Banks can pay back bailout money next week

updated 10:40 a.m. ET June 12, 2009

NEW YORK - Banks will be able to start repaying federal bailout money on Wednesday, according to two people familiar with the talks between the banks and the government.

Morgan Stanley, and possibly JPMorgan Chase & Co., are among the institutions expected return their federal funding next week, these people said on Thursday, speaking on condition of anonymity because the talks are confidential.

The Wall Street Journal reported late Thursday that American Express, as well as Morgan Stanley and JPMorgan, was likely to repay its TARP next week.

Earlier this week, the Treasury Department said it would allow 10 of the country’s largest financial companies to pay back $68 billion in funding from the Troubled Assets Relief Program, or TARP.

Returning the TARP money will free the firms from limits on executive pay that the banks had protested, as well as the high dividends that the companies must pay for the federal financing.

The approved banks included eight that passed the government stress tests earlier this year: JPMorgan, 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. Two others got permission, too: Morgan Stanley and Northern Trust Corp.

A spokesman from the Treasury Department could not immediately be reached.

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