Finance Globe

U.S. financial and economic topics from several finance writers.
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BofA Pays Back Entire $45 Billion in TARP Funding

Bank of America announced last week that it would repay the entire $45 billion received from the Troubled Asset Relief Program (TARP).

Paying back the funds would allow the North Carolina-based bank to break free of the federal government's restrictions and save approximately $3.6 billion annually in interest payments to the government. BofA has already paid $2.54 billion in dividends to the U.S. Treasury since the bank initially received TARP funding.

And on Wednesday, the U.S. Treasury Department announced that it has received the full payment form BofA - which puts the total amount of repaid TARP funds at $118 billion. The Treasury now estimates that total bank repayments could reach up to $175 billion by the end of 2010, cutting total taxpayer exposure to the banks by almost three-quarters from the peak.

"We appreciate the critical role that the U.S. government played last fall in helping to stabilize financial markets, and we are pleased to be able to fully repay the investment, with interest," said Kenneth D. Lewis, chief executive officer and president in last week's company statement. "As America's largest bank, we have a responsibility to make good on the taxpayers' investment, and our record shows that we have been able to fulfill that commitment while continuing to lend. We believe that this is good news, not only for the U.S. taxpayer and our company, but for the country as it is a milestone indicating that public policy has succeeded in helping our industry and the economy begin to recover."

"Adding TARP to our capital has allowed Bank of America to continue to support the economy. In the 12 months since the government first made its investment in Bank of America, our company originated $760 billion in new credit, or approximately $3 billion per business day," Lewis added. "Importantly, this includes our leadership role in financing home ownership, helping more than 1.54 million customers purchase a new home or refinance their existing mortgages and another 423,000 homeowners modify their loans to avoid foreclosure."

The Treasury estimates that every one of its programs aimed at stabilizing the banking system – the Capital Purchase Program, the Targeted Investment Program, the Asset Guarantee Program, and the Consumer and Business Lending Initiative -- will earn a profit thanks to dividends, interest, early repayments, and the sale of warrants.

Total bank investments of $245 billion in 2009 that were initially projected to cost $76 billion are now projected to bring a profit of $19 billion, the Treasury reported. "Taxpayers have already received about $15 billion in revenue through interest, dividends, and the sale of warrants, and that profit could be considerably higher as Treasury sells additional warrants in the weeks ahead."


Sources:
U.S. Department of the Treasury
Bank of America
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Thursday, 22 August 2019

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