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Business

US banks to repay the government $68 billion

Text by NEWS WIRES

Latest update : 2009-06-10

The US Treasury has said it will allow 10 banks to repay the government $68 billion after they raised capital to bolster their balance sheets. Some banks, not named yet, are hoping to repay the government by the end of June.

AFP - Ten of the largest US banks have been approved to repay the government a total of 68 billion dollars for capital injections made to stabilize the financial system, the Treasury said Tuesday.

 

The Treasury, without naming any specific banks, made the announcement a day after the Federal Reserve said the 10 banks ordered to raise new capital following "stress tests" have developed sufficient programs to shore up their finances.

 

"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," a Treasury statement said.

 

"If these firms choose to do so, Treasury will receive 68 billion dollars in repayment proceeds."
 

Combined with repayments from smaller banks, the Treasury will have received some 70 billion dollars in repayments under the Capital Purchase Program, formerly known as the Troubled Asset Relief Program (TARP).

 

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

 

Some banks are hoping to repay the government by the end of June.
 
 

A number of major banks including Goldman Sachs, Morgan Stanley, Bank of America and others have said they would seek early reimbursement of the capital aid injections that began last year to shore up a financial system reeling from a housing meltdown and economic slump.

 

The Fed had said the banks "must demonstrate an ability to access the long-term debt markets" without government guarantees "and must successfully demonstrate access to public equity markets."

 

Some banks had argued that the capital program was forced on them and imposed conditions such as limits on executive compensation, and raised fears about government meddling in bank operations.

Date created : 2009-06-09

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