US taxpayers start to reap good returns
US taxpayers have so far made about $11bn (£6.7bn) from the state bailout of troubled banks, with Bank of America becoming the latest firm to repay its bailout money.
Bank of America surprisingly said on Wednesday night it would repay the entire $45bn it received from the government under the Troubled Asset Relief Programme (Tarp), plus a $425m termination fee. It has already paid $2.54bn of dividends.
The news boosted UK banking stocks yesterday. Joshua Raymond of City Index said: “The move is a strong sign of confidence by the US bank that they are ready to return to normality and boosts hopes that a number of other major US banks such as Citigroup could be set to follow suit.”
So far, the US Treasury has made $6.8bn in dividends and $2.9bn selling warrants, according to the latest figures to the end of October. Other fees take the total return to nearly $11bn. An auction of warrants demanded by the government in return for bailing out banks including Capital One, JP Morgan and TCF Financial was expected to raise a further $3bn yesterday.
Other big banks, led by Goldman Sachs, JP Morgan Chase and Morgan Stanley, were quick to repay the Tarp money in June after receiving the green light from the government. Stung by its portrayal in the media as a “vampire squid,” Goldman Sachs stressed that taxpayers had made a return of 23 per cent on their injection of aid into the investment bank.
Citigroup, which has received $45bn in aid, and Wells Fargo, which got $25bn, have yet to repay the money. Bank of America said it would use $26.2bn in excess liquidity plus $18.8bn raised from selling common equivalent securities to pay back the taxpayer handout it received last year to help it to swallow its acquisition of Merrill Lynch.