Banks to relase get-out-from-under TARP plans
NEW YORK -- Today marks the 30-day deadline for banks to release plans on how they'll raise the capital set by federal regulators after the stress tests conducted on the USA's 19 largest banks. It also is the start of a process that clearly differentiates between stronger and weaker banks.
On one side are banks that are able to repay Troubled Asset Relief Program (TARP) funds and return to running their businesses without the increased oversight that came with the bailout money. On the other are the weaker banks still scrambling to raise capital and left with no choice but to comply with the additional government regulation.
"TARP funds have become an irritant, and any bank that has the ability will pay it back," says analyst Richard Bove at Rochdale Securities.
The Federal Reserve and top bank regulators that conducted stress tests found that 10 of the 19 largest banks had to raise a total of $75 billion in capital to withstand losses from a further drop in the economy. Those banks have since raised money via stock and debt offerings and asset sales.
Meanwhile, nine banks have said they want to repay TARP money. First, the Fed said they have to show they can continue to lend, maintain minimum capital levels and raise equity and debt from private investors. The Fed has said it will say this week which banks have met those conditions. Clearance to repay could come as early as today.
The government formed TARP in October to stabilize the financial system and help support lending amid economic turmoil. However, Congress imposed new rules on banks that took the bailout money, including limits on compensation. That triggered complaints from executives. JPMorgan CEO Jamie Dimon said that TARP had become a "scarlet letter." BB&T CEO Kelly King called the government's investment "destructive," vowing to repay TARP money "as soon as it is humanly possible."
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