BB&T, nine other large banks receive OK to pay back bailout funds

Posted June 9, 2009

— BB&T (NYSE: BBT) is one among the nation's 10 largest banks allowed by the Treasury Department to repay $68 billion in government bailout money.

BB&T will pay some $3.13 billion in order to repurchase the preferred stocknsold to the government as part of last fall's banking industry bailout strategy., plus accrued and unpaid dividends.

"This is an important achievement for BB&T," said BB&T Chief Executive Officer Kelly S. King in a statement. "Repaying the government's investment will give us greater flexibility to benefit significantly from future opportunities that will be available as we emerge from this recession. In addition, we will become even more focused on the business of serving our clients, rather than dealing with government distractions."

The department on Tuesday said the banks, which were not named, will be allowed to repay the money they received from the $700 billion Troubled Asset Relief Program created by Congress last October at the height of the financial crisis.

The banks have been eager to get out of the program to escape government restrictions such as caps on executive compensation.

All eight banks that took TARP money and last month passed government "stress tests" confirmed that they received permission to repay the bailout funds. They are: JPMorgan Chase & Co., American Express Co., Goldman Sachs Group Inc., U.S. Bancorp, Capital One Financial Corp., Bank of New York Mellon Corp., State Street Corp. and BB&T.

Morgan Stanley did not pass the government test, but on Tuesday said it had raised enough capital quickly and was approved to repay its TARP money.

Northern Trust Corp. was not among the 19 banks subjected to stress tests, but the company said it also had received permission to repay the bailout funds.

Experts say allowing 10 banks to return $68 billion in bailout money illustrates some stability has returned to the system but caution that the crisis isn't over. Some worry the repayments could widen the gap between healthy and weak banks.

Stocks zigzagged after the Treasury's widely expected announcement. In midday trading, the Dow Jones industrial average dropped about 30 points. Broader indices were mixed.

More than 600 banks nationwide have received nearly $200 billion in TARP money and 22 smaller banks already have repaid it.

"These repayments are an encouraging sign of financial repair, but we still have work to do," Treasury Secretary Tim Geithner said in a statement.

But some analysts warned that strong performance at the largest banks might obscure greater dangers in the broader banking industry.

Smaller banks are still saddled with billions of dollars in risky commercial real estate loans, which could cause heavy losses depending on the speed of economic recovery. And large banks continue to hold the toxic, mortgage-backed assets at the heart of the financial crisis.

Longtime bank analyst Bert Ely called the repayments a positive sign for the banking sector but not a reason to celebrate. He noted that three of the nation's biggest banks - Citigroup Inc., Wells Fargo & Co. and Bank of America Corp. - are still tied to the bailout.

The repayments show "that some of the major players have strengthened and will be able to ride out the crisis. The question is how will the other banks manage. It's not even clear the recession is bottoming out," Ely said.

Even the banks permitted to repay the bailout funds are still dependent on government support, including debt guarantees from the Federal Deposit Insurance Corp. and credit lines from the Federal Reserve.

The firms now have the right to purchase the warrants Treasury holds in their firm "at fair market value." Besides Treasury's potential income from the sale of the warrants, the 10 banks already have paid dividends on the preferred stock totaling about $1.8 billion over the last seven months.

Testifying before a Senate panel Tuesday, Geithner said the value of the warrants for banks permitted to repay TARP funds are in the "several billion dollar range."

Treasury spokesman Andrew Williams said the banks can begin repaying immediately - "as soon as they figure out where to send the check."

Dividend payments received for all TARP participants are about $4.5 billion to date, according to Treasury.

The amounts the banks could repay are:

- JPMorgan: $25 billion

- Morgan Stanley: $10 billion

- Goldman Sachs: $10 billion

- U.S. Bancorp: $6.6 billion

- Capital One: $3.6 billion

- American Express: $3.4 billion

- BB&T: $3.1 billion

- Bank of New York Mellon: $3 billion

- Northern Trust: $1.6 billion

- State Street: $2 billion

The push to repay the funds comes a month after "stress tests" of the nation's 19 largest financial firms found that 10 needed to raise $75 billion more to protect against future losses. All of those banks, including Citigroup, Wells Fargo and Bank of America, had submitted plans by late Monday to bolster their capital cushions that were enough to help them survive a deeper recession, the Fed said.

The other nine institutions had to prove they could raise enough private capital without federal guarantees before they could return the money.

So far, 16 of the 19 banks have raised $75.2 billion, mostly by selling common stock.

Regulators want to avoid letting a bank repay its TARP money only to have it return months later in worse shape, seeking another handout.


