Goldman Sachs, JPMorgan and Morgan Stanley have applied to the Federal Reserve to repay $45 billion in TARP funds. Thus far, 14 smaller to mid-level banks have repaid their TARP funds, but none of the 19 Stress Test banks have been qualified for repayment.

Under the repayment applications, Goldman Sachs and Morgan Stanley would repay $10 billion each and JPMorgan would repay $25 billion. The diminishing TARP fund would increase to approximately $150 billion of taxpayer money.

The big banks want freedom from the fed. TARP funds arrive with government regulations including compensation limitations. The three big banks are seeking to reverse a bad situation and take something positive from their temporary reliance on taxpayers. Banks that repay the TARP funds are expected to launch aggressive marketing strategies that capitalize on their stability.

Treasury Secretary Timothy Geithner said on April 21st that he would accept repayments as long as regulators would agree. Regulators are obligated to decide if the repaying institutions have enough capital to keep lending if the economy hits another downturn. The availability of credit is necessary to keep the economy moving forward.

Analysts have speculated that Treasury would like to establish industry compensation guidelines before accepting any TARP repayments. On Monday, Geithner alluded to “some broad constraints” on financial incentives throughout the financial industry. A February law is awaiting determinations by Treasury on compensation caps for TARP recipients.

In the wake of the TARP repayment release, Citigroup and Bank of America jumped more than 5%. The S & P 500 posted a 0.7% gain on Monday as Lowe’s and BOA earnings came in higher than expected.

This entry was posted on Tuesday, May 19th, 2009 at 1:17 pm and is filed under Economy, Stimulus Plan, recession. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.