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Ten Banks Allowed To Repay $68 Billion to the TARP Fund

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Ten of the nation's largest banks will be allowed to repay a total of $68 billion they received from the $700 billion TARP fund, created last fall during the height of the financial crisis.

Eight banks that took TARP money and passed last month's government "stress tests" confirmed that they received permission to repay the bailout funds.

They are: JPMorgan Chase, American Express, Goldman Sachs Group, U.S. Bancorp, Capital One Financial, Bank of New York Mellon, State Street and BB&T.

Morgan Stanley did not pass the government test, but on Tuesday said 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.

The banks have been eager to get out of the program to escape government restrictions such as caps on executive compensation.

Experts say allowing 10 banks to return $68 billion in bailout money illustrates some stability has returned to the system but caution that the crisis isn't over.

Appearing at the White House, President Obama called the repayments a "positive sign" but said this  "is not a sign that our troubles are over—far from it."

Several of the banks repaying TARP saw their stocks rise in reaction, but the overall market was cautious.

"What that's telling you is that banks are spending all their money paying back the government and not doing what that money was intended to do, which was to stimulate the economy and lend that money," said Marc Pado, US market strategist at Cantor Fitzgerald.

Some worry the repayments could widen the gap between healthy and weak banks.

More than 600 banks nationwide have received nearly $200 billion in TARP money and 22 smaller banks already have repaid it.

"These repayments are an encouraging sign of financial repair, but we still have work to do," Treasury Secretary Tim Geithner said in a statement.

But some analysts questioned whether strong performance at the largest banks obscures greater dangers in the broader banking industry.

Smaller banks are still saddled with billions of dollars in risky commercial real estate loans, which could cause heavy losses depending on the speed of economic recovery.

And large banks continue to hold the toxic, mortgage-backed assets at the heart of the financial crisis.

Source: CNBC

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