The U.S. government is beginning to send signals to the nations leading banks that they will be able to repay federal bailout money, but has not yet made clear how it will decide who will get to go first. The government has kept banks guessing on what exactly it will require before allowing repayment of tens of billions of dollars received by banks under the Troubled Asset Relief Program. 

Several major banks that underwent the government stress tests of their ability to withstand a severe economic downturn have asked to repay TARP as soon as possible. The government has not yet announced who and when, and does not expect to until around the second week of June. Recommendations will likely come in batches rather than one bank at a time, the official said. 

But regulators worry that banks trying to get out of TARP are overestimating their prospects and could be forced to return for more money if the economy falls off a cliff. Experts believe the government will allow TARP recipients to repay funds only over time, perhaps 12 months, rather than all at once. Goldman Sachs Group Inc, JPMorgan Chase & Co, and Morgan Stanley have applied to repay TARP funds. 

Earlier this month, regulators told nine of the 19 big stress-tested banks that they did not need more capital. The government created TARP last fall to unlock the flow of credit after credit markets were brought to a near halt by shocks such as Lehman Brothers Holdings bankruptcy. At first, banks viewed TARP money as a positive, signaling government confidence. But TARP also allows the government to unilaterally impose restrictions, including on pay back, and many investors now believe holding bailout money signals weakness. 

Many banks have met major requirements to repay funds, including sales of debt not backed by the government. However, regulators have not made clear what other factors they are considering, such as how much can be repaid at once and on what terms, or what they will charge banks to buy back warrants giving the government a right to buy stock over time. Policymakers are causing confusion among large banks about what the Treasury Department must see before deeming a bank safe outside TARP, said a financial industry source familiar with the talks about repayment.  The Treasury Department is also concerned that if it lets some banks repay TARP but not others, investors will punish those banks deemed to be falling behind. 

Several analysts said many members of Congress are tired of throwing taxpayer money at the banking system. Lawmakers are eager for repayments but do not want the funds to go back into TARP, where the money could be available for future rescues.