Blogs and Stories
Goldman and JP Morgan Poised to Pay Back Taxpayers—UPDATED
Evan Vucci / AP Photo
UPDATE: More than two weeks after it was first reported by The Daily Beast’s Charlie Gasparino, Goldman Sachs and JPMorgan Chase appear poised to receive approval to repay their Troubled Asset Relief Program loans. On Monday, The Federal Reserve outlined the process it would use to allow banks exit TARP, and both Goldman and JP Morgan—which raised additional capital, perhaps to address consumer loan issues brought up by The Daily Beast—confirmed that they plan to do so this month. Additionally, Morgan Stanley will now sell $2.2 billion worth of stock in an effort to follow suit.
Wall Street may have another reason to hate Goldman Sachs: The venerable firm with contacts throughout the federal government looks as though it may be the first financial institution to be allowed to repay government bailout money, The Daily Beast has learned. Repaying its Troubled Aseet Relief Program loan would free Goldman from various restrictions, including those on the compensation of key executives.
The decision as to which banks would be given the green light from banking regulators, most notably the Federal Reserve and the Treasury Department, could be made as early as next week, these people say. Goldman already has a tentative approval from the Treasury and is awaiting approval from the Federal Reserve, according to one person with knowledge of the matter.
JP Morgan feels comfortable they have convinced both the Treasury and Fed that they should be allowed to repay the money along with the first group of banks.
During the height of the financial crisis, the federal government handed out billions of dollars in aid to the big banks in an effort to boost capital levels depleted by bad real-estate loans and bonds. While the bailout money helped stabilized a spreading financial panic, it also led to massive government ownership of some of the nation's largest banks and controls on business practices and compensation.
As the financial crisis has abated, some banks, most notably Goldman Sachs, JP Morgan Chase, Bank of America, and Morgan Stanley have said they can now repay the money and get out from under federal control. The government must first approve the measure; last week it announced results of so-called stress tests to determine which banks have the most capital to withstand further erosion in business conditions. The government also announced two conditions to repay the money: The issuance of debt that is not backed by FDIC insurance and sufficient "tier one" capital levels. Tier one capital is the strongest capital in the market.
Based on the stress tests, Goldman Sachs and JP Morgan were deemed to be among the strongest of the big banks; unlike Morgan Stanley, Bank of America, and Citigroup, both Goldman and JP Morgan were not required by regulators to raise capital levels. Since that time, officials at Goldman and JP Morgan have been pressuring regulators to allow them to repay the bailout money that was granted from TARP.
According to sources, Goldman appears to be furthest along in getting final approval to repay the $10 billion loan; JP Morgan would have to repay $25 billion. These people, speaking on the condition of anonymity, say one obstacle JP Morgan may be facing is that unlike Goldman, which recently converted from a securities firm into a more traditional bank, JP Morgan has been a commercial bank from the beginning and thus it has large exposure to credit-card debt and other consumer loans that may go sour depending on the length and breadth of the recession.
Another person close to the situation says people at JP Morgan feel comfortable they have convinced both the Treasury and Fed that they should be allowed to repay the money along with the first group of banks that will be allowed to do so; that announcement, these people say, could be made as early as next week.
The Right Dumps Carrie
Jacob Bernstein is a senior reporter at The Daily Beast. Previously, he was a features writer at WWD and W Magazine. He has also written for New York magazine, Paper, and The Huffington Post.
What's Joe's Problem?
Lloyd Grove is editor at large for The Daily Beast. He is also a frequent contributor to New York magazine and was a contributing editor for Condé Nast Portfolio. He wrote a gossip column for the New York Daily News from 2003 to 2006. Prior to that, he wrote the Reliable Source column for the Washington Post, where he spent 23 years covering politics, the media, and other subjects.
Geithner's Stock Plummeting
Jeff Madrick is a contributor to the New York Review of Books and a former economics columnist for the New York Times. He is editor of Challenge Magazine, visiting professor of humanities at Cooper Union, and senior fellow at the New School's Schwartz Center for Economic Policy Analysis. He is the author of Taking America, The End of Affluence (Random House) and The Case for Big Government.
The Best Job No One Wants
Charles Gasparino is CNBC's On-Air Editor and appears as a daily member of CNBC's ensemble. He is a columnist for the Daily Beast and a frequent contributor to the New York Post, Forbes, and other publications. His forthcoming book about the financial crisis, The Sellout, is scheduled to be published later in 2009.
Wall Street's Grinch Speaks
Charles Gasparino is CNBC's On-Air Editor and appears as a daily member of CNBC's ensemble. He is a columnist for the Daily Beast and a frequent contributor to the New York Post, Forbes, and other publications. His forthcoming book about the financial crisis, The Sellout, is scheduled to be published later in 2009.
