Geithner Testifies as 10 Banks Receive Approval to Repay TARP Funds
Geithner Testifies as 10 Banks Receive Approval to Repay TARP Funds
Geithner testified before the U.S. House Panel today over the recent developments surrounding the U.S. economy and the Treasury’s actions, while also announcing that 10 of the largest U.S. banks received approval to repay Troubled Assets Relief Program funds after meeting the requirements.
JPMorgan Chase, Goldman Sachs, and Morgan Stanley are among 10 banks that were approved to repayment of TARP funds today according to the U.S. Treasury, as all 10 banks combined will pay back $68 billion in total, the repaid money will be added to $1.8 billion of dividends paid so far by those 10 banks.
American Express, Bank of New York Mellon, BB&T Corp., Capital One Financial Corp., Northern Trust Corp., State Street Corp., and U.S. Bancorp also announced that they will repay TARP money to the Treasury.
The Treasury also announced that banks approved to repay their TARP funds will be also given the option of “repurchasing the warrants that the Treasury holds in their firms at fair market value.” Banks have been able to raise almost $100 billion after the U.S. Treasury said that the results of the Stress Tests showed that the largest 19 U.S. banks will need to raise $76.4 billion.
The banking industry has been under huge pressure over the course of this crisis, as tightened credit conditions and widened credit spreads restricted lending between banks, and the huge losses acquired as a result of the ongoing crisis also forced the banks to ask the government for help, however the recent optimism that continues to dominate markets encouraged those banks to raise money through capital markets.
The financial sector however is still facing huge challenges ahead, as the ongoing recession continues to weigh down on economic activity and accordingly their business remains under pressure, yet the recent improvement in global credit and money markets helped several banks to return back to profitability and that paved the road for banks to feel some relief.
Banks so far lost more than $1.4 trillion around the globe in which almost $1 trillion of losses is reported by U.S. financial institutions, while losses are still expected to continue to mount over the upcoming period, however those losses won’t be as drastic as they used to be over the course of this crisis.
Meanwhile, the U.S. Treasury Secretary Timothy Geithner signaled in his testimony today that the U.S. economy is on its way to recovery as the TARP represents the first step towards this anticipated recovery, however Geithner signaled that challenges remain, though stimulus plans and credit improvement helped in easing some pressures so far.
Geithner also called for other governments around the globe to adopt the U.S. model in order to be able to achieve economic stability and lead global financial markets back to normality through stabilizing the global financial system. Geithner though admitted that the government didn’t react quickly enough to contain the crisis which eventually spread all around the globe.
Geithner stressed that the government is not aiming at making decisions for firms, as Geithner still believes that the government is a “reluctant investors”, while Geithner also signaled that the government’s use of its voting rights will be rather limited, since the government’s job is to help those firms to stand again on their feet rather than suppressing their potentials.
Geithner also commented over the Private-Public Investment Program which is aimed at reviving activity in the housing market, yet Geithner admitted that few investors signaled their interest in participating in the program, as the majority are still reluctant to participate, however Geithner prefers to continue with the program even if the number of investors was small.
Geithner also highlighted the need for a change, as he plans an overhaul of regulations that govern the current financial system, as Geithner stressed that new decisions must be taken in order to prevent such a crisis from happening again, and Geithner announced that President Obama will be announcing the details for the upcoming regulatory overhaul as soon as next week.
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