The Treasury Department said Monday it had provided SunTrust Banks Inc. with an additional $1.35 billion in capital, completing the Atlanta-based company's double dip into the $700 billion Troubled Asset Relief Program.
SunTrust got $3.5 billion on November 14, when it sold preferred stock to the government as part of Treasury Secretary Henry M. Paulson's plan to inject capital directly into banks to strengthen their balance sheets and spur lending.
SunTrust decided to take the additional money - pushing its total to the Treasury Department investment cap of 3 percent of total risk-weighted assets - after concluding that the outlook for the economy had grown bleaker.
"Given the increasingly uncertain economic outlook, we have concluded that further augmenting our capital at this point is a prudent step, especially if the current recession proves to be longer and more severe than previously expected," Chairman James M. Wells III said in a statement last month.
SunTrust is the only bank to have received two disbursements from the $250 billion of TARP money set aside for capital purchases. More than 280 banks, thrifts and finance companies have received taxpayer capital or been approved for it.
The preferred stock that SunTrust and the other participants are selling to the government pays an annual dividend of 5 percent for the first five years and 9 percent thereafter. The Treasury Department also receives warrants to buy common stock in the companies, which could provide a return to taxpayers if their share prices rise.
I believe the more accurate term is "triple-dipping," especially if you were one of the initial investors that lost money with SunTrust. Your tax money pays for the bailout to replenish the money you lost, with no guarantee that you'll see your money again. www.losinggame.com