Banks cleared to return bailout funds

Ten of the nation's biggest financial companies got a green light Tuesday to return $68 billion in federal bailout money -- freeing the banks from limits on executive pay and leaving the government with a small gain on the rescue cash.

While the paybacks could be a signal that the banking industry is stabilizing, analysts say it is far from a clean bill of health, and some said it was too soon to let the banks give back the money.

Presidential spokesman Robert Gibbs said the returned money would go "back into general revenue" and could even be used to bail out banks again.

Still, the government has collected $1.8 billion from dividends on shares of preferred stock it received in exchange for bailout money, he said. And the government still holds warrants to buy shares of bank stock at cut-rate prices in the future.

The $68 billion in paybacks would be the largest since the $700 billion Troubled Asset Relief Program took effect eight months ago at the peak of the financial crisis. Specifically, the money comes from a $250 billion slice of the $700 billion bailout package.

Other chunks of the $700 billion will be harder, if not impossible, to recover. Some of it, such as $70 billion funneled to failed insurer American International Group Inc., ended up in the pockets of healthier banks that did deals with AIG.

And even the banks getting out from under the TARP still rely on government support, including debt guarantees from the Federal Deposit Insurance Corp. and credit lines from the Federal Reserve.

Among the banks approved to pay back their bailout cash are eight that passed the government "stress test" earlier this year: JPMorgan Chase & Co., American Express Co., Goldman Sachs Group Inc., U.S. Bancorp, Capital One Financial Corp., Bank of New York Mellon Corp., State Street Corp. and BB&T Corp.

Those banks had to show they could raise private capital without federal guarantees before getting permission to pay back TARP money.