George S. May Business Blog

Big banks shuffle off almost $9 billion in company shares

In order to raise capital and bring themselves closer to removing the ‘bailout monkey” from their backs, four financial giants are selling company stock at light-speed.

“JPMorgan Chase & Co., Morgan Stanley, KeyCorp and American Express Co. all announced sales of common stock in order to meet capitalization requirements laid out in new Federal Reserve Board criteria for banks seeking to exit the Troubled Asset Relief Program.” (souce)

The numbers are pretty incredible:

American Express sold $500 million in stock this week.

KeyCorp brought in $1 billion

Morgan Stanley raised $2.2 billion in stock sales yesterday alone

And JPMorgan brought in a whopping $5 billion

We can assume that the onslaught of stock sales are attributed to the Federal Reserve Board’s recent announcement of “special rules” that would be put into play for the 19 largest financial institutions who received bailout money. Basically, in order for the large banks to get back the shares that they sold to the government, they have to prove that they can generate and hold on to cash without the help of the previous capital injections. In addition to keeping cash on their books, the banks also must prove that they are continuing ‘business as usual’ in that they will continue normal lending activities, maintain funding obligations to counterparties, and support subsidiary institutions.

Although, to date, none of the four banks selling stock this week have been approved to redeem these shares, the extra capital accumulated by the move will definitely bring them a step closer to removing the Congressional collar. Between the restrictions on executive pay and the massive negative PR offensive the media has launched in their direction, getting out from under the TARP is something which you can bet the top executives can’t achieve quick enough.

Executives at JPMorgan and Morgan Stanley have said they expect to be out of the TARP program by the end of the month. The Treasury said it would rule on their applications next week.

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