U.S. clears 10 big banks to repay bailout funds
The U.S. Treasury Department said on Tuesday that 10 of the nation's biggest banks were approved to pay back a combined $68 billion of taxpayer money pumped into them last year to combat the credit crisis.
Many banks had chafed at restrictions on executive pay that accompanied the capital injections. Permitting some of them to repay money to the government's Troubled Asset Relief Program, or TARP, effectively initiates a process of separating stronger banks from weaker ones as the financial sector begins to regain its balance.
Treasury refused to name the banks but some quickly stepped forward, including Morgan Stanley and JPMorgan Chase & Co, to say they were among those cleared to return money.
U.S. Bancorp, American Express, Bank of New York Mellon and BB&T Corp also said they had received approval to repay funds the government had pumped into them to try to ensure the banking system was well capitalized.
A source familiar with the matter said Northern Trust, State Street, Capital One Financial Corp and Goldman Sachs Group Inc had also received a green light.
The Dow Jones industrial average and the S&P 500 and Nasdaq pared gains after the approvals were announced on concerns that banks' repayment of government bailout money may damage prospects for economic recovery.
Some analysts, however, viewed the government's decision as a positive as it was announced by the U.S. Treasury after bank regulators had determined banks' had met criteria for repaying, including a proviso that they be in position to support lending.
"People should be pretty comfortable that now the government is allowing these banks to pay the TARP money back, they fully believe that the worst is behind us," said William Lefkowitz, an options strategist with VFinance Investment.
CHAFING OVER PAY RESTRICTIONS
Some banks remain on government life support, which makes them subject to the pay restrictions. Others complained they did not need the help and were being put at a competitive disadvantage because they couldn't set their own pay levels.
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