WASHINGTON — The U.S. Department of the Treasury announced on June 9 that 10 of
the largest U.S. financial institutions participating in the Capital Purchase Program (CPP) have
met the requirements for repayment established by the primary federal banking
supervisors.
Following consultation with the primary banking supervisor of each
institution, the Treasury Department has notified the institutions that they
are now eligible to complete the repayment process. If these firms choose to do
so, the Treasury Department will receive $68 billion in repayment proceeds.
Combined with repayments received to date from other institutions, the Treasury
Department will have received approximately $70 billion in repayments from CPP
participants. More than 600 banks across the country have participated in the
CPP, representing $199 billion in investments.
"These repayments are an encouraging sign of financial repair, but we
still have work to do," said Treasury Secretary Tim Geithner.
These repayments follow a period in which many banks have successfully
raised equity capital from private investors. Also, for the first time in many
months, these banks have issued long-term debt that is not guaranteed by the
government.
Under the CPP investment agreements, firms that repay their preferred stock
have the right to repurchase the warrants the Treasury Department holds in
their firms at fair market value. In addition to the Treasury Department's
potential income from sale of the warrants, these 10 institutions have already
paid dividends on the preferred stock totaling approximately $1.8 billion over
the last seven months. Dividend payments received for all CPP participants are
approximately $4.5 billion to date.
Under the Emergency Economic Stabilization Act, proceeds from repayment will
be applied to Treasury Department's general account. These repayments help to
reduce Treasury Department's borrowing and national debt. The repayments also
increase Treasury Department's cushion to respond to any future financial
instability that might otherwise jeopardize economic recovery.
