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CNBC News Associate
Treasury Secretary Timothy Geithner said that the Obama administration will end some of the TARP programs by the New Year. What does this mean for the financial sector?
Mark Lane, equity research analyst at William Blair & Co., and Fred Cannon, co-director of research and chief equity strategist at KBW, shared their insights.
Lane's View:
“The environment is more stable and the companies are comfortable taking a little bit more risk,” Lane told CNBC.
“But the improved trading results we see this quarter was not really driven by increased risk-taking, it was driven a lot by better execution, by continued favorable competitive environment and not undue risk.”
Recommendation:
Lane’s firm has a rating of “Market Perform” on Morgan Stanley stock.
Cannon's View:
Cannon said it’s “time to phase the [government] programs out...the large banks in particular.”
“A lot of the programs have worked and it’s time to start scaling them back and get the TARP money back," he said. "With that said, you still have some big issues with the regionals and these commercial real estate losses that are still in front of us.”
The Treasury has spent more than $454 billion through the TARP programs. And 47 recipients have paid back nearly $73 billion.
“Most of the large banks will be able to pay it back… Where you may see losses is the fact that we’ve seen a dozen of the small banks defer their payments on TARP—you’re going to see some losses in that group, so you could see $10 to $20 billion that may not come back,” he said.
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Cannon said big banks have access to liquidity programs and as long as that remains in place, the government can scale back the TARP programs.
“The only issue is that they need to have them at the ready, in case we see any kind of liquidity scare for any reason as we go into 2010,” he said.
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Top Financial Companies:
JPMorgan [JPM
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Goldman Sachs [GS
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Morgan Stanley [MS
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Citigroup [C
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Bank of America [BAC
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Disclosures:
No immediate information was available for Cannon or his firm.
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Data is a real-time snapshot *Data is delayed at least 15 minutes