Washington got some TARP money back this week from some of the largest banks in the country that are eager to get out from under the rules that came along with the cash. How financial exchange traded funds (ETFs) take it remains to be seen.
As of Wednesday, TARP paybacks from 10 financial banks that wanted out from under the regulations that came with the taxpayer money totaled $68 billion. Robin Sidel for The Wall Street Journal reports that by returning the TARP capital, they are on their own to deal with financial problems and recessionary climes.
This widely expected move creates a definite line between banks that are healthy and those worse for wear. This payback was widely anticipated after the Treasury Department gave permission to return the money last week.
- Financial Select Sector SPDR (XLF): down 6.4% year-to-date; J.P. Morgan Chase (JPM), 12.8%; Goldman Sachs (GS), 7% and Morgan Stanley (MS), 2.8%.
First Trust has filed for a community bank ETF, the first of its kind. It would track the NASDAQ ABA Community Bank Index, which holds small- and mid-cap community banks listed on the NASDAQ stock exchange, Index Universe reports. The index has a variety of criteria in place to ensure that its components are strictly local institutions.
The difference between the huge national and multi-state banksfrom a community bank is that these smaller banks are locally owned and operated. Most community banks do not offer some of the services that larger banks offer such as brokerage services and multi-million dollar financing, explains Creditor Web.
Community banks also differ from regional banks in that the latter is a mid-size depository institution that is larger than a community bank, but smaller than an institutional bank. A regional bank does not have international presence and would have many retail branches, according to Investor Glossary.
- SPDR KBW Regional Banking (KRE): down 35.8% year-to-date
For more stories on regional banks, visit our regional banks category.
For more stories related to financials, visit our financial category.