Banking crisis is over, but bailout is alive and kicking

With nearly $5 billion yet to be repaid, banks that have been unable or unwilling to escape TARP could get hit by a looming spike in dividend rates.

By MSN Money Partner Jul 16, 2013 5:27PM

Fox BusinessPile of cash (© Jorge SA! Ribeiro/E+/Getty Images)By Matt Egan

 

While big banks like JPMorgan Chase (JPM) and Citigroup (C) couldn't return their TARP funds fast enough, dozens of publicly-traded lenders and thrifts are still sitting on nearly $5 billion in bailout cash some four years after the Great Recession ended.

 

These TARP holdouts include medium-sized institutions like $2.3 billion Synovus Financial (SNV) and Puerto Rican lender Popular (BPOP), as well as much smaller lenders such as Atlantic Bancshares (ATBA), which is on the hook for just $2 million.

 

Banks that have been unable or unwilling to escape TARP now run the risk of being hit by a looming spike in dividend rates at the five-year anniversary of entering the government program, as well as being stigmatized by customers and counter-parties alike.

 

"If after four years they still haven't repaid their money, that is a sign of an inherent weakness," said Anthony Michael Sabino, a professor at St. John's University. "Maybe it's time to urge those banks to seek out a merger partner."

 

According to SNL Financial, there are 75 publicly-traded banks and thrifts that remain in the TARP program, which was hastily cobbled together by the U.S. in the fall of 2008 following the implosion of investment bank Lehman Brothers. A recent report by the Treasury Department lists $4.68 billion in outstanding TARP payments as of June 30.

 

Virtually all of the biggest financial institutions, from Bank of America (BAC) and Goldman Sachs (GS) to Wells Fargo (WFC), have repaid their bailouts, with interest and dividends.

 

But some regional lenders, many of which struggled during the downturn more than their big-bank cousins, remain on the TARP list, raising questions about their overall health.

 

"A lot of the banks that have the ability to repay have probably done so," said Andrew Wolcott, an analyst at SNL Financial.

 

Still on the hook

Synovus, which is headquartered in Columbus, Ga., has not yet repaid the $967.9 million in TARP funds it received. A spokesman reiterated that Synovus expects to repay the money during the third quarter.

 

San Juan, Puerto Rico-based First BanCorp (FBP) owes $222.7 million of the original $400 million the U.S. provided.

 

John Pelling III, an investor relations officer at First BanCorp, referred questions about a TARP exit to the Treasury Department -- because the U.S. converted its preferred shares in the lender into common stock during a recapitalization. "We cannot control when they decide to sell their common shares -- only they can," he said.

 

A spokesman from the Treasury Department declined to comment, but pointed to comments made last week by Timothy Massad, the Treasury's assistant secretary for financial stability.

 

"Our economy is in a stronger position because of our efforts, and we will continue to wind down the remaining CPP investments in a way that helps support community banks and protects taxpayer interests," Massad said.

 

Other public TARP holders include Bluffton, S.C.-based Atlantic Bancshares, El Monte, Calif.-based Cathay General Bancorp (CATY), which owes $129 million, and Anchor BanCorp Wisconsin (ABCW), which is also undergoing a recapitalization.

 

None of those lenders responded to a request for comment.

 

Click here to read the full report.

 

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36Comments
Jul 16, 2013 6:55PM
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The banking crisis is over?  So the banks should be able to stand on their own 2 feet, without assistance, right?  Let's stop QE and see who's still standing after a couple of quarters.  Then we can judge if the banking crisis is truly over.
Jul 16, 2013 6:36PM
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Wow, some folks are still spreading the MYTH that Big Banks have fully paid back the Government. Clearly that is hardly the case. Fact, TARP was just a mere fraction of what the Government aka the FED has done to keep the Big Banks from going under. What Uncle Ben is doing now, artificially low interest rates and the FEDS buying Programs are by FAR the biggest portion of the ongoing Bailout of Big Banks. This has allowed them to function and profit while the rest of us suffer. Nor is the Banking Crisis over, it has just been delayed. Big Banks get to pretend it's all over and hope everyone is none the wiser to what is really going on.

