Goldman Sachs and Other Banks Feel the Heat to Pay Back Bailout Billions

By returning the government aid, financial institutions stand to benefit in a variety of ways. Not only will they appear to be in stronger financial shape, but they will also be able to avoid the administration's restrictions on executive compensation.

On Tuesday, Goldman Sachs sold $5 billion in a public stock offering in an effort to pay back the $10 billion it received as part of TARP, the government's $700 billion bailout program.

Goldman to Repay TARP 'If Permitted'

In a statement Monday, the bank said it would repay the funds "if permitted by our supervisors and if supported by the results of the stress assessment," which chief financial officer David Viniar said the bank expected "to be completed around the end of this month."

The Treasury Department had no comment.

Goldman is just one in a string of banks starting to give back government aid.

Bank of America, along with Goldman, one of the nine original recipients of TARP money, may also start repaying the government the $45 billion in bailout help that it received

Earlier this month, five smaller banks said they would return the money, with one bank even citing the compensation issues.

After Signature Bank in New York returned $120 million, its president and CEO Joseph DePaolo cited the restrictions on executive pay written into the administration's $787 billion stimulus bill.

"The revised, expanded legislation included in the American Recovery and Reinvestment Act of 2009, passed on Feb. 17, 2009, adversely affected our business model and it became apparent that we should return these funds to the Treasury," DePaolo said. "The return of these funds allows us to continue to execute our business model, which includes the successful recruitment and retention of highly talented banking professionals throughout the metropolitan New York area."

After the meeting at the White House on March 27, one CEO told ABC News that every bailed-out bank in the meeting wanted to pay back the government as soon as possible.

"I think every bank in the room wants to return their TARP money, but not so much because of the strings that are starting to be attached or may be attached, but because I think they're starting to feel confident enough that they don't need it," said Cam Fine, CEO of Independent Community Bankers of America. "At least several of the banks in the room expressed a desire to give it back as soon as they could give it back."

Return of TARP Funds

But the approach from these banks was met with some disagreement by the administration.

As has been reported by Politico.com and confirmed by ABC News with a source familiar with the meeting, Dimon jokingly offered Treasury Secretary Tim Geithner a fake check for $25 billion, the amount of money the bank received from TARP. But Geithner did not take the check.

The source noted that the CEOs and President Obama were hardly seeing eye to eye about returning TARP funds.

At the meeting, some executives argued that they wanted to return any unneeded money as soon as possible and that the process should be streamlined. But the president compared the situation to sick patients taking antibiotics -- even if they start feeling better, they shouldn't stop taking the medicine.

"Treasury has to look at what is best for the overall economy, not what is best for Goldman Sachs," Egan said.

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