Treasury to Banks: Pay Back TARP Now

Color me skeptical this is happening anytime soon:

“Concluding that some of the nation’s biggest banks are in good enough shape to raise capital from private investors, senior Treasury officials would like more of them to repay billions of dollars in taxpayer money that bailed them out over the last year.

But many of those banks would prefer to keep the money for several more years rather than raise new money and dilute their existing stockholders.

Ten big financial institutions repaid nearly $70 billion in June. But the Treasury said at least several other major financial firms were strong enough to follow suit, and they were debating whether federal bank regulators should send a signal encouraging them to do so.”

As we have discussed previously, there are still big write-downs coming in commercial real estate, home mortgages and credit cards defaults.

Big. Write-downs. Coming.

TARP repayment at this moment might be a tad too optimistic and premature for many banks.

On the other hand, this rally ain’t gonna last forever. If your stock is up 40, 50 even 60%, now might be an advantageous time to raise a few billion dollars.

As any smart farmer will tell you, the time to make hay is when the sun is shining . . .


Calling on Big Banks to Repay Bailout Now
NYT, October 14, 2009

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