Wells Fargo & Co. (WFC) and Citigroup Inc. (C) unwrapped their Christmas presents to themselves Wednesday: They both repaid their government aid, escaping heightened regulatory and public scrutiny.
Wells Fargo said it completed its $25 billion repayment, and Citi followed with its announcement that it wired $20 billion and tore up guarantees it received from the U.S. government for losses stemming from securities tied to soured mortgages.
Both banks were forced to raise capital that diluted shareholders' equity to exit the Troubled Asset Relief Program, but the restrictions that came with the aid program and the distraction to management that resulted from holding the funds drove both banks to repay.
With the actions by Wells Fargo and Citi, the nation's four largest banks have returned their aid packages, as have several large regional banks. The largest banks that haven't yet repaid their TARP funds are PNC Financial Services Group Inc. (PNC) and SunTrust Banks Inc. (STI)
The rush to repay signals that banks once more have access to private capital. But it also reflects bankers' resistance to government influence, which restricted executive pay and, some said, prevented banks from operating freely.
It wasn't a foregone conclusion that Wells Fargo and Citi would repay their TARP funds by Christmas. Bank of America Corp. (BAC) surprised investors by announcing plans to repay $45 billion in TARP aid earlier this month. Citi had been eager to return the funds, but wrestled with regulators about the terms. It announced its repayment plans on Dec. 14, and Wells Fargo followed later the same day.
Source: Wall Street Journal | Matthias Rieker
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