US Treasury anticipates $25bn to be repaid by bailed out banks

| May 20, 2009 | 0 Comments
US Treasury anticipates $25bn to be repaid by bailed out banks

US Treasury Secretary, Timothy Geithner, expects US banks to repay $25 billion (£16 billion) of bailout funds over the next 12 months.

According to Mr Geithner, the money will be put towards helping other financial institutions in need of assistance.

Mr Geithner told Congress it is imperative that the Government protect the remaining $123.7 billion in its $700 billion bailout fund (which was approved by Congress last autumn).

Meanwhile, Mr Geithner also added that the recent “stress tests” carried out on 19 US banks had helped to restore some confidence in the US financial sector.

The stress tests were conducted by the Federal Reserve to establish which financial institutions are in a position to weather the downturn and discovered that ten of the banks require a total of $74.6 billion (£50 billion) in extra capital to cover future losses.

With regard to raising this capital, Mr Geithner, said the majority of the banks should be able to raise money from private sources, however, if they are unable to do so, the Government may have to inject further taxpayer money into the banks.

According to Mr Geithner, the injection of funds has meant that the financial system is “starting to heal” but cautioned that the US still faced a “very challenging economic and financial environment”.

In related news today, Bank of America (BoA) announced that it has raised approximately $13.47 billion in a share placing. The company issued 1.25 billion shares at an average price of $10.77.

BoA topped the list following the stress tests as the bank requiring the most capital.

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