Since last fall, when the financial bailouts began, the government has injected about $250 billion into hundreds of banks, whether they're faltering or not. The original Troubled Assets Relief Program flooded all banks of significant size with money to prevent bank runs, prop up lending, and convince consumers and investors that the entire banking sector is safe.
Since then, the TARP mission has changed. Regulators, politicians, and taxpayers all want to know which banks are healthy and able to pay back their taxpayer funds and which are sick and likely to need more. The Obama administration's "stress tests" of the 19 biggest banks are one effort to figure out which banks can stand on their own and which are likely to need more government aid.
We've devised another. Using easy-to-understand public data, we've developed a "market-to-bailout ratio" for about 45 banks, which measures how investors value the bank relative to its size and to the amount of bailout money it has received.
A ratio of 1.0 would mean that investors believe the bank's market value is only equal to the amount the government has invested in it. To pay back the government injections, such banks would probably have to sell assets, which could worsen their prospects. A ratio lower than 1.0 is even worse and might signal that the bank, instead of being ready to pay back public funds, might need more.
Banks with a market-to-bailout ratio of 2.0 or higher are in fairly good shape, with investors valuing the company well above the amount of government aid it has received. Based on our numbers, here are the banks most likely to pay back the taxpayer funds they've received:
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Sources: FDIC, Treasury Dept., ProPublica Ultimate Bailout Guide, Milken Institute, Google Finance
Disclosure: no positions