Morgan Stanley to repay TARP

Discussion in 'Wall St. News' started by patchie, Jun 17, 2009.

  1. patchie


    Morgan Stanley to repay TARP

    NEW YORK -- Morgan Stanley is expected to repay its government bailout money on Wednesday, according to a person familiar with the talks between the bank and the government.

    The investment bank will return all of the $10 billion in loans it received last fall during the height of the credit crisis, said the person, who spoke on condition of anonymity because he is not authorized to speak publicly about the bank's plans.

    Morgan Stanley is among 10 of the country's largest banks that won approval last week to pay back a total of $68 billion in funding from the Troubled Asset Relief Program, or TARP.

    Wednesday is the first day that the banks are eligible to begin repaying the funds.

    Returning the TARP money will free the firms from limits on executive pay that the banks had protested, as well as the high dividends the companies must pay under terms of the financing.

    The banks approved to repay the bailout money include eight that passed the government stress tests earlier this year: J.P. Morgan Chase & Co., American Express Co., Goldman Sachs Group Inc., U.S. Bancorp, Capital One Financial Corp., Bank of New York Mellon Corp., State Street Corp. and BB&T Corp. Northern Trust Corp., which did not participate in the stress tests, also got permission.

    Morgan Stanley was told by the government it needed to raise $1.8 billion in additional capital to protect it from future losses in case the economy worsened. After the stress test results were announced, Morgan Stanley immediately raised $3.5 billion in stock, more than covering that shortfall. The bank has since offered an additional $2.2 billion of stock in a public offering.

    Banks wanting to repay the bailout funds first had to prove their ability to raise capital in the public markets without government assistance.

    In addition to Morgan Stanley, other major financial institutions including J.P. Morgan and American Express are also expected to repay TARP funds this week.

    A Treasury Department spokesman could not immediately be reached.

    Copyright © 2009 Associated Press
  2. patchie


    What is interesting about this turn of events is that it was just last September that MS had one foot in the grave. Now, a mere 8 months later they are spinning tales of profitability and have a clean bill of heath from the Treasury’s stress test. Just imagine:

    In September the stock was being raided in a sell-off despite an agreement in place with Mitsubishi for stock purchase at over $25.00/share. The repetition of bogus news touting a broken deal, amidst a sell off, forced a renegotiation of this deal costing shareholders more. MS was about to be the next Lehman or Bear Stearns.

    In come CEO John Mack and his political clout. Regulators impose a mandatory moratorium on short selling and the feds provide billions in TARP money to provide the appearance of stability. Now a few short months later it was if September were just some bad joke played on shareholders. No longer a distressed company, the TARP is being repaid and the bonus pool is once again accumulating capital for end of year handouts that will make most involved happy once again.

    So what would have come of MS had the government efforts not been undertaken? Would the short sales and the false rumors have driven this now ‘solid’ company into the ground? Certainly there were rumors of a MS demise.

    I wonder; how often do events like this occur where the CEO does not have the political clout to acquire protection from the abuses in the market? How many companies would have dried up and gone away instead of surviving as MS has done? How much did shareholders lose in the renegotiation of the Mitsubishi deal, a loss they will incur forever as evidenced by the dilution affect of the renegotiation.
  3. Another major point is the "accurate repayment of TARP"....

    ie GS is going to walk away without repaying the total amount it received from TARP....

    ie the amount paid to GS via AIG is not included in their payback amount....

    TARP repayments are not the correct amounts due....