Wells Fargo Poised to Repay Bailout Funds Taken During the Peak of the Foreclosure Triggered Crisis
Wells Fargo is poised to repay bailout funds taken during the peak of the foreclosure triggered crisis. It is planning to sell new stock worth $10.4 billion so as to repay the government all of the funds ($25 billion) taken at the height of the financial mayhem last year.
This was announced by this mega bank, based in San Francisco, only few hours after Citigroup declared that it would repay the $20 billion it had taken from the taxpayer’s kitty.
A spokesperson of Wells Fargo said that the bank was not making this announcement because of the earlier move by Citibank. She said, “We’ve said for quite some time that we wanted to repay at the appropriate time.”
By repaying the bank hopes to get out of the restrictions imposed upon it by the Federal Government. It has also been subjected to rigid supervision that accompanied the taking of the bailout funds. Wells Fargo said that it has paid $1.4 billion as dividends to the Federal Government as per the agreement terms.
The bank hopes that its plans will bring down the income of its final quarter by $2 billion but add to the per-share income this year. By returning the money the bank will save itself from giving $1.25 billion per year in preferred stock dividends.
The plans of Wells Fargo is to raise $1.35 billion by awarding stock instead of some of it as cash that it had scheduled to give out as bonuses. The issuing of its stocks would benefit the bank. By the end of 2011 the bank is planning to sell assets worth $1.5 billion to enable it reach the targeted amount.
Citigroup said last Monday on 12th April that it would return the $20 billion it had previously taken from TARP. The latter had been launched in 2009 to bring back stability to the financial sector by giving cash to the banks as a cushion for it fall back on.
The banks have been eager to return the money to get back its independence and side step the supervising by the Federal Government. The banks had come in for harsh criticism for paying heavy bonuses to its executives in these tough days while everybody else was suffering. The firm stand taken by the government made Goldman Sachs say that it would not give out cash bonuses to its employees for 2009 but would instead pay in stocks that could be sold only after five years.
