WASHINGTON — Ten of the nation’s largest banks were given the green light Tuesday to repay $68 billion in government bailout money, freeing them from restrictions on executive compensation that they say are making it difficult to keep their top-performing executives.
The Treasury Department said the banks had been approved to repay the money they received from the Troubled Asset Relief Program created by Congress in October at the peak of the financial crisis.
Experts say allowing 10 banks to return $68 billion in bailout money shows some stability has returned to the system but caution that the crisis isn’t over. And some fear that the repayments could widen the gap between healthy and weak banks.
All eight banks that took TARP money and last month passed government stress tests confirmed they received permission to repay the bailout funds: JPMorgan Chase, American Express, Goldman Sachs, U.S. Bancorp, Capital One, Bank of New York Mellon, State Street and BB&T.
Morgan Stanley did not pass the government test, but it said Tuesday it had raised enough capital quickly and was approved to repay its TARP money.
Northern Trust was not among the 19 banks subjected to stress tests, but the company said it also had received permission to repay the bailout funds.
President Barack Obama welcomed the news but said, “This is not a sign that our troubles are over — far from it.”
Some analysts questioned whether the repayment of TARP money obscures dangers in the broader banking industry. Smaller banks are still saddled with billions of dollars in risky commercial real-estate loans. And large banks continue to hold the toxic mortgage- backed assets at the heart of the financial crisis.
Bank analyst Bert Ely called the repayments a positive sign for the banking sector but not a reason to celebrate. He noted that three of the nation’s biggest banks — Citigroup, Wells Fargo and Bank of America — are still tied to the bailout.
