Repayments to push US bank bailout into profit

Reuters ^ | March 30 2011 | David Lawder

[Toddsterpatriot]

WASHINGTON, March 29 (Reuters) - The U.S. Treasury's bank bailout program will move into a profit for the first time on Wednesday with the expected repayment of $7.4 billion in taxpayer funds, Treasury officials said.

The transfers to the Troubled Asset Relief Program will push recoveries from banks to $251 billion in repayments of capital, dividends, interest and other income. It invested $245 billion in banks during the financial crisis to help avert a U.S. financial system collapse. The officials did not identify the banks expected to repay funds. But SunTrust Banks Inc and Key Corp said on March 18 that they planned to repay $4.9 billion and $2.5 billion, respectively. The repayment from the third bank would likely be much smaller.

The Treasury has estimated it will earn about $20 billion in profits from the bank portion of TARP.

[Toddsterpatriot]

What? Impossible!

[Toddsterpatriot]

Who knew? Ping!

[Horusra]

I wonder if its QE money?

[griswold3]

The TARP funds used to repay treasury still came from the banks’ customers, in other words the TAXPAYERS still footed the bill.
Rewarding bad behavior will net even more bad behavior.

[Toddsterpatriot]

The TARP funds used to repay treasury still came from the banks’ customers

I hate it when profitable banks repay their debts.

in other words the TAXPAYERS still footed the bill.

Just the ones who owed the banks money.

Rewarding bad behavior will net even more bad behavior.

But enough about Congress.

[griswold3]

You must not have gotten any notices that your bank fees and credit card rates were going up after TARP was initiated.
The losses from the bad players should have been taken. instead we’ve misallocated a massive sum of money to keep the TBTF banks alive.

[Toddsterpatriot]

You must not have gotten any notices that your bank fees and credit card rates were going up after TARP was initiated.

I don't pay any fees and haven't carried a credit card balance in years.

The losses from the bad players should have been taken.

Banks lost billions.

[expat_panama]

Those of us without tinfoil hats have known Bernanke's 2008 TARP was both necessary and profitable.  My bet's the story's breaking now is because liberals want to keep confusing TARP with Obama's spending so they can justify even more spending and pan the Republican congress' budget cuts.  

Note how libs and their useful fools on these threads call them both 'bailouts'.

[MichiganConservative]

Those of us without tinfoil hats have known Bernanke's 2008 TARP was both necessary and profitable.

Those of us who can read and understand the US constitution and understand the evils of government intervention know TARP was illegal and evil.

But whatever. When you are a moral relativist, the ends justify the means. Are you a banker? Are you making money off this? Or did you buy the hype and want to rationalize your decision?

[expat_panama]

Those of us who can read and understand the US constitution...

Great, always nice to meet with others with so much in common; let's go over it together starting with Article 1 Section 8  "The Congress shall have Power To...   ...coin Money, regulate the Value thereof..." 

We still together?

[Toddsterpatriot]

Those of us without tinfoil hats have known Bernanke's Paulson's 2008 TARP was both necessary and profitable.

[expat_panama]

Bernanke's Paulson's 2008 TARP

Huh, and all this time Bernanke's Paulson's been getting all the credit blame.

[jimt]

Senator Grassley says they might be “repaying” TARP using SBA loans.

In other words, the goobermint is loaning them money to repay their TARP loans.

[Toddsterpatriot]

Senator Grassley says they might be “repaying” TARP using SBA loans.

They? I'm not that familiar with the SBA. Aren't the loans they provide pretty small? I mean the two main banks discussed in this article are paying back $7.4 billion, I'd be surprised if the SBA loans more than 7 figures to a single business.

[CutePuppy]

You must not have gotten any notices that your bank fees and credit card rates were going up after TARP was initiated.

Fees and rates have absolutely nothing to do with TARP. For the real culprit of higher fees and charges and reduction in free services look at the Dodd-Frank "financial reform" passed last year. It put many regulations intentionally and specifically designed to cut profit of banks and many other financial institutions and financial services providers.

It also established the Consumer Financial Protection Agency, embedded into the Federal Reserve so it would be unaccountable to Congress, chaired by famous crusader and foe of banks, credit card companies, and capitalism in general (and participant in Michael Moore movies and other anti-credit "mokumentaries") - Elizabeth Warren.

As part of new law and regulations the Fed had to propose Draconian cuts in debit card fees, which may cut as much as $80B worth of credit from the economy annually, private investment services including trading, derivatives and other "free" or inexpensive services that used to be part of banks' profit...

As usual, and as was expected, the banks have to make up for the lost profit somewhere else, which in this case would be you, the customer - the same one that Dodd-Frank was ostensibly passed to protect from the "evil" banks.

