The US government will be repaid a third of the money it pumped into the country's teetering banks last year, after the Treasury department said 10 banks were strong enough to stand once again on their own two feet.
Financial giants including Goldman Sachs, Morgan Stanley, JPMorgan Chase and American Express were on the list of companies told yesterday they are free to buy back the preference shares and warrants issued to the government during last autumn's financial panic.
The 10 will return $68bn to the Treasury, more than had been expected, freeing themselves from a slew of government controls and marking a new phase in the financial system's recovery from the credit crisis.
President Barack Obama said that the Treasury will make a profit on its investments in the 10 banks. "This is not a sign that our troubles are over, far from it, but it is a positive sign," he said. "I also want to say, the return of these funds does not provide forgiveness for past excesses or permission for future misdeeds."
The administration is still planning to set new rules on finance industry compensation, and is examining proposals to improve the management teams at major banks that are holding on to bailout funds.
When then-president George Bush announced the cash infusions last October, he called the plan "an essential short-term measure to ensure the viability of America's banking system". Since then, more than 600 banks have taken a total of $199bn in government funds, but the cheap money has come with strings, including caps on executive pay and a prohibition on hiring foreign workers, and all recipients are facing greater political and media scrutiny.
Public appearances by Goldman Sachs' chief executive, Lloyd Blankfein, have been disrupted by protests by the so-called "pink ladies", who are campaigning against the Wall Street bailout. Jamie Dimon, the chief executive of JPMorgan Chase, described the money as a "scarlet letter" and railed at having to rescind job offers to foreign employees. Northern Trust, which was also given permission to repay the money yesterday, was attacked for spending millions at a charity golf tournament, featuring private performances by Earth, Wind & Fire and Sheryl Crow.
Ronald Logue, the chairman of State Street, which is paying back $2bn, said: "We have consistently supported the objectives of the capital purchase programme and believe our participation in the programme, as one of the nine banks asked to initiate it, has assisted the federal government's efforts in stabilising the financial markets."
The repayments come after the Treasury conducted "stress tests" of the nation's 19 biggest banks to determine whether they had enough capital to survive a deeper-than-expected recession. Scores of other banks are expected to follow the initial wave.