Tuesday, May 19, 2009

TARP Repayment Restrictions

by Bill McBride on 5/19/2009 01:28:00 PM

From CNBC: Banks Are Facing Restrictions On Repaying TARP: Sources

Among the conditions: no bank will be allowed to repay the TARP until after June 8, when 10 of the 19 biggest banks must present plans to boost their capital under the government's stress tests.
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The government also won't allow any one bank to repay the TARP first but will approve them in batches.
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The banks face other restrictions: they still have to pass another stress test, issue debt that isn't government guaranteed, demonstrate the ability to self-fund in the market and win the approval of their banking supervisor.
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The Treasury will also announce a process for auctioning TARP warrants ...
I'm not sure what "another stress test" means or why they will only be approved in batches. Being able to issue non-government guaranteed debt makes sense.

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