Since US merchant bank Lehman Brothers went under last year, the US government’s $700 bn Troubled Asset Relief Program (TARP) has funded the likes of Citigroup, JP Morgan and Goldman Sachs. These banks, and many others, needed an emergency bail-out to stabilise their capital situation and boost liquidity.
Take a look at today’s chart, which shows the Nasdaq OMX Government Relief Index (ticker: QGRI, black line) against the S&P 500 (green line) for the year-to-date. You can see that the rescue-seekers have fallen four times as much as the market.
The bailout bunch’s share performance shows a 22% loss since its launch, compared to the S&P 500’s 5% drop for the same period. Clearly, all that capital from Uncle Sam is holding investors off, rather than enticing them to invest.
No recovery yet for the banks in ‘rehab’... 
Source: Bloomberg
On 18 June, JP Morgan returned $25 billion back into Treasury coffers. Goldman Sachs and Morgan Stanley paid back $10 billion. Seven other banks did the same, taking the total to $68 billion. Hurrah? Not so fast...
These banks are still in trouble. Goldman and Morgan have had to change their charter to become commercial banks. It’ll be some time coming before the troubled banks deal with all their loans and declare the write-offs. The recent payback by 10 banks hasn’t helped boost investor interest. We expect the "rehab index" to continue trading down this year. Steer clear of those 24 banks until they go from rehab to recovery.
Recommended article: Click here to read Bill Bonners recent article on debt and the economy
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