By Binyamin Appelbaum
Washington Post Staff Writer
Tuesday, June 9, 2009
Ten of the nation’s largest banks will be allowed to repay $68 billion in federal aid received at the height of the financial crisis, the Treasury Department announced this morning.
The government did not name the banks, but the list includes J.P. Morgan Chase, Goldman Sachs and Capital One Financial of McLean, according to the companies and other sources.
The banks could begin to return the money later this week, marking an important milestone in the government’s efforts to stabilize the financial industry.
The list of banks was longer than many financial analysts had expected. It includes all eight banks that received a clean bill of health last month after the government’s stress tests, plus Morgan Stanley, which was required to strengthen its capital reserves after the stress test, and Northern Trust, which was not subjected to a test. The remaining banks on the list are American Express, Bank of New York Mellon, BB&T, State Street and U.S. Bancorp, according to the companies and other sources familiar with the matter.
The government already has allowed 22 community banks to repay about $2 billion in federal aid, but the announcement today marks the first time large banks have been given permission to return money. Treasury officials say they now are comfortable that these banks can weather the recession without the benefit of direct government support. However, the government continues to support banks through a variety of other programs, including debt guarantees, cheap loans and a pledge that the largest banks will not be allowed to fail.
The government also will continue to hold warrants in the 10 banks that allow it to purchase shares of their common stock. Analysts estimate that those warrants are worth about $5 billion, but negotiations over how much the banks should pay the government to tear up the warrants have yet to find common ground.