Big banks repay government bailout funds

Five of the largest U.S. banks, including Goldman Sachs Group Inc (GS.N), JPMorgan Chase & Co (JPM.N) and Morgan Stanley (MS.N), repaid billions of dollars in taxpayer bailout funds on Wednesday, getting out from under the government's thumb.

Banks have been anxious to return funds taken from the $700 billion Troubled Asset Relief Program to escape the strings attached, including restrictions on executive compensation.

JPMorgan said it repaid $25 billion, Goldman and Morgan Stanley $10 billion each, U.S. Bancorp (USB.N) $6.6 billion, and BB&T Corp (BBT.N) $3.1 billion.

In connection with announcing the repayment, Goldman also said it paid a dividend of $425 million, which will reduce second-quarter profit by about 77 cents per share.

BB&T, JPMorgan, U.S. Bancorp and BB&T also intend to buy back warrants for their common stock from the U.S. Treasury, which they awarded when they took the bailout money.

The warrants give the Treasury the right for up to 10 years to buy common stock in the banks at a set price. Banks can buy back the warrants at "fair market value," the Treasury said.

BB&T is negotiating a buyback, a spokesman said. The other banks did not comment on the status of buybacks or potential terms.

Banks Line Up

Other big banks are also lining up to return bailout funds. American Express Co (AXP.N), which took $3.4 billion, was expected to follow suit.

Other big banks that won permission from the government to repay TARP funds are Bank of New York Mellon Corp (BK.N), Capital One Financial Corp (COF.N), Northern Trust Corp (NTRS.O) and State Street Corp (STT.N).

As a condition of being allowed to repay, banks had to show they could raise money from the private sector by selling stock and issuing debt without the help of government guarantees.

The Federal Reserve also had to agree that their capital levels were adequate to allow them to continue lending.

At least 22 smaller banks have been allowed to repay some or all of their TARP money, although most must still negotiate terms to buy back or extinguish their associated warrants.

Bank shares were mostly lower on Wednesday, with the KBW Banks Index .BKX down 1.3 percent in afternoon trading.

[Fuente: By Elinor Comlay, Reuters, New York, 17Jun09]

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