Race To Repay Bailout Could Shortchange Taxpayers

DANIEL WAGNER

NEW YORK (AP) — The race to repay federal bailout money could end up reducing the amount that taxpayers eventually get back.

Some banks that want out of the Troubled Asset Relief Program may be allowed to buy back the government's investments at below-market prices. That could cut into taxpayers' potential profits by billions of dollars.

Goldman Sachs, Morgan Stanley and JPMorgan Chase & Co. have notified federal regulators of their interest in returning their share of the $700 billion bailout. Returning the money would let banks avoid restrictions on executive pay and hiring.

Approval for big banks to repay TARP funds could start in early June, a Federal Reserve official said on condition of anonymity because the applications are still being reviewed.

But before big banks can repay a penny and quit the bailout, they must agree to a price for the warrants the government received in return for the original loan. Those warrants gave the government the option to buy stock at a set price over 10 years.