By Joseph A. Giannone and Mark Felsenthal
NEW YORK/WASHINGTON (Reuters) - Several major banks are seeking permission to repay government bailout funds, and JPMorgan Chase & Co expects repayments to begin within the next couple of weeks.
Regulators are talking to several big banks that want to repay funds received under the government's Troubled Asset Relief Program, or TARP, a Federal Reserve official said on Tuesday. No announcements on returning TARP funds will come until around June 8, the official added.
Goldman Sachs Group, Morgan Stanley and JPMorgan recently submitted applications seeking permission to repay TARP funds, people familiar with the situation told Reuters. The three banks declined to comment.
Earlier Tuesday, JPMorgan Chief Executive James Dimon told shareholders he expects regulators will let a few strong banks repay TARP funds within weeks.
"We believe we can and should be able to repay TARP," Dimon said during remarks at his bank's annual meeting. "We believe the government will allow a few well-capitalized banks to repay TARP in the next couple of weeks."
The comments helped lift JPMorgan shares, which were down as much as 2 percent in morning trade, but the shares later gave up those gains.
Banks asking to repay TARP are among the 19 institutions that submitted to government "stress tests" to determine their ability to withstand a sharp economic downturn, the Fed official said. Supervisors will seek more information from the banks and then recommend to Treasury whether to approve repayments.
Recommendations will be made in batches, not a case-by-case basis, the official said. Going forward, supervisors will make repayment recommendations to the Treasury on a monthly basis, the official added.
TAKING DOWN TARP
Last October, the Treasury stepped in with $125 billion of bailout funds for nine of the largest U.S. banks, part of a $700 billion plan to stabilize a system rocked by the collapse of Lehman Brothers. Regulators wanted banks to have enough capital to continue lending during one of the worst recessions since the 1930s.
JPMorgan has long denied that it needed rescue financing and has repeatedly said it wants to repay the $25 billion it received.
Investors have rallied behind banks that demonstrate they can survive without public support.
Treasury and Federal Reserve officials this month announced the results of the stress tests and asked many of the largest banks to bolster capital. The stress tests revived market talk about which banks would be the first to repay TARP funds, and when.
Before they make repayments, banks must show they can raise funds from private sources without any government guarantees.
These conditions have sparked a wave of stock and debt sales in recent weeks.
Banks have been eager to repay TARP money because it comes with several conditions, including limits on executive bonuses and hiring of foreign workers.
Government officials have expressed concern that banks, in their eagerness to sever government ties, may return the capital too soon, only to need it again later.
Goldman and JPMorgan were found by the stress tests to have sufficient capital. Morgan Stanley had a small shortfall, quickly erased by stock and debt sales.
(Reporting by Joseph Giannone; Additional reporting by Elinor Comlay and Steve Eder; editing by John Wallace)
