10 U.S. banks repay $68 billion in TARP funds

A key government effort to ease the credit crisis reached a milestone yesterday as 10 large banks, including Virginia-based Capital One Financial Corp., said they had repaid a total of $68 billion in bailout funds.

The Treasury Department said last week that the banks could begin repaying money they received under the $700 billion financial system bailout known as the Troubled Asset Relief Program, or TARP. The government created the program in October as its flagship effort to address the global credit crisis and teetering financial markets.

McLean-based Capital One said in a regulatory filing that its $3.57 billion payment included accrued dividends on the 3.6 million preferred shares the government held.

Winston-Salem, N.C.-based BB&T Corp., which has significant presence in the Richmond area, repaid $3.1 billion.

"Our strong capital position allowed us to pay back TARP in a very short amount of time," BB&T CEO Kelly King said. "Now we have a singular focus on the business of serving our clients."

Meanwhile, officials hustled to prepare an announcement about the pricing of stock warrants that the Treasury holds -- a final barrier to the banks' ending their ties to the bailout program. The warrants allow the Treasury to buy the banks' stock at a fixed price at some future date. The banks now want to buy back those warrants.

And a congressional watchdog called for more transparency about the warrants and the repayment process.

The flurry of activity around TARP comes after months of criticism from opponents of government intervention in the financial industry. It showed that some of the biggest TARP investments are winding down sooner than many had feared.

More than $70 billion has been returned to the fund. That includes yesterday's redemptions and about $2 billion in earlier repayments from smaller banks.

But until the banks can buy back the stock warrants from the Treasury, they remain entangled in a program that has subjected them to limits on executive pay and other restrictions. The banks have chafed against TARP from early on, fearing government-imposed rules could hurt their profits and prevent them from hiring or keeping top talent.

The warrants are hard to price because their values will fluctuate along with the banks' stock prices. The Treasury wanted more money to unwind the contracts than the banks were willing to pay.

Uncertainty surrounding the warrant sales raises questions about whether the Treasury "is getting the best possible price for taxpayers," the Government Accountability Office charged in a report released yesterday.

The GAO also urged the Treasury to create consistent rules for evaluating bank requests to buy their way out of TARP.

The Associated Press and Bloomberg News contributed to this report.