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.
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.
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.
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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.
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.
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!!
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.
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.
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The offering could become the second-biggest this year if underwriters exercise an option to buy more shares.
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