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JP Morgan, Goldman among banks set to repay TARP
Regulators may approve exits next week in sign financial system is more stable

J.P. Morgan Chase, Goldman Sachs and some other large U.S. banks will likely be given the go-ahead to repay billions of dollars in government money next week, suggesting authorities are more comfortable about the stability of the financial system.

Other banks that may be approved next week to repay money from the Troubled Asset Relief Program, or TARP, include Morgan Stanley /quotes/comstock/13*!ms/quotes/nls/ms (MS 30.95, -0.02, -0.07%) , American Express /quotes/comstock/13*!axp/quotes/nls/axp (AXP 24.96, +0.01, +0.04%) , Bank of New York Mellon /quotes/comstock/13*!bk/quotes/nls/bk (BK 28.28, +0.06, +0.21%) , State Street /quotes/comstock/13*!stt/quotes/nls/stt (STT 47.00, -0.27, -0.57%) , US Bancorp /quotes/comstock/13*!usb/quotes/nls/usb (USB 18.03, +0.03, +0.17%) and BB&T Corp. /quotes/comstock/13*!bbt/quotes/nls/bbt (BBT 21.50, +0.09, +0.42%) .

Other big banks face a longer path to TARP freedom, including Bank of America /quotes/comstock/13*!bac/quotes/nls/bac (BAC 11.88, -0.03, -0.25%) , Citigroup /quotes/comstock/13*!c/quotes/nls/c (C 3.46, -0.11, -3.08%) and Wells Fargo /quotes/comstock/13*!wfc/quotes/nls/wfc (WFC 24.70, -0.02, -0.08%) .

Still, the fact that the government and industry regulators are willing to unleash some of the nation's largest banks shows how much they think the environment has improved in recent months, analysts said.

In February, the markets panicked at the prospect of some big U.S. banks possibly being nationalized. Less than four months later, the industry has raised more than $65 billion in new capital by selling new shares and other equity-linked securities to private investors, according to Keefe, Bruyette & Woods.

"We've seen government programs address liquidity and capital concerns pretty well," Fred Cannon, a bank analyst at KBW, said in an interview. "The fact that banks have been able to access capital markets is a good sign."

Treasury Secretary Timothy Geithner has said on several occasions that before the government lets financial institutions repay TARP he must be comfortable that they can raise capital on their own and that the financial markets are stable.

In May, Geithner told lawmakers that the Treasury, the Federal Reserve and the Office of Comptroller of the Currency would consider both the health of each institution and the economy "as a whole" before deciding whether to let banks return the funds.

In early May, the government announced the results from stress tests of the largest U.S. banks, ordering them to raise almost $75 billion in new equity capital.

However, nine companies were told they didn't need extra capital: J.P. Morgan, Goldman, American Express, BB&T, Capital One Financial /quotes/comstock/13*!cof/quotes/nls/cof (COF 24.20, +0.09, +0.37%) , Bank of New York, State Street, US Bancorp and insurer MetLife /quotes/comstock/13*!met/quotes/nls/met (MET 31.25, -0.20, -0.64%) .

On June 1, the Federal Reserve outlined criteria it will use to pick which stress-test banks can repay TARP money.

"Redemption approvals for an initial set of these large bank holding companies are expected to be announced during the week of June 8," the Fed said in a statement.

Before being allowed out, a bank has to issue debt that isn't guaranteed by the Federal Deposit Insurance Corporation and must sell new shares in private capital markets, the Fed explained.

Banks must also be financially strong enough to keep lending to creditworthy consumers and businesses after they return TARP money, the Fed added.

J.P. Morgan, Goldman, Morgan Stanley, American Express, Bank of New York Mellon, State Street, US Bancorp and BB&T Corp. have sold new common stock to private investors and have issued non-guaranteed debt, meeting two of the main criteria for exiting TARP.

Getting out will be a relief for many banks because Congress imposed several restrictions on TARP recipients, including limits on compensation.
http://www.marketwatch.com/story/jp-morgan-goldman-among-banks-set-to-repay-tarp?