Will Banks Be Allowed to Repay TARP Early?

Now that the bank stress test results are in, there are some banks that are considering getting permission to repay TARP early. For the most part, in exchange for loans from the Federal Reserve at favored rates, big banks gave up some of their assets and agreed to tighter government regulatory oversight. Fearing that they might not make it through the recession and all the write-offs, some of the country’s biggest banks accepted.

And they’ve been chafing ever since.

Now, though, it has been revealed that the Treasury Department thinks that nine of the 19 biggest banks are on solid enough ground that they will make it through the recession (10 banks were singled out as needing more capital). Three of the nine “strong” banks are proposing to repay their TARP funds early. In order to raise the required capital, Capital One, U.S. Bankcorp and BB&T are issuing more common stock.

Of course, before TARP funds can be paid off, the government needs to approve. But it would be wise to do so. After all, it means less of a loss for taxpayers down the road.

image source: Wikimedia Commons