Citi and Wells seeking to repay TARP funds

Source: AP

NEW YORK (AP) -- Citigroup Inc. and Wells Fargo & Co. are seeking to repay billions in federal bailout aid but so far haven't received permission from the government, people familiar with the talks told The Associated Press.

The main sticking point is how much capital the banks would need to raise to repay taxpayers the money they received at the height of the financial crisis, according to two people with direct knowledge of the talks who requested anonymity because the discussions are ongoing. Citigroup received $45 billion in bailout money and is now 34 percent owned by the government. Wells Fargo received $25 billion.

The government has told Citigroup that it would need to raise at least $20 billion in common equity to be able to quit the Troubled Asset Relief Program, according to one of the sources. It was unclear how much Wells Fargo needed to raise.


Read more: http://finance.yahoo.com/news/Citi-and-Wells-seeking-to-apf-2098792823.html?x=0&sec=topStories&pos=4&asset=&ccode=

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"Sticking point" indeed. And that's hardly the only one.

IIRC, BOA's raising $19B of the $45B they need to repay.

In one breath you celebrate being repaid bank money they should have never gotten, in another since the same crooks were left in charge and nothing has done to reform the system you realize they are about to cut lending because they will have less capital to do lending with.

Games of chicken being played throughout the financial world right now.

Let us begin by setting the stage:

The place: Boardrooms, bedrooms, and government offices around the country.


The players:


US – Uncle Sam
BB – The bad banks. An embarrassingly large number – but not all of them… there’s no need to pretend otherwise.
GB – The good banks. Yes… they exist and there’s no need to argue that either… but too few
TP – The taxpayers. Sadly, far too often treated like the other kind of “TP”… but that’s another story.


Act I – The financial world is falling apart at the seams.


BB – Help! We’re dying here! And if we go… you go.

US – We need to find a way to prop up the system and get banks lending again. We’ll inject capital to stabilize their balance sheets and keep the cancer from spreading. BB? Come here and take this cash.

TP Ouch! Hey!

BB – If we take that then everyone will know that we’re dying and will take their business across the street. We’ll go out of business!

US - You’re right. We can fix that. GB? Come here and you take this cash as well. Then TP won't be able to tell the good banks from the bad ones.

TP - Hey! Isn't that something we SHOULD be able to do in a free country? I thought capitalism meant...

GB – What? We don’t need it or want it. If we take it we’ll look like we’re as bad as BB is. No way!

US – If you don’t take it then we’re worried that everything will fall apart. You WILL (hint hint) be taking this money. Don’t forget who regulates/audits you.

GB – This sucks!

US – Don’t worry…we won’t hold it against you and we’ll charge everyone a low enough rate that you’ll be at a competitive disadvantage if you DON’T take it.

GB – Grumble. Ok.


Act II – Armageddon averted but other things getting worse.


TP – Hey! We can’t get a loan and your fees are too high and your CEOs make too much money and (you get the picture). We gave you this massive bailout and THIS is how you treat us?

GB - What? I thought accepting this things wasn't going to be held against us.

US - That was us... TP gets to make up his own mind on what is held against you. Oh... and we feel an urge to do what they want even if they don't know what that is.

US – We’re going to set limits on executive pay… and forbid you from paying dividends… and chastise you in the media and (you get the picture). You took out money and now we own your a$$.

BB – Do we have a choice?

GB – Ouch… Hey! You made us take this money! Now TP is treating all the banks like they’re the same. Take back your stupid TARP. We neither need it nor want it.

US – We’re not sure that we’re going to let you do that. You would have less capital to lend out.

GB – We’re not BB… we can raise capital if we need to. Take the money back.

US – Plus interest of course. We’ll think about it.

TP – Give us back our money!

US – Not sure whether we want them to pay it back or not. Either way, we're going to regulate the heck out of your industry.


Act III – Present day.


BB – We need to find a way to pay this off. This sword of Damocles will hang over our heads for years (BB CEO “and I want more money”). We’ll have to raise expensive capital because OUR lenders know we’re not as good a risk as GB.

US - ???

TP - ???


No Deux Ex Machina here folks. Are we better off letting them pay it back if they aren’t really stable enough to do without it? OTOH… do we want them to have it in the first place (especially now that it’s an open secret which banks are better than others)?

Tune in next week for next exciting episode… Will TP cry "ouch!" again?

"We will regulate the heck out of your industry"

Neither the banks nor Uncle Sam ever had that intention :rofl:

The error was not using the mechanisms in place to wipe out the Bad Banks.

It's a common mistake to assume that the industry wasn't heavily regulated. My experience (and I used to teach those regs) is that they're second to nuclear power and maybe a few other industries... but QUITE regulated.

What was lacking was the RIGHT regulations (and/or getting rid of the wrong ones) AND the knowledge/will/whatever to oversee those regs correctly (as you've hinted though IIRC we don't agree on the specific example).

And don't be mistaken... there are congressmen (on both sides I would say) who LOVE this opportunity to score some political points by coming up with new rules that they claim will save the day the next time.

O have little faith that the RIGHT regs will come out of this... but they certainly intend to come up with some (and already have).

Again... whether they are the right regs... or worth anything at all (or even fail to hurt) is a matter for debate - and I suspect we agree on that.

I saw plenty of regulations in my day that were a way to appease public anger with the least effect to the practice.

They're not just a way to appease the public but often "adjusted" to account for industry concerns (to the point where their propoenets might not agree that the reg is effective any longer)...


...but I can tell you that they sure waste a whole bunch of time trying to demonstrate compliance with all of them. A whole industry built up around training/tracking/etc for compliance issues.

Which is NOT to say that all of those regs are worthless.