10 big banks repay $68B

6/18/2009

WASHINGTON - A key government effort to ease the credit crisis reached a milestone yesterday as 10 large banks said they had repaid a total of $68 billion in bailout funds, which is more money much sooner than expected.

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. 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 that the Treasury holds - a final barrier to the banks' ending their ties to the bailout. The warrants allow the Treasury to buy the banks' stock at a fixed price at a 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.

More than $70 billion has been returned to the fund. That includes yesterday'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 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 about 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 yesterday.

Yesterday marked the first repayment opportunity for the 10 large banks whose exit applications Treasury approved last week. The list included JPMorgan Chase & Co., Morgan Stanley, Goldman Sachs Group Inc., U.S. Bancorp, Capital One Financial Corp., American Express Co., BB&T Corp., Bank of New York Mellon Corp., Northern Trust Corp., and State Street Corp.