Paulson’s response, history records, was analogous to Don Corleone saying “either your signature or your brains will be on this piece of paper.”

For that reason alone, I think the Treasury hasn’t much to say to Morgan or anyone else about the disposition of their rights under TARP. There’s a lot of other reasons, too.

The TARP money is intended as an addition to the *capital* positions of the assisted banks. Not their cash flows. Loans, even long-term loans, don’t count as high in the capital structure as preferred stock. (Citigroup’s position was so dire that the Treasury went as far as converting their TARP shares to common stock, which is an even higher form of capital.)

Since the Bear Stearns fiasco, Morgan has been the Treasury and the Fed’s close ally in their ad hoc crisis management. That was another thing Dimon didn’t want to do, and was forced to by the New York Fed. And guess what, they’ve lost all of the money they were forced to put up for Bear Stearns assets.

I notice you don’t object to the thing that Morgan started immediately doing last fall with their new capital: they started buying up distressed bank assets on the cheap. That was pretty dirty, if you ask me,

In terms of calling back the preferred shares, Morgan probably will do that someday. If memory serves, they carry a 5% coupon for three years, which then jumps to 9%. Since a large bank generally figures its cost of capital at something like 8 or 9 percent, the TARP deal is sweeeeeeeeet. After the dividend resets, they’ll either call the shares back or renegotiate the deal.

As far as the government throwing their weight around, in re exec comp and all the rest: The government is going to mess with Citi, and maybe with BAC, but not with Morgan.

I hear where this diary is coming from, but (1) we want the banks to get healthy and start turning profits again, (2) $2 billion is not actually that much money relative to the overall size of the bank, (3) as Neil notes, Uncle Sam isn’t necessarily treating all the bailout money as loans, and (4) just because a bank hasn’t publicly laid out an exit strategy from TARP-land does not mean they have none. In fact, while I have no personal knowledge of JPM’s plans, it would not be surprising if they are waiting to see what Goldman does and whether the government lets Goldman follow its plan before announcing one of JPM’s own.

Don’t know the website, but it has as a breakdown of the TARP phases. From what I can tell, it is a fund, not a loan.

Don’t know the author, but the article basically states my frame of mind concerning the issue.

I look at it this way:
1) the bailouts should not have happened.

2) but, how much damage would have been caused by letting the banks fail? how widespread? and what would it have meant?

3) the bailouts did happen. the money is out of the bag.

4) if companies can afford to pay it back, great.

5) if companies pay it back to gain a PR win, but can’t afford to, then it solves nothing and could only make matters worse.

6) companies that didn’t want federal monies but were forced to accept the bailouts, should return the money, if allowed.

JP Morgan should pay back as much as possible while still preserving enough to continue having profitable quarters…if not we get into a situation of killing the goose before he has laid enough egss to repay his debt in full.

It is going to be a difficult thing to do, especially with evermore intervention by the FED and the Obama Admin…which may even be at odds with each other.

The whole thing is a mess and makes me want to agree with Jaded and say full stop….I am torn.