US government to name banks that can repay TARP money

09 June 2009

US government is expected to allow some of the 19 large banks that have undergone stress tests to prepay their loans taken under the Troubled Asset Relief Programme (TARP).

Many large banks had accepted federal bailout money to prop up their dwindling cash reserves in the wake of credit market crunch, some though reluctantly, under pressure from the Treasury.

The administration had spent about $700 billion to buy toxic assets from troubled banks. The bailout package was aimed at buying distressed assets from financial firms, cleaning up their balance sheets and  restarting the lending process (See: US Senate bails out markets - passes $700-billion package).

According to the Treasury Department, more than 600 lenders took money from TARP, and 20 have paid some or all of it back: these include the Bank of Marin Bancorp in California, which paid back $28 million, Old National Bancorp in Evansville ($100 million), Signature Bank in New York ($120 million), and Iberiabank Corp. in Lafayette ($90 million).

However, the administration has been reluctant in taking back the money from some big banks that have till then offered to pay back the amount, saying that those same banks may return for more aid as the recession has not been contained.

According to federal officials, they have now outlined a plan under which banks will be the first to be allowed to repay the TARP loans. A number of firms, including American Express, Stanley, Morgan Chase and Sachs, are already in line to return the taxpayers' money.