Good morning folks!
Yesterday afternoon Bank of America announced that it was going to be paying back $45 billion of the TARP funds received from the Federal government over the last year. More importantly $18.8 billion of the payback figure is to be raised by B of A selling securities.
Why this is important:
For Bank of America to pay these funds back is a sign that the U.S. financial industry is returning to health. Our current recession was triggered by a near insolvency of the U.S. banking industry. The same banking industry that provides capital, in the form of debt, to businesses and individuals alike. That capital really is the blood circulating through the national economic body, while the banking industry is its heart. To put it mildly, the economy suffered a heart attack that lasted for almost two years.
This is also important news because Bank of America is the single most important U.S. bank. Any change or improvement in solvency of U.S. banks had to start at B of A. Fortunately, B of A is not the only bank improving as many banks are beginning to lend again…meaning that blood is pumping through the system once more.
Lastly, this is also important news because it means that the TARP plan set in motion last year is beginning to wind down. Payment from those who received funds will improve the books of the U.S. government and that is an unquestioned good thing.
Jason
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