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US puts conditions on bailout repayments

The Financial Times reports that the US will put conditions on TARP bailout repayments from banks who say they are ready to pay back the government.

"Strong banks will be allowed to repay bail-out funds they received from the US government but only if such a move passes a test to determine whether it is in the national economic interest, a senior administration official has told the Financial Times.

“Our general objective is going to be what is good for the system,” the senior official said. “We want the system to have enough capital.”

His comments come as Goldman Sachs, JPMorgan Chase and other relatively strong banks are pressing to be allowed to repay their bail-out funds..."

Pretty amazing, isn't it? Some of these banks were strong-armed into taking TARP funds in the first place (so as not to "stigmatize" banks that truly needed the money).

Now the government is trying to control the repayment schedule of said funds, or at least give the impression that they are successfully directing the economy and driving a shattered industry to act in the "national interest" by providing "credit to support the recovery", etc.

Is the government simply trying to maintain control over the troubled banking industry, or are conditions on TARP repayments a way to ensure that all banks look the same (with none visibly stronger or weaker than the others) in the eyes of the public?

Naked Capitalism has some additional commentary on the issue of TARP repayments, and Paul Kedrosky offers up this chart of the S&P 500 financials which illustrates how well the industry has done in recent months, thanks largely to taxpayer funded bailouts (H/T to Howard Lindzon).

Related articles and posts:

1. Jamie Dimon eager to pay back TARP funds - Finance Trends.

2. William Black: "stress tests are a farce" - Finance Trends.

3. Nationalization in Denial? - Naked Capitalism.

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