Don't kid yourself that this means these banks are healthy - far from it. It means they want to go back to their old carefree, criminal ways:

The Treasury Department cleared the way for 10 big banks on Tuesday to start repaying billions of dollars in taxpayer aid, a crucial step in easing the government’s grip after an unprecedented series of interventions.

The banks were deemed strong enough to leave the Troubled Asset Relief Program, or TARP, after months of lobbying and strong performances on recent stress tests. The banks are expected to return about $68.3 billion to the Treasury Department, more than double the administration’s initial estimate of about $25 billion in funds to be returned this year. The timetable is also earlier than government officials originally intended.

Although the Treasury did not identify the banks, people briefed on the situation said they include American Express, Bank of New York Mellon, the BB&T Corporation, Capital One Financial, Goldman Sachs, JPMorgan Chase, the State Street Corporation and US Bancorp. All passed the stress test and applied to return their TARP funds. Another bank, Morgan Stanley, which needed to raise $1.8 billion after the stress test, was also said to have received permission, as was Northern Trust, a large custodial bank that did not undergo the stress test.

The $68.3 billion represents about a quarter of the TARP money given to banks. So far, 22 small community banks have been allowed to return $1.9 billion in government money.

Within the next few days, the big banks will be able to wire the money back to the Treasury Department. Still, they will not fully get out from under the government’s thumb until they rid themselves of warrants giving taxpayers a share of the potential upside on their investments.

Analysts say warrants for the 10 big banks could be worth as much as $4.6 billion. Treasury officials have not disclosed how they plan to value and sell them.

This whole incestuous mess just gets worse and worse, doesn't it? It appears the foxes are dining quite well while working as henhouse security guards:

Last month, a little-known company where [Larry] Summers served on the board of directors received a $42 million investment from a group of investors, including three banks that Summers, Obama’s effective “economy czar,” has been doling out billions in bailout money to: Goldman Sachs, Citigroup, and Morgan Stanley. The banks invested into the small startup company, Revolution Money, right at the time when Summers was administering the “stress test” to these same banks.

A month after they invested in Summers’ former company, all three banks came out of the stress test much better than anyone expected -- thanks to the fact that the banks themselves were allowed to help decide how bad their problems were (Citigroup “negotiated” down its financial hole from $35 billion to $5.5 billion.)

The fact that the banks invested in the company just a few months after Summers resigned suggests the appearance of corruption, because it suggests to other firms that if you hire Larry Summers onto your board, large banks will want to invest as a favor to a politically-connected director.

Continue reading »

Oh, boo hoo! How dare the Fed stop him from having his way? More to the point, how dare they say "no" to a Wall St. player? (Which begs the rhetorical question: Don't these people ever learn?)

CAINSVILLE, Mo. — No one seems to want to own a business in this dusty, windswept corner of rural America, population 370, with its crumbling sidewalks and boarded-up storefronts.

Except, that is, for J. Christopher Flowers, a media-shy New York billionaire who last year bought the First National Bank of Cainesville, one of the United States’ smallest national banks.

Mr. Flowers, a private equity manager, has no particular love for rural Missouri; in fact, he has never set foot in Cainsville. Rather, he wants to use the national bank charter he picked up in this farm town to go on a nationwide buying spree.

With that charter in hand, Mr. Flowers plans to take over a handful of large struggling banks, casualties of the economic crisis. In some cases, he hopes, the federal government will help.

But Mr. Flowers, whose investments in banks overseas have made him one of the richest men in America, has run into a major obstacle in the United States: the Federal Reserve, and its very notion of what a bank should be.

The Fed does not mind if private equity firms have a minority interest in banks — the Obama administration even wants them to invest. But the Fed will not let them take control, a stance the firms are lobbying regulators mightily to change, especially given that stress test results to be released Thursday are expected to show a glaring need for capital in the banking system.

It’s not personal, Fed officials say. It’s just that as the nation recovers from one of the worst banking crises in history, the Federal Reserve wants to make sure that it does not set the stage for the next financial implosion by turning banks over to private equity firms, some of the riskiest players in the business world.

So while Mr. Flowers was able to buy the bank here with his own money, he cannot tap into the billions his firm, J. C. Flowers & Company, has raised.