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Thu, Feb 12, 2009 - Page 10 News List

US bankers say bailout helped, repayment to come

AP , WASHINGTON

Several chief executives at major US banks that received injections of capital from the US federal government last fall say they made more loans as a result of the infusions and vowed to pay back the taxpayer money over time.

In prepared testimony to be delivered yesterday before the House of Representatives’ Financial Services Committee, executives also sought to reassure lawmakers that they and their employees took significant reductions in compensation last year and that no government money was used to pay bonuses or dividends.

The executives represent eight of the nine banks that the Treasury Department selected last fall to participate in a US$125 billion taxpayer-financed stock purchase plan designed to pump capital into the banks and, thus, ease credit for consumers, businesses and even other banks. The money was part of the US$700 billion Troubled Asset Relief Program that Congress approved last fall.

The institutions are Bank of America Corp, Citigroup Inc, JP Morgan Chase & Co, and Wells Fargo and Co, each of which received US$25 billion; The Goldman Sachs Group Inc and Morgan Stanley, each of which got US$10 billion; and State Street Corp and the Bank of New York Mellon, which received smaller amounts. The ninth institution, Merrill Lynch, merged with Bank of America.

Citigroup and Bank of America subsequently received additional targeted funds after their financial condition became less stable.

Vikram Pandit, Citigroup’s chief executive officer, said in his prepared remarks that with the help of the government bailout funds the bank has expanded mortgages, personal loans and lines of credit for individuals, families and businesses. He said Citigroup plans to pay the government US$3.4 billion in annual dividends for the US$45 billion it has received.

“Our goal, my goal, is to make this a profitable investment for the American people, as soon as possible,” he said.

Jamie Dimon chairman and CEO of JP Morgan Chase, said his bank delayed the start of foreclosure proceedings on more than US$22 billion in mortgages held by more than 80,000 homeowners.

He said he took no bonus last year and that, company wide, average incentive compensation went down 38 percent.

“Despite recessionary headwinds, we are lending,” said Kenneth Lewis, chairman and CEO of Bank of America. “In the fourth quarter alone, we extended more than US$115 billion in new credit to consumers and businesses”

He credited the government funds for the bank’s ability to continue lending and said the bank will pay its first dividend to the Treasury — more than US$400 million — next week.

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