US may allow mergers among troubled banks
Department may become more aggressive
Washington: The US Treasury Department is considering selling stakes and allowing mergers involving banks in the Troubled Asset Relief Programme (Tarp), an Obama administration official said.
The Treasury is also weighing the restructuring of some of about 370 remaining Tarp banks that received government bailouts during the financial crisis and allowing third-party investments, said the official, who declined to be identified because the information hasn't been made public.
The Treasury may become "more aggressive in offering financial incentives on a case-by-case basis to support third party money and mergers," said Kip Weissman, a partner at Luse Gorman Pomerenk & Schick in Washington, who represents Tarp banks. "The weak banks can't repay the Tarp without help and cajoling."
After lenders including Citigroup, JPMorgan Chase & Co, and Bank of America Corp repaid taxpayer-funded bailouts, most firms left in Tarp are small or regional banks.
Exploring options
The largest include Regions Financial Corp of Birmingham, Alabama; Zions Bancorporation of Salt Lake City; and M&T Bank Corp of Buffalo, New York.
The possible sale of stakes in Tarp banks was reported earlier by Dow Jones Newswires.
In November, the Treasury said it was working with investment firm Houlihan Lokey to explore options to help the government recuperate Tarp money from banks.
Under Tarp, originally approved by Congress in 2008 as a $700 billion (Dh2.57 trillion) programme to rescue financial institutions, the Treasury put cash into banks in exchange for equity stakes. Many bailout recipients repaid Tarp funds, plus interest payments on preferred shares.
The Treasury has estimated that it will profit by about $20 billion on the bank portion of Tarp.
The US Government Accountability Office, in a report last month, said the Treasury has highlighted projected gains while omitting estimated losses in press releases about federal bailouts.