The FEDS/Government takes all the Risk while the Big Banks rake in all the Rewards. Main-street is punished as Seniors take it on the Chin with Zero Return of Savings and a Major Hit to the Social Security Trust Fund. Big Banks loan out Bail-out cheap money at Loan Shark Rates while literally laughing all the way back to the BANK. But sure, go ahead and believe the Big Banks paid it all back with Interest and Dividends. Big Banks will never pay back what they owe and they still have massive toxic Derivatives still on their books.
Jul 16, 2013 8:35PM
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I'd like to see your post replace this piece of crap article above, Dave1230. What was TARP... $700 Billion? The collective bail-outs since: buy-back (of crap credit) program, $85 billion monthly QE and Get out of Jail Free programs like- ignore the LIBOR manipulation, the nickel manipulation, the stock manipulation and making both Goldman Sachs and Morgan Stanley "banks" when they are nothing more than crooked financiers... adds up to many many many many many Trillions. Let's not even be highlighting all the effects of these garbage moves to save garbage bankers who couldn't live without control and manipulation. A reminder that banks caused the 21st Century Depression and continue to influence the outcome (which isn't a good direction, for sure). Exactly WHAT would it have cost to- close the banks, end the Federal Reserve and get RID of Wall Street in that 2008 "hurried" session of Congress where Hank Paulsen duped them into TARP? My guess-- many many many many Trillions LESS, and we'd have economy right now. Bankers-- can't live with them, best to eliminate their genetic footprint on Earth and make new Laws preventing their reincarnations.
Jul 16, 2013 10:06PM
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If bank crisis is over why aren't depositors receiving any interest on their money?
Jul 16, 2013 9:02PM
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A bailout for Wallstreet!

 

A bailout for the banks!

 

Trickled down to the economy and helped "real" employment as of date? Not really. 

Is the American Dream of a secure job, owning your own home and one or two new cars in the driveway still alive? No.

 

Socialist Democracy may appear to be a holy grail for the economy... but in the long term, it will bring us all down.  We will follow France down the loo.

 

 

Jul 16, 2013 9:17PM
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Ben will bankrupt the country with the free money he is giving the banks.Then he will be better known as the fool he is!!

Jul 16, 2013 9:40PM
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Wait a minute!!!  A lot of this crisis is being made worse by the BIGGEST banks in the country, and the solution promoted in this article is to have the SMALLER banks being taken over by the bigger ones?? what we NEED is NO GOVERNMENT SUPPORT AT ALL for ANY bank.  Let the biggest one fail, if they deserve to, the economy would be BETTER OFF if we had MORE and SMALLER banks. oh yeah, instead of letting these banksters get away with their crap, how about we put them on prison farms and show them what REAL work is, and what happens when you try to screw people? NO BAILOUTS FOR ANY BUSINESSES!!!! Screw them, if they can't OR won't compete in  the marketplace they DESERVE to fail.
Jul 16, 2013 7:17PM
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Well said Dave and Brutus...this is not going to change.  There is no recourse at this point.  This "must" continue with the FED and they know it.  Must continue with the "alternative funding"  in banks and "reports from the government" disguising the problems.  Must continue with the "markets"....as they are entirely controlled by above mentioned.  The "pundits" must do what they do to support and .... on and on.  It is now entirely comical as they believe we are that stupid and noone invests other the same doing the same thing.  Say it again....grow a garden and get a mattress for what is left of your portfolio.  Fox news and some of the "simpletons" there.... think that their 401 K's have improved.  Shepard is needing some meds to think that. Do what you think.  Adios.
Jul 16, 2013 10:05PM
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Over in which country?  Matt must mean the US because it's not over in China and the EU by any means. In the US the banks were bailed out with taxpayer fund, free deposits with no interest and the Fed printing almost unlimited currency. I would not have ever believe it if I had not live through it. The USD is a complete Ponzi scheme along with Medicare and Social Security. In which god do we trust?
Jul 17, 2013 1:02AM
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Much of this I really don't understand, but what I do understand is my money is going nowhere these days to buy anything.  Through no fault of my own, my property has been devalued from $355,000 down to $97,000 now conveniently up to $142,000 and I am still underwater with 2 mortgages that I cannot get one of those very low interest rates because someone is manipulating my property value.  What the hell is going on in this country, for what I see, nothing but government and corporate greed and the only recourse we have is to get these scoundrels out of office and out of these overpaid CEO positions that only cause people like me to become extremely angry and it will come together and hurt this country.  The core of all this trouble is called the United States Federal Government and politicians who don't give a damn about us and line their own greedy, slimy pockets.  Neighbor cannot even help neighbour today because of the greed in Washington DC and this government.  Going to help myself one way or another, but I will survive because I am a good american, no debt except this mortgage and I will find a way to settle it.
Jul 16, 2013 10:49PM
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Is TARP another government program  used to pay out contractually obligated bonuses?
Jul 17, 2013 8:09AM
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The US Government has exploited the middle class and has created policies that ultimately created wealth for their own personal net worth. HOW DO "WE THE PEOPLE" CLEAN THE HOUSE OUT??? Ah, the last that I knew is the government works for us and we pay them a salary to keep our economy and quality of life strong through policy making to PROTECT NOT ONLY OUR BORDERS, BUT ALSO OUR ECONOMY AND NET WORTH AND FUTURE GENERATIONS. WASHINGTON, YOU ARE FIRED! NOW HOW DO WE GET THEM ALL OUT?
Jul 16, 2013 10:33PM
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I realize the Big Banks....If that's what you want to call them, are taking a great advantage of all the situations presented them.  Probably about time to call in some markers...

