U.S. breaking even on its bank bailouts
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Nearly 2 and a half years after the federal government began handing out billions in bailout funds to rescue the banking industry, the U.S. Treasury Department says enough banks have kept up with the interest payments or have repaid the funds in full that taxpayers have broken even on their investment.
The Troubled Asset Relief Program provided $245 billion to banks during the financial crisis and, so far, has recovered $243 billion through repayments and other income, according to the department.
As the government winds down the controversial program, it is launching another bank funding program meant to prop up the economy by encouraging community banks to lend to small business.
To date, 105 financial institutions have returned their TARP funds out of 763 that received the aid, said Linus Wilson, finance professor at the University of Louisiana at Lafayette, who has been tracking the program.
Locally, two of the nine Western Pennsylvania-based banks that received help have returned the funds: PNC Financial Services Group, Downtown, and FNB Corp. in Hermitage.
In the Pittsburgh region and nationwide, the biggest banks have been in a rush to repay the money because of the caps on executive pay that came with the aid and the stigma attached to taking public money.
Six of the seven local banks still holding TARP funds say they intend to pay off the loan before the interest payment is slated to rise. Payments are made in the form of quarterly dividends on preferred shares that the treasury department purchased. The dividend rate was set at 5 percent for the first five years, jumping to 9 percent after that.
A spokesman for S&T Bank in Indiana, Pa., was less specific about the bank's plans, saying it would repay its $108.7 million in TARP money "when we determine that the time is right."
Executives at most of the local banks said they were considering paying off the TARP funds with money borrowed from a new $30 billion federal program set up to spur community banks to lend more to small businesses and boost the economy.
The program, called the Small Business Lending Fund, is open to banks with less than $10 billion in assets. Banks have until the end of the month to apply. Bankers are expecting that in order to participate, they will be required to repay TARP with the proceeds.
First Published March 17, 2011 12:00 am
