Treasury secretary, Timothy Geithner said earlier this week that out of the total Troubled Asset Relief Program (TARP) funds given to banks, about 75% have been repaid. Also, taxpayers have gained $21 billion from the government’s investments in those banks.

In total, the Treasury gave $247 billion to the banks. Out of the total repayment, more than half has come back from the healthy banks. Banks have also paid about $11 billion in interest and dividends.
 
Taxpayers have received decent returns on many of their financial-sector investments. Repayments under TARP have generated a 17% annualized return from stock-warrant repurchases and $12 billion in dividend payments from dozens of banks. However, Geithner expects a loss related to the rescue of American International Group (AIG).
 
In its monthly report to Congress earlier this month, the Treasury stated that repayments of the TARP fund have exceeded the total amount of outstanding TARP funds by $4 billion until the end of May.
 
At the end of May, TARP repayments totaled $194 billion, surpassing the outstanding TARP funds of $190 billion.

Following the receipt of funds in May by the Treasury, the total repaid fund surpassed total funds outstanding, including gross proceeds of $6.18 billion from the sale of 1.5 billion shares of Citigroup Inc. (C) and $23 billion of dividend payments, interest and other income.
 
The Treasury expects TARP to rescue the nation’s financial industry at a cost less than anticipated. At present, the Treasury projects the TARP costs to be $105.4 billion, down $11.4 billion from its previous expectation in February 2010.
 
The estimated cost for AIG was down by $2.9 billion. The government is expected to exit its holdings in AIG in the near term. Also, AIG is in the process of disposing unnecessary businesses and planning to raise funds through earnings from business operations to repay the TARP loan to the government.
 
Major institutions in the financial market that have repaid the TARP loan in full include JPMorgan Chase and Co. (JPM), Bank of America Corp. (BAC), Wells Fargo & Co. (WFC) and Goldman Sachs Group Inc. (GS). Also, the Treasury is auctioning stock warrants acquired from the banks that received a significant portion of taxpayers’ money and have since fully repaid.
 
The decrease in TARP costs and increasing repayments of bailout money can be viewed as signs of economic recovery. However, the overall economy is not yet out of the woods as we continue to see tumbling home prices, soaring loan defaults and a high unemployment rate.
 
During the height of the financial crisis in 2008, an oversight panel was created by Congress to oversee TARP. The panel, which has assumed a critical role in the program, criticized the Treasury’s actions on several grounds.

Among others, the chairperson of the panel, Elizabeth Warren, criticized the Treasury for not conducting further stress tests as was previously done with the 19 biggest banks. We contend that the major problems in the economy need to be addressed by the government first before shifting the strategy to growth.
Read the full analyst report on “AIG”
Read the full analyst report on “C”
Read the full analyst report on “JPM”
Read the full analyst report on “BAC”
Read the full analyst report on “WFC”
Read the full analyst report on “GS”
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