Tabs

Friday, July 9, 2010

TARP Banks Yield Better Return for Taxpayers Than S&P 500

The taxpayers’ profits from the bank TARP programs are no surprise to the banking industry; in fact, in testimony before Congress nearly a year and a half ago (January 2009), the American Bankers Association (ABA) stated: “There is also the misperception that somehow taxpayers are going to lose money on the CPP [Capital Purchase Program of TARP]. ABA strongly believes that Treasury will make money on the CPP – billions of dollars.” [1]

Nearly 18 months later, it is now more widely recognized that TARP investments in banks are providing taxpayers with a significant return. According to a July 6 report from Keefe, Bruyette & Woods Inc., bank TARP programs yielded on average 5.5% more than the S&P 500 returned over the same period. The taxpayers earned an average 10.3% return on banks repaying their TARP investment, with returns equal to or exceeding 20% for six of the bank investments.

As of June 30, 2010, banks had repaid $138.4 billion, or roughly 75% of the Treasury’s investments. Additionally, banks paid $14.9 billion in dividends and interest, or 98% of scheduled payments. Treasury has also received $17.5 billion from warrants and the sale of Citigroup stock.

According to a Treasury spokesman, “almost all of the $24 billion in profits TARP has realized to date has emanated from the banking sector,” a fact ABA has been predicting all along.


Sources:
1. Testimony of Edward Yingling on behalf of the American Bankers Association to the House Financial Services Committee. January 7, 2009.
2. “Return on Banks Receiving TARP Payments Exceed S&P Financials Index, Study Reports,” Daily Report for Executives. BNA. July 8, 2010.

No comments:

Post a Comment

Please read our comment policy before making a comment.