10 banks get OK to return $68B in bailout money

WASHINGTON — Ten of the nation's biggest financial companies got a green light Tuesday to return $68 billion in federal bailout money — freeing the banks from limits on executive pay and leaving the government with a small gain on the rescue cash.

While the paybacks could be a signal that the banking industry is stabilizing, analysts say it is far from a clean bill of health, and some said it was too soon to let the banks give back the money.

Presidential spokesman Robert Gibbs said the returned money would go "back into general revenue" and could even be used to bail out banks again.

Still, the government has collected $1.8 billion from dividends on shares of preferred stock it received in exchange for bailout money, he said. And the government still holds warrants to buy shares of bank stock at cut-rate prices in the future.

The $68 billion in paybacks would be the largest since the $700 billion Troubled Asset Relief Program took effect eight months ago at the peak of the financial crisis. Specifically, the money comes from a $250 billion slice of the $700 billion bailout package.

Other chunks of the $700 billion will be harder, if not impossible, to recover. Some of it, such as $70 billion funneled to failed insurer American International Group Inc., ended up in the pockets of healthier banks that did deals with AIG.

And even the banks getting out from under the TARP still rely on government support, including debt guarantees from the Federal Deposit Insurance Corp. and credit lines from the Federal Reserve.

The banks chafed under restrictions on executive pay imposed by the government for banks that took bailout cash, arguing they were losing top talent to other firms. The administration is expected to roll out new executive pay rules Wednesday that would apply to banks that still have TARP money.

"It's our obvious hope that additional money is not going to have to be used to stabilize banks," Gibbs said. "I certainly wouldn't rule it out."

Indeed, banking experts stressed that the payments do not signal an end to the financial crisis. In fact, they say, most banks approved to pay the money back never needed it in the first place.

And three major banks that have not been approved by the government to pay the money back — Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. — could need federal help for years to come.