Wait, We're Actually Getting Money Back?

The Treasury Department cleared the way for 10 big banks on Tuesday to start repaying billions of dollars in taxpayer aid, a crucial step in easing the government’s grip after an unprecedented series of interventions. JPMorgan Chase and Goldman Sachs were among the banks deemed strong enough by federal regulators to leave the Troubled Asset Relief Program, or TARP, after months of lobbying and strong performances on recent stress tests. The 10 banks are expected to return about $68.3 billion to the Treasury Department, more than double the administration’s initial estimate of about $25 billion in funds to be returned this year. The Treasury did not identify the banks, allowing them to come forward individually. They include American Express, Bank of New York Mellon, the BB&T Corporation, Capital One Financial, the State Street Corporation and US Bancorp. Along with JPMorgan and Goldman, they all passed the stress test and applied to return their TARP funds. Another bank, Morgan Stanley, which needed to raise $1.8 billion after the stress test, also received permission, as did Northern Trust, a large custodial bank that did not undergo the stress test.

President Obama, in comments Tuesday, said that taxpayers would “actually turned a profit” from the deal, but he also offered banks a warning. “I also want to say: the return of these funds does not provide forgiveness for past excesses or permission for future misdeeds,” Mr. Obama said. “It is critical that as our country emerges from this period of crisis, that we learn its lessons; that those who seek reward do not take reckless risk; that short-term gains are not pursued without regard for long-term consequences.” The $68.3 billion represents about a quarter of the TARP money given to banks. So far, 22 small community banks have been allowed to return $1.9 billion in government money. Within the next few days, the big banks will be able to wire the money back to the Treasury Department. Still, they will not fully get out from under the government’s thumb until they rid themselves of warrants giving taxpayers a share of the potential upside on their investments.

NYTimes

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A good sign on the whole, although this seems to have as much to do with banks desire to get away from some of the TARP restrictions as anything else. However, the couldn't leave if they weren't healthy enough, and in doing this they will significantly surpass the amount of repayment for 2009 set by the Obama administration. Hopefully this will ease the paranoia of a long-term government run banking system seen amongst some of those less grounded in reality...