Wall Street Will Walk
Charles Gasparino is CNBC's On-Air Editor and appears as a daily member of CNBC's ensemble. He is a columnist for the Daily Beast and a frequent contributor to the New York Post, Forbes, and other publications. His forthcoming book about the financial crisis, The Sellout, is scheduled to be published later in 2009.
Those filthy scumbags! They are still paying it WITH OUR MONEY. They stole our money by laundering it through AIG as a 'counterparty'. Why in the heck is the government not recognizing this garbage? Where is the Change We Needed?
Brings tears to ones eyes, how dare they be so ingrateful and want to pay back the taxpayers monies because it infringes on their pay and bonus packages, and keeps the government from taking control.....how callous of them.
This user is no longer registered.
The financial institutions need the regulations to protect the American people, and I want the money back!
I say yay! And let them all do the same and then regulate them like no tomorrow.
Who cares. I want all the money back that they got from AIG using taxpayer funds, and the other government aid they got other than in the form of the direct bail-out loan. That dwarfs their token loan by comparison. They don't deserve to be celebrated for returning the loan -- the AIG taxpayer money rhey received alone could have covered it many times over.
This user is no longer registered.
Now wait a minute Baba Louie. Goldman has been the recipient of a lot of other money that the Fed and the treasury has doled out to others that Goldman has done business with. They Need To Pay That Back Too. Don't have Peter robbing Paul, then blame Paul for the money he borrowed. Someone else is on the hook for all that borrowed money that Goldman got from other bailout recipients. If they go under because they gave Goldman all that money, the taxpayer will be footing the bill for those bonuses that Goldman is looking to pay. Now that is paying the fox for guarding your chickens.
These banks are the biggest welfare queens in US history, and all they do is rip off the consumer and lobby constantly against the public interest. They would all be out of business now if the government hadn't saved them--and they would have deserved to go under. I think people are going to despise and distrust them all for at least a generation.
Michael C. McHugh
http://secondprogressiveera.com
The top 10 or so banks are as you say -"welfare queens." The other 20000 or so are well run enterprises. This whole crisis has been manufactured to save a few institutions that should have been allowed to fail. unfortunately, we had crony capitalism under Bush and Gangster socialism under Obama. I'm not sure which is worse.
This user is no longer registered.
The bankers need to unite against this type of political favoritism. Get on the news channels, Meet the Press, and let the whole world understand what's going on
Let them pay it back. I want the banks and AIG to pay back every single cent that they borrowed. The government also need to start having much stricter regulations and therefore limiting how much risk they can take with their clients money.
I agree with you, but there is no money to pay back. It doesn't exist. never did, it was all made up, fake, bogus, just like the former president.
Bankers unite? Oh those poor greedy bastards- are they going to lose their bonuses this year? They should all lose their bonuses until regualtions are in place to limit their theft.
Correct me if I'm wrong but once these banks pay back these loans the Government won't own any part of them anymore and therefore the GOP can't say the president is a socialist? Well, of course, they will still say it but it will be totally without merit.
%45 percent of the US economy is now the government sector. We are at this point in time a socialist country, though we are not very good at it.
This user is no longer registered.
As "Liberal" becomes less and less the "dirty word" conservatives have worked so hard to make it, they are turning more and more to "socialist," hoping (I'm sure) to associate it in the public mind with the USSR under Stalin--rather than the gentler form that works so well in so many countries. Whatever Democrats/Progressives try to accomplish, hidebound Republicans will continue to respond more with name-calling than with intelligent debate.
This user is no longer registered.
For another look at Goldman suspicions, see
http://www.portfolio.com/executives/features/2009/01/07/Goldman-Sachs-Al umni-in-Finance
They are all "forgetting" to pay back all the taxpayer money they got funneled through AIG. Until they pay back that I say NO WAY they go back to their evil ways.
these plutocrats should be in the govt tether until we get the percentage of profits from the financial sector GDP back to the historical range of around 20%--otherwise, we leave them with too much sway with our govt..
According to ABC News, "[Goldman] borrowed $10 billion from TARP funds, they repaid those funds. Have we offered them very cheap financing backed by the government which has allowed them to take great risk? Absolutely. ... If they can turn the page ... it means higher taxes. And for right now ... that is what we need." (quoted from http://www.newsy.com/videos/as_good_as_goldman, edits mine)
I'd be more inclined to believe the "we need higher taxes" line if we knew those taxing us had accountability to pay us back, which I'm still not convinced they do.
Thank you.
As a first time user, your comment has been submitted for review. It can take anywhere from a few hours to a day or two for your comment to be reviewed, depending on the time of week and the volume of comments we receive.
Please log in to leave comments.