Treasury Secretary Timothy F. Geithner told a congressional panel Tuesday he was eager for companies to pay back the nearly $600 billion already loaned out under the Troubled Asset Relief Program implemented last fall, but was uncertain about what hurdles those banks would have to first clear.
Banks that took the money are not only required to pay 5 percent interest, the are subjected to new regulations regarding disclosures and executive compensation.
But they can’t simply say “no thanks” and write a check to the Treasury if they don’t need the money, Geithner said.
“The basic objective that’s guiding what we do is to make sure the system is working as a whole” when deciding whether to take back TARP money, Geithner told the panel, which is charged with overseeing TARP.
The “ultimate test,” Geithner told the panel, is whether having a certain bank return the money is good for the credit system.
Companies such as JPMorgan Chase have been clamoring to return their money, saying they do not want to operate under the control of the government and have recovered enough to go it alone. Chase took $25 billion in bailout money but says it is healthy enough now to do without the aid.
Minneapolis-based TCF Bank apparently cleared the government hurdle for returning tarp money. The bank on Wednesday will write a check to the U.S. Treasury for $361.2 million, the largest TARP refund so far.
Bank spokesman Jason Korstange said the company has always been able to make loans and never needed the money, but took the funds last fall when it was offered as a way to allow TCF to buy other troubled banks. But Korstange said the government changed the rules midway, making it impossible for TCF to buy other banks.
“We took it because we thought we were being good citizens,” Korstange said. “We thought we could possibly help out and acquire some of these banks and put them under our management and possibly make them better, and in making them better you would improve the communities in which they were a part. But it became clear you couldn’t do that.”
Korstange said the company, which has so far paid about $8 million in interest on its TARP loan, asked the Treasury to take back the money Feb. 17. Sixty days later, it accepted.
