Payback Time Has Come

Ten of the largest banks to receive TARP funds -- the taxpayer money associated with last fall's $700 billion bank bailout -- have been approved to repay the Treasury in full, plus interest.

Who are these lucky 10? Take a look:


TARP Dollars Received

JPMorgan Chase (NYSE: JPM  )

$25 billion

Goldman Sachs (NYSE: GS  )

$10 billion

Morgan Stanley

$10 billion

US Bancorp (NYSE: USB  )

$6.6 billion

Capital One

$3.55 billion

American Express (NYSE: AXP  )

$3.4 billion


$3.1 billion

Bank of New York Mellon

$3 billion

State Street

$2 billion

Northern Trust

$1.6 billion


$68.25 billion

The 19 largest banks accepted about $200 billion from the Treasury, so this $68 billion figure is a pretty sizable chunk. In recent months, 22 small banks returned just under $2 billion to taxpayers as well.

Technically, the Treasury can reuse the proceeds to lend money to other bludgeoned banks. This was one seemingly small loophole in TARP that might end up irking those who think we should consider these paybacks as "mission accomplished" and quit while we're ahead. (Count me in that group.) Ideally, the money would be used to pay down the massive amount of public debt raised to fund this grand adventure. The Treasury is pretty ambiguous as to what it intends to do with the money, stating this morning:

... proceeds from repayment will be applied to Treasury's general account. These repayments help to reduce Treasury's borrowing and national debt. The repayments also increase Treasury's cushion to respond to any future financial instability that might otherwise jeopardize economic recovery.

So, in theory, the money does help repay national debt, but it also reloads the Treasury's bailout arsenal. Last month, Treasury Secretary Tim Geithner announced the intention to use repayment funds to help stabilize small, community banks. In one door, out the other.

What's this all mean for the industry? As I noted a few weeks ago, these TARP repayments instantly form two distinct groups: (1) strong, TARP-less banks and (2) Citigroup (NYSE: C  ) , Bank of America (NYSE: BAC  ) , and Wells Fargo (NYSE: WFC  ) . These three now have the stigma of being the only megabanks still attached to the government's hip (although many would argue Wells is among the strongest banks alive).

Undoubtedly, that will put them at a competitive disadvantage when trying to woo clients and employees. I don't think there's anything wrong with that -- banks get what they deserve -- but it's an important fact that could dictate their recovery.

Related Foolishness:

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. American Express is a Motley Fool Inside Value recommendation. The Fool owns shares of American Express, and has a disclosure policy.

Read/Post Comments (16) | Recommend This Article (51)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 09, 2009, at 5:37 PM, Alg0rhythm wrote:

    It's something, but not much. We still need to talk about those trillions from the Federal Reserve as well. The American people will not forget those.

    Those banks need to focus on lending to stimulate economic growth, (small business loans) and alternative energy. Forget big coal. Every house in America in America can have it, the government will subsidize it, and most people will take loans for them.. nice steady profits, low risk, but reasonable margins.

  • Report this Comment On June 09, 2009, at 6:25 PM, Shawnerz wrote:

    The question I have is: where did $68.25 billion come from? How did 10 banks raise *that much* capital, *that* quickly?

  • Report this Comment On June 09, 2009, at 6:28 PM, harrymax wrote:

    The reason these banks are rushing to pay back the TARP money, is that they don't want the regulation and transparency they might have to abide. Their fuzzy math got us into this and their fuzzy math will get them off the hook.

    I would like to see their books. Where is this "money" suddenly coming from? It certainly isn't coming from the banks interaction with the American economy in any positive or material way. The new- found money is probably getting underwritten by entities and schemes that we don't want to know about. Not sure we could stomach the truth.

  • Report this Comment On June 09, 2009, at 8:18 PM, jbromet wrote:

    My understanding is that so far very little of the bailout money has been distributed and yet even the financial czars are saying that we've reached bottom. If that is true, then why do we still keep borrowing money "from ourselves" to keep these institutions afloat? Perhaps it's too embarrasing for the administration to admit that the "emergency" that sparked the bailout wasn't necessary. Now, the next "emergency" is health care. How much do we payout for that? The government motto: "We have nothing to fear but the absence of fear itself!"

  • Report this Comment On June 09, 2009, at 8:29 PM, FreeTruth wrote:

    one guess where some of the 2 trillion the Fed has stuffed down their pants went...let's see 2 trillion minus 68.6 billion...plenty left to have fun with.

  • Report this Comment On June 10, 2009, at 12:15 AM, jbreth wrote:

    cool, we got 66 of 700 billion back. oh wait, wheres the rest.

  • Report this Comment On June 10, 2009, at 1:48 AM, mikecart1 wrote:

    I will LOL if one of the 10 banks ever ask for money again this year or anytime soon. BAC, C, and WFC are the smart ones using the money until they are clearly in the CLEAR.

    I wouldn't be fooled by this payback at all.

  • Report this Comment On June 10, 2009, at 6:38 AM, PeterBradshaw wrote:

    How come all the TARP haters seem to forget that the program was not started by the present Obama administration, but its predecessor? And that the present administration is trying to get better regulation set up, to stop it happening again?

  • Report this Comment On June 10, 2009, at 8:40 AM, ziq wrote:

    To be fair, none of the TARP haters in this thread mentioned any administration, except PeterBradshaw.

  • Report this Comment On June 10, 2009, at 9:30 AM, ARJTurgot wrote:

    Seems to me TARP has worked more or less as originally billed. Maybe Geithner and Paulson are smarter than the people posting on MF...

  • Report this Comment On June 10, 2009, at 9:34 AM, CAPTAINWACK wrote:

    I would like to know the interest rate these banks were charged for the billions they borrowed. What were the fees and interest the US tax payers were charged for the bond sales? Will there be a profit from this bailout like we were all sold by the Washington politicians? If anybody has these numbers, please post them.

  • Report this Comment On June 10, 2009, at 9:40 AM, farmnut1985 wrote:

    Good questions, "Where did the money to repay TARP come from?" So is anyone able to answer this?

  • Report this Comment On June 11, 2009, at 8:37 AM, jfrankh57 wrote:

    The TARP kept these banks afloat---heck, it made them a bunch of money. I thought TARP was supposed to loosen the choke hold the banks had on credit?!?!? Oh, I guess the banks don't really need to lend money out in order to make money---they have a "slush fund" to draw on.

  • Report this Comment On June 11, 2009, at 8:47 AM, jfrankh57 wrote:

    Oh, yeah---I forgot to add to my previous comment: Many of the banks on TARP support seemed to have made profits in the first months of this year so that answers famnut1985's question about where they got the money to pay back the TARP so soon.

  • Report this Comment On June 11, 2009, at 12:30 PM, mpendragon wrote:

    We haven't lent out $700 billion as part of TARP, that's the maximum we've set. We've given out about $319 billion and the current budget impact should be around $146 billion according to a federal budget watchdog group.

    You can look it up here:

  • Report this Comment On June 15, 2009, at 7:14 PM, Daveoffv wrote:

    I don't know what kind of results you guys are expecting, but to me its so far, so good.

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