San Francisco-based Wells Fargo today said it would repay its $25 billion in bailout money, making it the last major bank to reach a deal to wipe the slate clean with the U.S. government. The Wells Fargo announcement came on the same day that Citigroup said it would repay it’s $20 billion it received under the government’s Troubled Asset Relief Program, or TARP. Bank of America returned $45 billion in TARP money last week.
After scrambling for days to reach a deal with U.S. regulators, banking giant Citigroup – one of the most troubled icons of the financial crisis – announced today it has reached an agreement to repay $20 billion in bailout funds and “terminate the loss-sharing agreement” with the government. “We owe the American taxpayers a debt of gratitude and recognize our obligation to support the economic recovery through lending and assistance to homeowners and other borrowers in need,” said Citi Chief Executive Officer Vikram Pandit.
The Obama Administration’s mortgage modification effort to rescue homeowners from foreclosure is caught in a crossfire. On one side, the lenders say they are struggling to get borrowers on board with tough paperwork rules that require additional staff – a bureaucratic “struggle,” a top lender called it. On the other side, administration officials are now formulating financial penalties and other actions against the mortgage servicers that they determine are not keeping pace.
It is shaping up to be a whirlwind stay in Washington, D.C. next week for Citigroup Chief Executive Vikram Pandit, as he reportedly plans to meet with President Obama and try to negotiate a bailout repayment deal with officials. Pandit reportedly wants out of the unenviable spot of being the remaining top bank chief not to orchestrate a repayment of Treasury bailout funds under the Troubled Asset Relief Program. He is reportedly seeking to hash out a deal next week.
The U.S. Treasury earned $936 million from the sale of warrants to purchase stock in JPMorgan Chase & Co., the highest single return from investments linked to the bank bailouts. The auction of the Chase warrants – priced at $10.75 per warrant – fetched above the set minimum of $8, but lower than expectations.
Mortgage bankers and broker-dealers are strongly opposing the so-called “cram-down” amendment – allowing judges to modify mortgage terms in bankruptcy cases. The amendment is now attached to a broader financial reform bill in the House that may come to a vote today. The controversial provision, introduced by Rep. John Conyers, D-Michigan, chairman of the House Judiciary Committee, would allow bankruptcy courts to reduce mortgage interest rates, adjust principal balances or extend the term lengths of mortgages to rescue homeowners who face foreclosure.
Obama Administration officials are considering a mechanism for re-shifting bailout money to rescue small businesses still mired in a tight credit market. The strategy for refocusing bailout funds will likely, to some extent, come from a host of ideas presented to President Obama seven days ago in a report by the U.S. Treasury titled, “Small Business Financing Forum.”
The Obama Administration said today its modification program to help homeowners avoid possible foreclosure has converted only 31,382 mortgages to permanent status, out of 728,000 underway. The monthly report found that borrowers in modifications are saving an average of over $550 per month.
Speaking before the bailout program’s Congressional Oversight Panel, U.S. Treasury Secretary Timothy Geithner defended his extension of the program through October by outlining a four-part exit strategy he called crucial to economic recovery. “I can report significant improvements in our financial markets and economy, as well as the positive financial results” of the bailout programs, Geithner said. “However, our job is far from finished. History suggests that exiting too soon from policies designed to contain a financial crisis can significantly prolong an economic downturn.”
Foreclosure filings — default notices, scheduled auctions and bank repossessions — hit 306,627 U.S. properties in November, the ninth straight month of 300,000-plus filings, reported RealtyTrac, an online marketplace for foreclosures. One in every 417 U.S. housing units received a foreclosure filing in November, the report said.