 

But to let our Financial System totally collapse was not an option, to think that way is somewhat ludicrous..From lessons learned in our Great Depression, we would have had a total Global Meltdown.

And a Depression here that would make Japan's last 20 years look like a cakewalk..

We have put ourselves in a position of being tied to World production and dependent on it.

 

We have and had lost so much manufacturing, how much more do you really think we could afford to lose...?? Many businesses would have been penniless and Capitalism would face the brink of extinction for us...Why rebuild here, and bear the expense of all the cost going with it.?

Job losses could have possibly been twice as bad, just guessing?

 

We do not live on the farms anymore, many fewer in rural areas..

People or a great majority of people in the cities, would have considered giving up, in despair, depression and turned to begging in the streets or crime...Chaos would have reigned.

The Rich and Elite would have moved away or offshore and protected much of their Wealth like they have for several decades...

I think you had better be very "selective" for what you wish for.. 

This is only my opinion, but I really don't see it any other way, or a better outcome. 

Jul 17, 2013 6:59AM
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Senator Elizabeth Warren with the backing of John McCain has proposed legislation against Too Big To Fail Banks. With little doubt, I see another 2,700 page Tidal Wave of legalese ahead. We need to help our government understand WHO WE ARE. We are-- the People who have to follow those laws and if they can't read them, we can't follow them. ONE law-- no bank shall exist beyond the borders of the state it is headquartered in. A bank may lend but it is wholly liable for it's portfolio, and will service all the credit it extends. No bank will lend any money to a publically traded entity for any purpose. The entity may seek bonds for growth, otherwise it is beholden to the investments of those who believe in it enough to invest in it. The Glass Steagall Act will be restored. The Gramm Leach Bliley Act will go into the trash bin where it belongs. All out of state transacting shall occur through a separate industry facet that is wholly unconnected and unassociated with banks and contains no common personnel by any means construed as collusion by the People. Restore all of the Regulatory Controls placed on banks in order to ensure they never again become too big or in the precarious scenario for broad default and failure.
Jul 17, 2013 10:25AM
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Just who does Ben think he is?   He is on a bond buying binge.  WHERE did he get the money?   Congress needs to take away his ability to SPEND taxpayer money without Congressional OK.  He has purchased over 3 trillion in bonds.  Who in Congress authorized the expenditure?

Helicopter Ben needs to be impeached.  And sent to prison.  What do you think those bonds will be worth when interest rates go up.  How big a bath will taxpayers take?
Jul 17, 2013 5:10AM
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The Rich and Elite, the vast Majority are not going to move away from a Country that has the Greatest Military Power the World has ever seen. Those that want to leave America, that's fine and dandy, those types add very little value to America in the Big Picture. So if they crap on wanting to be here, There are literally millions just waiting to take their place. Go to China where they can execute you for being a financial criminal. So they better be careful about what they want or ask for, they just might get it.

Concerning letting the Too Big to Fail Banks actually fail and potentially causing the financial system to collapse, do we actually know that's what would have happened. Well no with don't, all we know is that is what we were told. We run a far bigger risk of it actually collapsing the longer the Global FEDS continue to play this Game of Robbing Peter to Pay Paul. We run a far bigger risk of it actually collapsing the longer Money Changer encourage Corporations to not pay most folks a Living Wage while giving away the entire store to the Rich and the Elite. The current path is epic Failure and One World Government and Currency. If we had just let the Too Big to Fail Banks go away, we go through some pain but not the far extreme and far longer term pain we shall have for not letting them fail.

Jul 17, 2013 10:49AM
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Contrary to what some might state, there is no book yet out about a Story that is still in the process of being written. Never before has this been attempted on such a Global Scale so guessing how this will exactly turn out is exactly that, our best guess. Uncle Ben is a like a person you go to for Credit Counsel. His answer is pulling out a Credit Card and maxing it out to infinity. Then he hands over the new Credit Card to you saying you now own it, Problem solved. You now have far more Debt and none of your real problems are solved. That's Uncle Ben in a Nutshell.
Jul 16, 2013 10:36PM
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When are you clowns going to understand the Fed isn't giving the banks free money. It is an exchange of assets or bonds for reserves. The banks are giving up bonds that have a coupon and principal for an infusion of reserves. .

Next TARP and QE are two entirely different things. With the former, the Fed is buying bank assets. These are troubled assets like mortgages or other forms of CDOs. 

BTW, TARP was around 450 B (cut down from 700 B), so only 5 B is chump change.
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