The Treasury Department has approved ten banks to repay a combined $68 billion in TARP loans by buying back preferred shares from the government. Many banks who received bailout assistance are anxious to repay the loans not only to show investors that they are healthy, but also so they may operate more freely, in regards to salary levels and lending practices. Among the banks already approved are JPMorgan, U.S. Bancorp, BB&T, and Morgan Stanley. The number of banks having received a total of about $200 billion in TARP money stands at 600; 22 smaller banks had already paid back about $2 billion. Major banks are now allowed to repay the loans for the first time.

 

The repayment of TARP funds is an encouraging sign that the worst of the financial crisis may be behind us, and also lessens the fears of nationalization. However, the issue of the toxic assets remains as they are still on banks’ books and aren’t going away any time soon. Until there’s a method of adequately coping with and pricing them, we have the uneasy feeling that the other shoe could drop. In a sign that the financial sector isn’t out of the woods, Secretary Geithner noted that the funds returned may be needed to help other banks.

 

The economy is not out of the woods yet either.  The Commerce Department reported a worse-than-expected 1.4 percent fall in wholesale inventories for April. April was the eighth straight month of declines for the measure.