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Ten US banks to pay back bail-out Ten US banks to pay back bail-out
(about 2 hours later)
Ten of the largest US banks will be able to repay $68bn in government bail-out money, the US Treasury says, a sign the financial crisis is easing.Ten of the largest US banks will be able to repay $68bn in government bail-out money, the US Treasury says, a sign the financial crisis is easing.
The Treasury had been reluctant to let banks repay but now appears to believe financial stability is not at risk. The Treasury had appeared reluctant to let banks repay but called the step an "encouraging sign".
Banks have been eager to pay back the money to escape potentially onerous government restrictions, such as caps on executive pay.Banks have been eager to pay back the money to escape potentially onerous government restrictions, such as caps on executive pay.
The Treasury did not name the banks that had received approval to repay. The banks received the money at the height of the financial crisis.
But JP Morgan, American Express, Bank of New York Mellon, BB&T Corp, Capital One Financial, Morgan Stanley, State Street and US Bancorp confirmed that they had received permission to pay back the money. The Treasury did not name the banks that had received permission to repay the money from the $700bn government bail-out fund, known as Tarp, set up in October.
Goldman Sachs and Northern Trust were also reported to be among those given approval to pay back the money from the US government's $700bn Troubled Asset Relief Programme (Tarp) introduced last October. But JP Morgan, American Express, Bank of New York Mellon, BB&T Corp, Capital One Financial, Morgan Stanley, State Street, Goldman Sachs and US Bancorp confirmed that they had received permission to pay back the money.
"Following consultation with the primary banking supervisor of each institution, Treasury has notified the institutions that they are now eligible to complete the repayment process," the Treasury said. These repayments are an encouraging sign of financial repair Treasury Secretary Tim Geithner
"If these firms choose to do so, Treasury will receive $68bn in repayment proceeds." All these banks except Morgan Stanley and Northern Trust passed the US government's stress tests in May which assessed whether banks had enough capital to withstand further losses should the economy worsen.
Northern Trust was not subject to the stress tests and Morgan Stanley said it had raised extra funds.
'Focus shift'
"These repayments are an encouraging sign of financial repair, but we still have work to do," said Treasury Secretary Tim Geithner.
The repayments could boost the Treasury's depleted Tarp funds and could in theory be made available to other institutions that got into trouble.The repayments could boost the Treasury's depleted Tarp funds and could in theory be made available to other institutions that got into trouble.
All these banks except Morgan Stanley passed the US government's stress tests in May which assessed whether banks had enough capital to withstand further losses should the economy worsen. "If these firms choose to do so, Treasury will receive $68bn in repayment proceeds," a Treasury statement said.
However, some observers fear premature repayment could stop the banks lending and thus undermine the chances of an economic recovery.However, some observers fear premature repayment could stop the banks lending and thus undermine the chances of an economic recovery.
"Partly what's that telling you is that banks are spending all their money paying back the government and not doing what that money was intended to do, which was to stimulate the economy and lend that money," said Marc Pado, US market strategist at Cantor Fitzgerald. "Partly what that's telling you is that banks are spending all their money paying back the government and not doing what that money was intended to do, which was to stimulate the economy and lend that money," said Marc Pado, US market strategist at Cantor Fitzgerald.
Others fear that the repayments could undermine the prospects of the banks that haven't been given the go ahead to repay the bail-out money.
"The focus is going to shift to those banks who are not repaying Tarp. This is going to put pressure on their stock price," said Christopher Low, chief economist at FTN Financial.