mellon, BB&T Corporation, Capital One Financial, Northern Trust and State Street Corporation confirmed repayments totalling 16.5 billion dollars.

The Bush administration rushed in with the emergency funding last year to contain the economic fallout resulting from the finance market meltdown that sent the United States into its worst recession in decades and sparked a worldwide economic downturn.

Nearly 600 banks nationwide have received TARP money and many smaller ones have already repaid it. Several of the largest banks like JPMorgan Chase and Morgan Stanley had said they've raised billions of dollars in new investments and were ready to begin repaying TARP loans.

The Treasury Department said it will allow the banks to buy back government holdings 'at fair market value.' Treasury said it has also received 1.8 billion dollars in stock dividends from the 10 banks and so far has earned 4.5 billion dollars in dividend payments from all the firms participating in TARP.

'While we know that we will not escape the worst financial crisis in decades without losses to the taxpayers, it is worth noting that in the first round of repayments from these companies, the government has actually turned a profit,' Obama said.

Treasury said the revenue will allow it to reduce national borrowing and debt or increase the 'cushion to respond to any future financial instability that might otherwise jeopardize economic recovery.'

Bank of America and CitiGroup are among the largest banks participating in TARP but have not achieved the stability required to begin loan repayments.