Bailout aid may soon be repaid

Several large banks may get government approval to repay billions of dollars in federal aid next week after completing a series of tests to prove they can stand without crutches.

JPMorgan Chase & Co., Goldman Sachs Group Inc. and American Express Co. are among the most likely candidates to get the Treasury Department’s blessing, according to financial analysts. Together they owe the government $38.4 billion. Other banks bidding for approval include credit card giant Capital One Financial Corp., BB&T; Corp. and U.S. Bancorp.

The Federal Reserve, which is administering the process for the Treasury, announced Monday that a first batch of applications would be approved next week.

The banks have been pressing the administration for permission to repay the money they received during last fall’s financial implosion. The government’s aid kept the banks from collapse, but they now are eager to show renewed vigor and to escape restrictions, including limits on employee compensation.

But the government is imposing stricter standards on the large banks than it has on smaller banks, about 20 of which already have been allowed to repay aid.

The big banks must convince regulators that repaying the government will not reduce lending or lower their capital below required levels. The banks also must demonstrate that they can raise money from investors by selling new shares of common stock and issuing debt without the safety net of a government guarantee.

The Fed’s announcement of the conditions Monday set off a scramble among banks that had not expected they would have to sell new common stock.

JPMorgan said it would meet all the conditions once it completed a plan to sell $5 billion in shares. American Express said it would sell $500 million in shares. Other companies, including Goldman, Capital One, BB&T; and U.S. Bancorp, sold shares earlier this year.

Most financial stocks fell Tuesday on news of the planned stock offerings. JPMorgan, American Express and U.S. Bancorp each sank more than 4%.

Regulators have not disclosed publicly how much stock a firm must sell to demonstrate its independence from federal aid, saying they will set individual requirements for each institution.

Many firms, including Bank of America Corp. and Citigroup Inc., had already been ordered by regulators to add billions of dollars in common equity after the completion of stress tests last month. This was intended to better protect the banks against unexpected losses.