US to Give Banks TARP Exit Guide Soon

U.S. officials could lay out as soon as Wednesday guidelines for how banks can repay taxpayer bailout funds, sources familiar with administration thinking said on Tuesday.

One key condition is expected to be that banks are able to participate in the credit markets without the help of government facilities, such as the Federal Deposit Insurance's debt guarantee program, the sources said, speaking anonymously because the guidelines have not been made public.

The announcement of the conditions will closely coincide with Thursday's public unveiling of the results of the government's stress test on the 19 largest U.S. banks.

The results will even further distinguish the stronger banks from those still harboring vulnerabilities, fueling the healthier firms' desire to exit from government assistance programs.

Some of the top U.S. banks being stressed tested, such as Goldman Sachs and JPMorgan Chase, have said they want to quickly repay the funds from the Troubled Asset Relief Program (TARP), which come with restrictions on executive compensation and dividend payments.

Banks also have likened the bailout funds to a "scarlet letter" that puts them in a bad light.

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Lawmakers included provisions in the economic stimulus legislation in February that makes it easier for banks to repay taxpayer money from the $700 billion TARP fund.

Banks must get the green light from their regulator, and Treasury has the option to say how the banks can repay, according to the law.

Treasury has determined that it wants banks to prove they are healthy enough to raise debt without government backing, the sources said.

Bank of New York Mellon on Tuesday sold $1.5 billion in non-guaranteed debt.

BB&T, JPMorgan Chase, Goldman Sachs and Northern Trust also have sold non-guaranteed debt in recent weeks. Northern Trust is not among the banks being stress tested. Other conditions for repayment are not yet clear.

Treasury Secretary Timothy Geithner has said that if regulators certify that a bank would be sound without government help, the Treasury would gladly take the money back.

But he also told lawmakers last month that his role is to ensure the soundness of the entire financial sector.

"My basic obligation and our responsibility is to make sure that (the) system as a whole ... has the ability to provide the credit that recovery requires," Geithner said, "So we need to make a careful judgment about what policies are going to best promote that objective."

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