WASHINGTON — A key government effort to ease the credit crisis reached a milestone Wednesday as 10 large banks said they had repaid a total of $68 billion in bailout funds.
Treasury said last week that the banks could begin repaying money they received under the $700 billion financial system bailout known as the Troubled Asset Relief Program, or TARP. The government created the program in October as its flagship effort to address the global credit crisis and teetering financial markets.
Meanwhile, officials hustled to prepare an announcement about the pricing of stock warrants Treasury holds — a final barrier to the banks’ ending their ties to the bailout program. The warrants allow Treasury to buy the banks’ stock at a fixed price at some future date. The banks now want to buy back those warrants.
And a congressional watchdog called for more transparency about the warrants and the repayment process.
What’s the rush?
The flurry of activity around TARP followed months of criticism from opponents of government intervention in the financial industry. It showed that some of the biggest TARP investments are winding down sooner than many had feared.
More than $70 billion has been returned to the fund. That includes Wednesday’s redemptions and about $2 billion in earlier repayments from smaller banks.
But until the banks can buy back the stock warrants Treasury holds, they remain entangled in a program that has subjected them to limits on executive pay and other restrictions. The banks have chafed against TARP from early on, fearing government-imposed rules could hurt their profits and prevent them from hiring or keeping top talent.
The warrants are hard to price because their values will fluctuate along with the banks’ stock prices. Treasury wanted more money to unwind the contracts than the banks were willing to pay.
Uncertainty surrounding the warrant sales raises questions about whether Treasury "is getting the best possible price for taxpayers,” the Government Accountability Office charged in a report released Wednesday.
The GAO also urged Treasury to create consistent rules for evaluating bank requests to buy their way out of TARP.
Wednesday marked the first repayment opportunity for the 10 large banks whose exit applications Treasury approved last week. Throughout the day, the banks announced that they had finished repaying the government money.
To begin the process of leaving TARP, the banks had to clear a series of hurdles designed to make sure they would remain viable despite the financial crisis and the recession.
by the associated press
Treasury said last week that the banks could begin repaying money they received under the $700 billion financial system bailout known as the Troubled Asset Relief Program, or TARP. The government created the program in October as its flagship effort to address the global credit crisis and teetering financial markets.
Meanwhile, officials hustled to prepare an announcement about the pricing of stock warrants Treasury holds — a final barrier to the banks’ ending their ties to the bailout program. The warrants allow Treasury to buy the banks’ stock at a fixed price at some future date. The banks now want to buy back those warrants.
And a congressional watchdog called for more transparency about the warrants and the repayment process.
What’s the rush?
The flurry of activity around TARP followed months of criticism from opponents of government intervention in the financial industry. It showed that some of the biggest TARP investments are winding down sooner than many had feared.
More than $70 billion has been returned to the fund. That includes Wednesday’s redemptions and about $2 billion in earlier repayments from smaller banks.
But until the banks can buy back the stock warrants Treasury holds, they remain entangled in a program that has subjected them to limits on executive pay and other restrictions. The banks have chafed against TARP from early on, fearing government-imposed rules could hurt their profits and prevent them from hiring or keeping top talent.
The warrants are hard to price because their values will fluctuate along with the banks’ stock prices. Treasury wanted more money to unwind the contracts than the banks were willing to pay.
Uncertainty surrounding the warrant sales raises questions about whether Treasury "is getting the best possible price for taxpayers,” the Government Accountability Office charged in a report released Wednesday.
The GAO also urged Treasury to create consistent rules for evaluating bank requests to buy their way out of TARP.
Wednesday marked the first repayment opportunity for the 10 large banks whose exit applications Treasury approved last week. Throughout the day, the banks announced that they had finished repaying the government money.
To begin the process of leaving TARP, the banks had to clear a series of hurdles designed to make sure they would remain viable despite the financial crisis and the recession.
by the associated press
No comments:
Post a Comment