Ten of the largest banks to receive TARP funds -- the taxpayer money associated with last fall's $700 billion bank bailout -- have been approved to repay the Treasury in full, plus interest.

Who are these lucky 10? Take a look:


TARP Dollars Received

JPMorgan Chase (NYSE:JPM)

$25 billion

Goldman Sachs (NYSE:GS)

$10 billion

Morgan Stanley

$10 billion

US Bancorp (NYSE:USB)

$6.6 billion

Capital One

$3.55 billion

American Express (NYSE:AXP)

$3.4 billion


$3.1 billion

Bank of New York Mellon

$3 billion

State Street

$2 billion

Northern Trust

$1.6 billion


$68.25 billion

The 19 largest banks accepted about $200 billion from the Treasury, so this $68 billion figure is a pretty sizable chunk. In recent months, 22 small banks returned just under $2 billion to taxpayers as well.

Technically, the Treasury can reuse the proceeds to lend money to other bludgeoned banks. This was one seemingly small loophole in TARP that might end up irking those who think we should consider these paybacks as "mission accomplished" and quit while we're ahead. (Count me in that group.) Ideally, the money would be used to pay down the massive amount of public debt raised to fund this grand adventure. The Treasury is pretty ambiguous as to what it intends to do with the money, stating this morning:

... proceeds from repayment will be applied to Treasury's general account. These repayments help to reduce Treasury's borrowing and national debt. The repayments also increase Treasury's cushion to respond to any future financial instability that might otherwise jeopardize economic recovery.

So, in theory, the money does help repay national debt, but it also reloads the Treasury's bailout arsenal. Last month, Treasury Secretary Tim Geithner announced the intention to use repayment funds to help stabilize small, community banks. In one door, out the other.

What's this all mean for the industry? As I noted a few weeks ago, these TARP repayments instantly form two distinct groups: (1) strong, TARP-less banks and (2) Citigroup (NYSE:C), Bank of America (NYSE:BAC), and Wells Fargo (NYSE:WFC). These three now have the stigma of being the only megabanks still attached to the government's hip (although many would argue Wells is among the strongest banks alive).

Undoubtedly, that will put them at a competitive disadvantage when trying to woo clients and employees. I don't think there's anything wrong with that -- banks get what they deserve -- but it's an important fact that could dictate their recovery.

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Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. American Express is a Motley Fool Inside Value recommendation. The Fool owns shares of American Express, and has a disclosure policy.