Renewed anger over Wall Street bonuses has led Congress to consider a tax on the U.S. financial firms that have tapped tax payer money under the U.S. Treasury’s Troubled Asset Relief Program (TARP) to cover losses. Some of the major banks escaping regulatory scrutiny have repaid all or partial sums of the bail-out funds, including 13 major banks or 52% of the components in the NASDAQ/OMX Government Relief Index , a benchmark index that tracks the performance of the companies that are participating under TARP.
The Index was launched on January 5th 2009, and since the close of its inception day it has gained about 11%. According to a report issued by the U.S. Treasury Department on January 11th, TARP repayments in 2009 totaled $165 billion, and accounted for 2/3 of the total funds distributed to bailed-out banks. TARP had been introduced at the height of the financial crisis in October 2008, just a few weeks after the Lehman Brothers collapse. However, to this day the shares of most QGRI financial companies are still trading well below pre-Lehman levels. The exceptions are Goldman Sachs, American Express, JP Morgan Chase, and Comerica which have seen their shares gain 2% or more since then.
Of the companies weighted in the Nasdaq/OMX Government Relief Index, the industry breakdown is as follows: 65% banking, 8% insurance, and 27% other financial. Through additional share offerings, 52% of the companies in the QGRI have managed to repay bail out funds totaling to approximately $158 billion, as Goldman Sachs, JPMorgan & Chase, and Bank of America’s exited TARP in 2009 after each were given capital injections in 2008 of $10 billion, $25 billion, and $45 billion respectively. Yet about 48% of the QGRI have not repaid the burdensome capital as smaller regional banks such as SunTrust Bank, Zions Bancorp , and Marshall Ilsley are not in the position to repay TARP and are still exposed to bad loans due to the real estate crunch as each received government aid of $3.5 billion, $1.4 billion, and $1.7 billion in the fall of 2008.
Also, American International Group which has benefited the most from governmental aid has received $70 billion in TARP funds, an additional $85 billion in the form of rescue bridge loans, and $37.8 billion in cash collateral. Nonetheless, AIG's stock has not been able to trade at the Pre-Lehman levels, and even hit an all-time low of $6.6/share reached during the market's March lows on 3/9/09. Since Lehman's collapse, SunTrust Bank, Hartford Financial , Zions Bancorp, and Marshall Ilsley have seen their shares decline 52%, 54%, 56%, and 63%, while AIG has shed 88% in its stock price. See table below for % change since the Lehman collapse of QGRI companies who participated under the government sponsored program TARP.