Jason

WASHINGTON (AP) -- The nation's largest banks that want to exit the financial rescue program will have to demonstrate to the government that they can survive without its support.

In a joint statement, Treasury Secretary Timothy Geithner and other government banking officials said Wednesday that the 19 largest banks seeking to withdraw from the $700 billion rescue program will have to prove that they can borrow money without the support of the Federal Deposit Insurance Corp.

The new rules for repayment of bailout money were issued by the Federal Reserve and the Treasury Department one day before the government is scheduled to provide the results of "stress tests" it ran on the 19 banks.

The statement said that the 19 banks will be allowed to exit the $700 billion bailout program only if they have the enhanced capital requirements called for in the stress tests.

In addition, they will have to show they can borrow money without the support of the emergency program established by the FDIC in October at the height of the financial crisis.

That program allows banks to borrow money at lower rates because the FDIC guarantees the bank loans. Banks have more than $330 billion in debt outstanding under the program.

http://finance.yahoo.com/news/Banks-...&asset=&ccode=

Drew1369

abit scary...

Chode

The scary thing is actually that a driving force behind banks wanting to get out of TARP seems to be dissatisfaction with some of the regulations such as salary caps and more importantly regulation on bank capitalization. "Some banks, tiring of the strings attached to government aid, are seeking to return TARP funds. However, the Treasury, which has veto power over the repayment, has signaled it might not let some leave the program.

Banks have been lobbying the Treasury to escape their contractual commitment to buy back the warrants at the time they repay the funds. The Senate will likely vote Tuesday on another amendment, offered by Sen. Jack Reed, D-R.I., to remove the repurchase obligation for banks leaving TARP.

Senate Banking Chairman Christopher Dodd, D-Conn., argued that Vitter's proposed criteria for repayment was too broad, and would allow certain banks to return capital they might later need to continue weathering the economic downturn.

"While being well-capitalized is very important, if you limit it to that and that only...you could put at risk the whole economy," Dodd said on the Senate floor."


-By Jessica Holzer, Dow Jones Newswires; 202-862-9228; jessica.holzer@ dowjones.com

When banks want to avoid buying back warrants held by the Treasury Department they are in effect saying "we want to buy back some of our preferred stock to benefit big investors and smaller investors can go have carnal knowledge of themselves." http://www.mondaq.com/article.asp?articleid=77580

Really nice to see that some players responsible for the current financial mess who got taxpayer dollars are unhappy with earnings restrictions and would like to avoid paying off on some of their more onerous debts. Why oh why can't it just be business as usual? Nice work if you can get it.

bry623

I think the banks want out because banks can't survive in communistic, non free enterprise society.

Chode

Funny how that philosophy didn't stop them from accepting Federal funding, isn't it? Personally, I would say that the salient point is that letting under capitalized banks bail out of TARP is just letting them out of obligations to repay public money, and setting themselves up for potential failure if the economy gets worse. Sure, some people would make money in the short run, but what does the tax payer get for letting these guys off without paying all their obligations? Hint: Phillips and Torx are both types of....

bry623

I have been against the bailouts since before Obama.