Repaying loans isn’t that simple

NEW YORK (AP) — Banks that are ready to repay government bailout money are finding it’s not as simple as writing a check to the Treasury.

So far, no large U.S. bank has returned funds received from the Troubled Assets Relief Program, or TARP. Last week, JPMorgan Chase & Co. CEO Jamie Dimon said he wants to repay TARP, but “the rules aren’t clarified.” Goldman Sachs Group Inc. CEO Lloyd Blankfein has repeatedly said he expects to pay back TARP “soon.”

And BB&T CEO Kelly King told The Associated Press Monday the timing of the repayment is “really in the hands of the regulators and the Treasury. All we can do is apply and meet the conditions, which we believe we have.”

To repay TARP money, the companies must meet three requirements.

First, they must raise long-term debt in the private markets without the Federal Deposit Insurance Corp. guaranteeing it. Second, they must agree to prices for the warrants the government received in return for the original loan. A warrant is the right to buy a stock at a certain price. Last, they must be deemed “well-capitalized” by regulators and the Treasury — a qualification that remains fuzzy at this point.

The reason for the rules? The last thing U.S. officials want is for a bank to return their funds, only to ask for more later. After Fannie Mae’s warning last week that it needs an extra $19 billion from the government after receiving $15 billion in March, it’s clear the financial crisis is not yet over.

“Regulators need to be very careful on their own credibility,” said Paul Miller, a bank analyst with Friedman, Billings, Ramsey & Co. “They’ve got to be very careful that they don’t give a seal of approval to a system that is not stable yet. There are a lot of other shoes that could drop in this economy.”