In case you haven't been following this (sounds like you haven't), here are some links and excerpts:

From $5 Fees May Be Coming to an ATM Near You - CNBC, 2011 March 31

J.P. Morgan Chase and other banks are trying to recoup approximately $30 billion a year in lost overdraft fee income by testing $5 ATM fees, Consumer Action spokesman Joe Ridout told CNBC. These banks have "historically been reliant on overdraft fees," he said, so they're "coming up with new ways to make up the difference." He said higher ATM fees and other rising costs penalize small depositors. Nessa Feddis, spokeswoman with the American College of Consumer Financial Services, agreed there are "enormous pressures on banks because of lost revenue." ..... < snip >

From JPMorgan's Dimon Warns of Regulatory 'Nail' in Coffin - CNBC / FT, 2011 March 31

Jamie Dimon, chief executive of JPMorgan Chase, launched a broadside against financial regulation on Wednesday, warning that new capital rules could be "the nail in our coffin for big American banks." ..... < snip >

..... On Tuesday, Alan Greenspan, the former Federal Reserve chairman, wrote in the Financial Times that the Dodd-Frank financial reforms risked creating "the largest regulatory-induced market distortion since America's ill-fated imposition of wage and price controls in 1971". ..... < snip >

..... John Tester, Democratic senator from Montana, has closed in on the 60 votes he needs to overturn the rule. He was supported on Wednesday by Mr. Dimon who called it "basic price fixing at its worst". ..... < snip >

..... Attacking another aspect of Dodd-Frank, Mr. Dimon said rules requiring companies to put up collateral as they trade derivatives would "damage America". Gesturing at the chief executive of Caterpillar , Mr. Dimon predicted the industrial company would take its derivatives business to Singapore. He said the new law had failed to improve the regulatory architecture. "We had a system of too many regulators, too much overlap and too many gaps. Instead of simplifying and strengthening, we added more. It's even more complicated now." ..... < snip >

Wells Fargo Halts Enrollment in Debit-Card Rewards, Citing New U.S. Rules - BL, by Dakin Campbell - 2011 March 25

From US Debit Fee Caps May Hurt Poorest Customers: Dimon - FR / Reuters via CNBC, posted by CutePuppy, 2011 January 14 (you've been warned)

Federal limits on debit card processing fees will force banks to charge customers more for services, making accounts too expensive for as many as 5 percent of customers, JPMorgan Chase & Co's chief executive said on Friday.

The rules, proposed as part of the Dodd-Frank financial reform law, would cap the fees that merchants pay banks for processing debit card transactions at 12 cents each. That is almost 75 percent less than the average 44 cents per transaction that banks get now. .....

Here's Barney Frank to the rescue!
If Big Banks Raise Fees, Bank Elsewhere: Rep. Frank - CNBC, by Michelle Lodge, 2011 March 25

Should big banks jack up fees, Rep. Barney Frank, (D-Mass.), told CNBC Friday, he would urge bank customers to shop around and find community banks and credit unions that offer services for free. ..... < snip >

Don't worry, the Democrats will find a way to "protect" you again from the "evil bankers" who obviously exploited some "loopholes" in the "good-for-you" Dodd-Frank Financial "Reform" Act.

[Sprite518]

It gets even more crazy. Go to Drudge Report right now at the top of the page. Tried to post it, but Free Republic is not that free. It will not let me post it? Perhaps it’s a joke?

[Toddsterpatriot]

The Monetary Control Act of 1980 says that a U.S. branch or agency of a foreign bank that maintains reserves at a Fed bank may receive discount window credit.

Why is this crazy? Fully collateralized short term loans are a joke why exactly?

[Sprite518]

If it’s no big deal, then why was Ben Bernanke hiding it?

[Toddsterpatriot]

There used to be a pretty big stigma for borrowing at the discount window. Regulators would wonder why you couldn't find enough consumer deposits to fund your loans.

The fear now is that if the public finds out a bank took out a discount window loan, it could trigger a run on the bank.

Going forward, the Fed has to release that info, with a 2 year lag.

[CutePuppy]

Want to know what’s really crazy?

With all the indignant uproar and claims on FR and by many clueless conservative “leaders” that TARP (and its smaller foreign equivalents) was “illegal,” a “bailout” of the banks and bankers, and how it was the taxpayers money “given” to the fat-cat bankers, and the bashing that Bernanke and Paulson have, and still receive on FR and elsewhere for their role in TARP - this was the only article posted on FR on the subject of TARP and its [not unexpected] success... and in 3 days it garnered only about 20 replies from less than 10 people.

Wanna bet how many posts and replies and associated hue and cry you would see on FR if the headlines would state that TARP was losing more money than “expected”?

Most people on FR apparently still don’t understand how close the civilized world’s financial system was to collapsing and how necessary TARP was to inject liquidity into temporarily illiquid financial system, deflating and frozen credit markets, and instill confidence in the worldwide financial / banking system to stop the runs on the banks and then, for a time, help sustain the liquidity of commercial paper repo market.

Bernanke, being a student of Great Depression and the mistakes that were made by the Fed and the Congress at the time, was uniquely in the right place at the right time.

Hank Paulson used his credibility and energy to convince Bush and clueless lawmakers of the necessity of the immediate action and, instead of being credited and given their due as heroes, they somehow became the most reviled people among the economically illiterate or politically obstinate (sadly, including many conservatives).