NEW YORK (CNNMoney.com) — With the stress tests behind them, banking regulators now face the potentially thornier issue of deciding which banks, if any, should be allowed to repay government funds.
Since regulators unveiled a long-awaited blueprint for returning money from the Treasury Department’s Troubled Asset Relief Program last week, lenders have been scrambling to raise cash so they can pay back TARP funds.
Four companies that were among those included in the stress test — BB&T (BBT, Fortune 500), U.S. Bancorp (USB, Fortune 500), Capital One (COF, Fortune 500) and Bank of New York Mellon (BK, Fortune 500) — all announced plans Monday to raise capital which would go towards buying the preferred stock and warrants associated with the government’s stake.
Before they can return taxpayer funds, banks first have to prove that they can issue debt without having to rely on the Federal Deposit Insurance Corp.’s debt guarantee program.
Even if they are able to do that, many experts contend that regulators may be tempting fate by allowing banks to carry out their TARP repayment plans.