Marginally profiTARPle

9 June 2009 By Rob Cox Follow @rob1cox

The bailout was meant to restore faith in banks. Yet the state has made a profit on the first $68bn being returned by banks. But those are the portfolio s winners. Net off the losses from the likes of AIG and Citi and the government will struggle to stay in the black overall.

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The US Department of the Treasury said 10 of the largest financial institutions participating in the Capital Purchase Program have met the requirements for repayment established by the primary federal banking supervisors.

The banks include JPMorgan, State Street, Morgan Stanley, Goldman Sachs, BB&T, Capital One, US Bancorp, Bank of New York Mellon, Northern Trust and American Express.

If these firms choose to buy back preferred shares issued to the government, the Treasury will receive $68bn in repayment proceeds. Combined with repayments received to date from other institutions, the Treasury will have received approximately $70bn.

These repayments are an encouraging sign of financial repair, but we still have work to do, said Treasury Secretary Tim Geithner in a statement.

Under the CPP investment agreements, firms that repay their preferred stock have the right to repurchase the warrants Treasury holds in their firms at fair market value. In addition to Treasury's potential income from sale of the warrants, these 10 institutions have already paid dividends on the preferred stock totaling approximately $1.8bn over the last seven months.

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