Treasury's Conditions for TARP Exit

Highlights include JPMorgan Chase & Co. (JPM - Analyst Report), Goldman Sachs Group, Inc. (GS - Analyst Report), Bank of New York Mellon (BK - Analyst Report), BB&T Corp. (BBT - Analyst Report) and Northern Trust Corp. (NTRS - Analyst Report).

In a joint statement issued last evening, the Treasury, the Federal Reserve and the Federal Deposit Insurance Corp. (FDIC) provided the guidelines to the banks seeking to return the TARP funds. The release can be seen here.

In addition to meeting the enhanced capital requirements (determined by the stress tests), the banks will have to prove that they can borrow money without the support of the FDIC's TLGP (Temporary Liquidity Guarantee Program). TLGP was created by the FDIC in October 2008, through which it provides insurance on debt issued by the Banks, for a small fee.

Banks have benefited a lot from this program as they are able to borrow cheaply and further the program was launched when the credit markets were virtually frozen. Banks currently have $332.5 billion of debt outstanding under this program.

As we had stated in our blog "Banks Don't Need Government Help, Really?" many banks have been trying to return TARP money, mainly due to strict conditions on executive compensation, whereas the fact is that these same banks are enjoying tremendous benefits from some other lesser-known Government programs that come without any attached strings such as FDIC's TLGP and Fed's emergency lending programs. The condition set now will ensure that the weaker banks do not return the TARP money just to avoid strict conditions and greater oversight by the Congress.

JP Morgan Chase (JPM - Analyst Report), Goldman Sachs (GS - Analyst Report), Bank of New York Mellon (BK - Analyst Report), BB&T (BBT - Analyst Report) and Northern Trust (NTRS - Analyst Report) have recently issued some debt without the FDIC's guarantee, whereas most others have continued to rely on FDIC's support.

Email	Print	Share	RSS	Rate Pos	Rate Neg	Comment

Loading Stories...

Related Content

RELATED ARTICLES ANALYST BLOG ARCHIVE

Zacks Blog: Another One Down, Bank Failures Hit 16
(JPM, FITB, USB, ZION, STI, PNC, BBT, RF)	02/08/10
PREMIUM: Zacks Blog: U.S. Banks Stock Update - Feb. 2010
(JPM, AXP, GS, MS, COF, BBT, USB, BAC, WFC, C, AIG, FNM, FRE, BANF, FCVA, BBNK)	02/03/10
Industry Outlook: U.S. Banks Stock Update - Feb. 2010
(BBT)	02/03/10
Zacks Blog: Bank Failures Inch to 15 in 2010
(WFSL, JPM, FITB, USB, ZION, STI, PNC, BBT, RF)	02/01/10
Zacks Blog: Zacks Analyst Blog Highlights: Washington Federal Inc., JPMorgan Chase, PNC Financial, BB&T Corporation and Regions Financial
(WFSL, JPM, PNC, BBT, RF)	01/26/10

 Posting Comment...

There was a problem posting this this comment. Please try back later.
[CLICK TO CLOSE X]

Comments (Limit 1000 Characters - Used: 0)

Please provide your comments here... Display Name: Email Address:  

 Loading Comments...

Be the first to comment on this article!