GM to buy stake from Treasury, government plans full exit

DETROIT, Wed Dec 19, 2012 — General Motors Co. said on Wednesday it will buy back 200 million of its shares from the U.S. Treasury, which intends to sell the rest of its GM stake over the next 15 months, bringing to an end ownership that led to the nickname “Government Motors.”

Chief Financial Officer Dan Ammann said GM will pay $5.5 billion, or $27.50 a share, for the Treasury stake in a deal expected to close by year-end. That represents a 7.9 percent premium on Tuesday’s closing price.

GM shares rose about 10 percent to $28.05 in premarket dealings.

Treasury said it will sell its remaining stake of about 300.1 million shares “through various means in an orderly fashion” over the next 12 months to 15 months, and could begin the process as soon as January.

GM received about $50 billion from the U.S. Treasury as part of its 2009 bankruptcy restructuring in 2009 under the Troubled Asset Relief Program.

The government bailed out GM and Chrysler Group in a move to protect jobs — a number it put at more than 1 million

Treasury: Regions Financial repays $3.5 billion in TARP funds

WASHINGTON, Wed Apr 4, 2012 – Regions Financial Corp. has repaid $3.5 billion to the U.S. Treasury Department that it received under the bank bailout program and is now fully out of the financial crisis-era program, the Treasury said on Wednesday.

The Treasury said that after the latest payment, the overall positive return on bank investments made under the Troubled Asset Relief Program, or TARP, has reached $18 billion.

A total of $245 billion was invested in banks under TARP’s bank programs and some $263 billion now has been returned in the form of repayments, dividends, interest and other income.

When Treasury put money into a bank during the 2007-2009 financial crisis, it received preferred shares and banks repay the funds by buying back the preferred stock. The Treasury still holds warrants to buy common shares in Regions Financial and could earn an additional return on those.

So far, taxpayers have recovered about 81 percent, or $337 billion, out of the total $415 billion that the government disbursed across all TARP programs.

TARP was set up as a $700-billion program at the height of the 2007-2009 financial crisis and was used as a mechanism for propping up struggling financial institutions that are regaining strength as economic conditions improve.

About 350 banks, mostly smaller ones, still have not paid back the TARP money that they received.

Fast TARP exit meant less capital for some banks: U.S. audit

WASHINGTON ― Some large U.S. banks would have stronger capital bases to better deal with today’s market stresses had regulators not relaxed bailout repayment criteria in late 2009, a new government audit showed on Friday.

Bank of America, Citigroup, Wells Fargo and PNC Financial were allowed to exit the Troubled Asset Relief Program without raising as much equity capital as initially prescribed by the Federal Reserve, the TARP Special Inspector General said in the report.

Following bank stress tests earlier in 2009, the Fed gave several banks guidance that they must raise $1 in common equity for every $2 in TARP bailout funds repaid — a formula meant to enable them to withstand future stresses.

But this standard — which was never previously made public — was quickly relaxed, allowing Bank of America, Citi and Wells Fargo to repay taxpayers nearly simultaneously in December 2009, raising a combined $49.1 billion in equity capital.

Enforcement of the $1 in equity for every $2 repaid guidance would have required $57.5 billion in equity capital to be raised by the three institutions. PNC was later allowed to exit TARP under similar relaxed guidance.

“It’s certainly a missed opportunity to get these banks out of TARP with not only more capital but higher quality capital, which could have had long-lasting consequences in strengthening their capital base,” TARP acting special inspector general Christy Romero told Reuters.

She said regulators “bowed” to pressure from the banks, who were keen to escape executive compensation restrictions associated with the bailout funds. But there was also pressure from the Treasury to allow them to exit TARP more quickly and repay taxpayers, she said.

U.S. bank shares, particularly those of Bank of America, have been hit by funding concerns amid market turmoil this month and Moody’s Investors Service last week cut credit ratings for B of A, Citi and Wells Fargo.xxThe SIGTARP report does not specifically address the current market concerns, but Romero said the original Fed exit guidance was aimed at providing ample and high-quality capital to absorb potential losses and demonstrate the banks’ viability to investors.

“What you see today is the banks selling off assets. While that may raise capital, it’s a one-time hit, and also you’ve just lost potential sources of revenue generation,” Romero said.

The report quotes U.S. Treasury Secretary Timothy Geithner as saying that Treasury pursued a “forceful strategy of raising capital early” to pressure on banks to sell shares sooner rather than later. “We thought the American economy would be in a better position if the firms went out and raised capital,” the report quoted him as saying.

Geithner often cites the U.S. bank stress tests and bank capital raisings of 2009 as a major source of strength for the U.S. financial system and is now pressing European policymakers to ensure their banks have adequate capital to withstand sovereign debt problems.

Tim Massad, Treasury assistant secretary for financial stability, said taxpayers stand to earn more than $20 billion from bailout investments in U.S. banks.

“Treasury wanted the major banks to raise private capital and repay taxpayers because that was necessary to restore stability and strength to the financial system,” he said.