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  • nerdlywehunt Jun 9, 2009

    The govt did NOT require the banks to accept the money. They all thought that George W was giving free money wiht no strings attached (W's words). Once they discovered (horrors) that the taxpayers wanted some say so in their operation (like some limits on the ten's of millions that the bank execs get) then oh my gosh....time to give it back! Look at some of the achived articles from the WSJ for Nov of last year and then in Jan of this year....very interesting.

  • moth Jun 9, 2009

    Either Geithner is completely incompetent or he's a crook.Evidently , nothing was learned from the AIG bailout.You get one guess who was in charge of that.

  • affirmativediversity Jun 9, 2009

    prodigalrm posted..."Sorry, but I'm not a big fan of drug addicted/abusing, self-absorbed millionaires."

    Holy cow...just a little judgemental. You must find it hard to find liberal to hero worship because you just eliminated Obama with that statement (Obama admits in his books that he's used drugs and, of course, he's a millionaire). Is Bill Clinton in this group or to you take him at his statement that "he didn't inhale". How about Tipper Gore. Is your disdain limited only to "drug use and millionaires" or do adulterers and millionaires make the cut...that's important so we can know if John Edwards is worthy of your disdain.

    Oh and as for the 4 to 6 years in you really think GM won't be coming out with any new models until 4 to 6 years has gone by. Do you honestly believe they don't already have those ugly, tuna can size, lawnmower engine, battery operated hoopty mobiles in the basement...HAHAHAhahah...YOU ARE NAIVE, if you believe that.

  • prodigalrn Jun 9, 2009

    Maybe you should start listening to Rush might give you a wider understanding of issues. Then again, you may just be typical liberal and only listen to yourself talk.
    June 9, 2009 3:43 p.m.

    Sorry, but I'm not a big fan of drug addicted/abusing, self-absorbed millionaires. You are kidding about the other stuff right? No-one is that stupid. And I AM correct, it takes 4-6 years for a car to go from drawing board to showroom, look it up! You don't force a car company to make a different kind of car in 4 months, which is how long Obama has been in office. And if you think Obama shouldn't have bailed out the car companies, tell that to the thousands who still have a job in Detroit now. If the American car companies had made BETTER CARS, the Japanese comapanies wouldn't be out-selling them now. Nice try at re-writing history though, a big hobby of Republicans now. Good luck with that!

  • affirmativediversity Jun 9, 2009


    Sorry but you are incorrect. Worland was correct. Have you not seen the riding lawn mowers with a bubble on top Obama Inc endorsed as the "eco car of the future" that is to be manufactured by

    Also, did you not hear the news about the DEMOCRAT's in Congress who called up the fake CEO of GM and told him "not to close the plant in his district" (I guess the fake CEO is to close a plant in someone's district, instead).

    Maybe you should start listening to Rush might give you a wider understanding of issues. Then again, you may just be typical liberal and only listen to yourself talk.

  • grenlyn1 Jun 9, 2009

    It would appear to me that making a bounce back that quickly and in those enormous amounts, that perhaps these banks were not as well off as they claimed to be. They put this money away in case the bottom fell out of the economy. Now, one would have to ask "why pay this money back now?" Oh ensure that government doesn't control banks and their finances so much that executive pay is not regulated. Hummmm...

  • prodigalrn Jun 9, 2009

    Worland, you are dead-wrong. Obama hasn't had any say in what types of GM or Chrysler cars are being built. Do you know how long it takes from a car's inception on the drawing board till it actually shows up on a dealer showroom? About 4-6 years! Stop talking about something you very clearly know less-than-nothing about. You just keep listening to Rush Limbaugh, he'll tell you what you should think. You're evidently already doing that.

  • JustAName Jun 9, 2009

    Worland, I agree, but you could say that the top execs of these firms didn't do a great job, because they put their bank in the position of needing the bailouts.

    I also want to know if the money that is being paid back is going to retire the debt or to some other pork project.

  • Worland Jun 9, 2009

    If the gov't forced me to take bail out money, then decided they had the right to run my business and hire/fire my employees... you bet I'd pay the money back and get them out of my hair.

    After all, when it comes to business, Obama hasn't been right about anything. Forcing GM and Chrysler to only build small cars, which haven't been selling at all, wasn't the brightest idea Obama ever had. Obama's stupidity put the final nail into Detroit's coffin.

  • Worland Jun 9, 2009

    When it comes to CEO's and other high tier exec's, you get what you pay for. If they didn't offer outrageous bonus's, they couldn't attract the best people out there. When you're good, as many of these really CEO's are, companies are forced to offer big bonus's or end up with second stringers in the driver's seat.