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Treasury says 10 banks can repay taxpayer bailout loans
— -- FINANCIAL/TARP (URGENT):U.S. approves 10 banks repaying bailout funds
In a sign of confidence that the financial system is stabilizing, the U.S. Treasury on Tuesday said 10 large banks can repay $68 billion of taxpayers' money.
"We should be reasonably encouraged," said Treasury Secretary Timothy Geithner, pointing to the banks' ability to raise billions from private investors by selling both shares and non-government-backed debt in the last month.
Just three months ago, financial markets were so shaken that many of the same banks had to rely on government guarantees to help raise money.
With this latest round, and another $2 billion that smaller banks have repaid, the Treasury will have gotten back $70 billion of about $300 billion handed out to banks.
President Obama said this is not a sign the economic troubles are over. "But it is a positive sign ... we're restoring funds to the Treasury," he said.
The announcement was the culmination of a process initiated by the top U.S. bank regulators to take out uncertainty from a severely wounded financial system. To achieve that goal, they conducted "stress tests" that found 10 of the 19 largest banks would have to raise a total of $75 billion in extra capital.
Almost all the banks that are being allowed to repay the bailout money were identified as well-capitalized enough that they didn't need to raise more money. However, they had to prove they had access to both debt and equity markets. Investment bank Morgan Stanley was the only firm that is being allowed to repay even though regulators asked it to raise $1.8 billion after the stress tests.
These banks have established themselves as stronger institutions and now will get less scrutiny than they've received as bailout recipients — such as limits that Congress set on executive compensation.
There is plenty of scrutiny still on the other big banks that received bailout money.
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