More US banks skip latest payment on bailout aid

By Reuters
Posted Sep. 17, 2010 at 3:52 p.m.

More than 100 U.S. banks failed to pay an Aug. 16 dividend on bailout money they borrowed from the U.S. government, signaling that the number of banks struggling to meet obligations under the program is rising.

The statistics, compiled by SNL Financial L.C. from U.S. Treasury data, show 115 U.S. banks skipped the Aug. 16 dividend payment required under the Trouble Asset Relief Program, or TARP. The figure is a 26 percent increase from May 2010, when 91 banks deferred that payment.

While most major U.S. banks have paid off the government’s temporary investment, roughly $130 billion is invested in more than 600 smaller banks.

Smaller U.S. lenders are still coping with high real estate-related loan losses in the wake of the housing crisis. Profits have become a rarity, crippling the ability of banks to pay dividends to both private and government investors.

The results were the fourth straight quarterly increase in the number of banks missing their required dividend payments to the U.S. Treasury. The total number of banks skipping payments has increased 109 percent from Nov. 2009, when 55 banks skipped the payments.

The program, introduced in the autumn of 2008, injected billions in taxpayer money into U.S. banks in the form of preferred investments the banks could repurchase over time. Banks, however, are allowed to defer dividend payments to a later date.

The SNL Financial data shows 28 banks deferred their first payment at the Aug. 16 deadline, up from 23 who skipped their first payment in May.

The banks that skipped the August payment received $3.6 billion in total TARP funds, or 1.8 percent of the money disbursed through the bank investment program.

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