Regions Financial Corp. (RF) repaid a $3.5 billion taxpayer bailout, the largest debt still outstanding to the U.S. Treasury Department’s Troubled Asset Relief Program, after the bank sold assets to boost capital.
The lender, the 10th-largest in the U.S., bought back preferred stock to exit the rescue fund, the Birmingham, Alabama-based company said today in a statement. It has paid $593 million in dividends to taxpayers since receiving the bailout in November 2008, the company said.
“On an annual ongoing basis, the repurchase eliminates the payment of $175 million in dividends on these securities,” said Regions, which sold $900 million of stock and its Morgan Keegan brokerage for about $1.2 billion to help repay the bailout.
TARP was created under President George W. Bush to prop up the nation’s financial system during the 2008 crisis. Regions was the biggest recipient of aid among the 350 banks left in the $700 billion bailout program, followed by Salt Lake City-based Zions Bancorporation (ZION), which announced plans to exit TARP last month. The remaining lenders owe taxpayers about $12 billion.
“This repayment is another milestone in our efforts to wind down TARP and provides an additional profit for taxpayers on the program’s investment in banks,” Timothy Massad, assistant secretary for financial stability at Treasury, said in a separate statement. “Replacing temporary government support with private capital is an important component of continuing to restore financial stability.”
Government rescues of failing banks have become a political issue as President Barack Obama gears up for his re-election campaign. The Treasury has been unwinding the bailouts to fulfill a 2009 vow by Obama to recover “every last dime” of taxpayer money.
Treasury continues to hold a Regions warrant that expires in 2018 to purchase 48.3 million shares of the lender’s common stock for $10.88 a share. The Treasury, before selling TARP warrants in a public auction, offers banks a chance to negotiate a price to repurchase the securities.