After almost a year of initiating the $700 billion Troubled Asset Relief Program (TARP) to rescue the nation’s financial industry, the U.S. Treasury Department said on Thursday that it would auction off stock warrants it acquired from three big banks that received a significant portion of taxpayers’ money and have fully repaid the same. The government is taking this step to free the lenders from the federal bailout program.

The three banks, whose warrants will be sold via auctions over the next month, are JPMorgan Chase (JPM), Capital One Financial (COF) and TCF Financial Corporation (TCB). These three banks, that received a total of $28.9 billion from the TARP, have fully repurchased Treasury’s preferred stock investment. The current move to sell their warrants will completely free these banks from government intervention.

The government still holds warrants of 261 banks, out of which only 15 have paid back the bailout money but not repurchased their warrants yet. Many other financial institutions that have already repaid bailout money include American Express (AXP), Goldman Sachs (GS), Morgan Stanley (MS), BB&T Corporation (BBT) and US Bancorp (USB). Also, banks like Bank of America (BAC), Wells Fargo (WFC) and Citigroup (C) are expected to exit TARP over the next 12 to 18 months.

Treasury will sell the warrants through a modified Dutch auction. According to the format, the three banks will be able to bid for the warrants themselves. However, the price at which banks could buy back the warrants became a contentious issue as banks started repaying their bailouts.

We think that the repayment of government money and repurchase of warrants can be viewed as a sign of recovery of the institutions as well as the economy. Also, the full repayment of government money by the bailed-out firms will help protect their executive compensation packages.

Zacks Investment Research

1. ($BAC) Bank of America to Pay TARP DividendsBank of America Corporation (BAC) said on Friday that it will pay $713 million in...
2. ($JPM) Will the Federal Deposit Insurance Corporation Borrow From Banks?About a year ago, during the height of the crisis, the government started bailing out...
3. SunTrust Banks To Repay TARP LoanThe Chief Executive Officer [CEO] of SunTrust Banks Inc. (STI) said on Tuesday that the...
4. (BAC) Bank of America to De-TARP in InstallmentsThe Chief Financial Officer (CFO) of Bank of America Corporation (BAC) said Tuesday that the...
5. (GS) U.S. Treasury Profits from Bailed-Out BanksThe U.S. government has already retrieved about $4 billion in profits from 8 of the...
6. (MS) Northern Trust Corporation Repurchases TARP WarrentsNorthern Trust Corp. (NTRS) on Wednesday declared that it has completed the final step to...

Search Posts by Tag: American Express Company | AXP | BAC | Bank of America Corporation | BB & T Corporation | BBT | C | Capital One Financial Corporation | Citigroup Inc. | COF | economy | Goldman Sachs Group | GS | JPM | JPMorgan Chase & Company | Morgan Stanley | MS | TCB | TCF Financial Corporation | Us Bancorp | USB | Wells Fargo & Company | WFC | Financial | Money Center Banks

RSS Feeds by Tag: American Express Company | AXP | BAC | Bank of America Corporation | BB & T Corporation | BBT | C | Capital One Financial Corporation | Citigroup Inc. | COF | economy | Goldman Sachs Group | GS | JPM | JPMorgan Chase & Company | Morgan Stanley | MS | TCB | TCF Financial Corporation | Us Bancorp | USB | Wells Fargo & Company | WFC | Financial | Money Center Banks |

Other Posts by: vitalstocks | RSS Feed for this author