The Headline Manipulation Buzz - 10 Banks Repaying TARP

Ever wonder when one sees pretty much the same headline on every single news site, blog and aggregator without much detail, how that happens?

(me too).

So what's behind this latest headline buzz of 10 banks paying back $68.3 Billion in TARP funds?

JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley were among 10 lenders that won U.S. Treasury approval to buy back $68 billion of government shares, freeing them from added oversight that curbed lending practices, hiring and pay.

Now wait a minute. That is buying back shares, not necessarily repaying the real amount. Is that market value for these shares? Is that the price which the Government paid for them?

The New York Times:

the plan is not without risks. The government is giving up $1.8 billion in annual interest payments while leaving its support programs in place, even for banks that repay. That means that taxpayers are giving up part of their upside while continuing to be liable for losses.

The firms are getting warrants, which behave like stock options:

Firms buying back the government’s preferred shares also have the right to repurchase warrants the Treasury holds “at fair market value,” today’s statement said.

Herb Allison, the Obama administration’s nominee to run TARP, told lawmakers last week that the Treasury would soon announce details of its policy handling the warrants. The total value of the warrants is about $5 billion, according to Treasury calculations made last month.

Some good news is the warrants require the Banks stick to some of the executive pay restrictions and not displacing U.S. workers with H-1B foreign guest workers.

Calculated Risk has a table of each bank announced to repay TARP funds.

Pro Republica has a great summary of how much money each bank has in TARP funds as well as the capitalization requirements from the stress tests.

Ritholtz implies the entire TARP was a glorified fake out to save the beloved mother Citigroup:

The TARP was all a giant ruse, a Hank Paulson engineered scam to cover up the simple fact that CitiGroup (C) was teetering on the brink of implosion. A loan just to Citi alone would have been problematic, went this line of brilliant reasoning, so instead, we gave money to all the big banks

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Citigroup still paying massive bonuses

Citigroup still paying massive bonuses.

In a bid to attract talent, Citigroup ( C - news - people ) has been paying traders in London guaranteed bonuses totaling millions of dollars. Among the lucky recipients are Rachel Lord, an executive in Citi's equities group, and Stefanos Bitzakidis, who is listed on Bloomberg as global head of exotic equity derivatives. The two received a total of roughly $3 million in guaranteed bonuses to join Citigroup from Morgan Stanley this year, says a person familiar with the situation. They are among a number of traders in Citi's equities division who have received guarantees to join the firm in recent months.

Talent??? What talent!

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Fighting to Maintain Status Quo

Now with all this excess capital lying around what will the financial conglomerates do with it?

They are not lending. So, they will use that excess capital to get bigger - more acquisitions or even worse take on more risk.

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