By Jim Puzzanghera

9:28 AM PDT, June 9, 2009

Reporting from Washington — The Obama administration today announced it has given approval to 10 of the nation’s largest banks to repay $68 billion in government bailout money they have received to stabilize the financial system.

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FOR THE RECORD: An earlier version of the headline on this article indicated that Bank of America and Wells Fargo were among the 10 banks given approval to repay government bailout money. Bank of America Corp. and Wells Fargo & Co. have submitted acceptable capital-raising plans, according to the Federal Reserve, but they are not among the 10 that received approval to repay bailout money.

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“These repayments are an encouraging sign of financial repair, but we still have work to do,” Treasury Secretary Timothy Geithner said.

The Treasury Department, which administers the $700 billion bailout fund, did not name the banks. And it was unclear whether all the banks that have received approval to repay the money will actually do so.

But all 10 made their own announcements after Geithner’s statement.

Banks that received permission to repay the government capital are American Express Co., BB&T Corp., Bank of New York Mellon Corp., Capital One Financial Corp., Goldman Sachs Group, JPMorgan Chase & Co., Morgan Stanley, Northern Trust Corp., State Street Corp. and U.S. Bancorp.

Several large financial institutions, including Morgan Stanley and Goldman Sachs, have been pushing to repay the bailout money, which many of them said they were forced to take last fall by then Treasury Secretary Henry Paulson. Large banks have chafed at executive compensation restrictions and other strings attached to the bailout money.

More than 600 banks have received about $199 billion from the bailout fund, which was initially called the Troubled Asset Relief Program, or TARP. The Obama administration has changed the name to the Capital Purchase Program. The government received preferred stock in the institutions and warrants to purchase additional stock as part of the investments. The banks also were required to pay dividends on the preferred stock, and so far the government has received $4.5 billion in such payments.

Several smaller banks already have been allowed to repay their bailout money, totaling about $1.9 billion so far. But the Obama administration has been concerned about the implications of some of the nation’s largest banks repaying their bailout money, fearing that a rush to return the money could prevent the banks from having enough capital to continue lending.

The Treasury Department, in conjunction with the Federal Reserve and other bank regulators, conducted stress tests of the 19 largest banks this spring to see if they had enough capital to withstand worse-than-expected economic conditions. Nine of the banks passed the test, but 10 others were required to raise a total of $75 billion in capital as a cushion against potential future losses on bad mortgage loans and other investments if the recession worsened.

Those banks have been working on plans to raise the money in recent weeks and faced a Monday deadline to submit those plans to the government. The Federal Reserve said Monday that the 10 banks, including Bank of America Corp. and Wells Fargo & Co., had submitted acceptable capital-raising plans.

The Treasury Department said today that banks that repay their bailout money will have the right to repurchase the government warrants “at fair market value.”

The Financial Services Roundtable, which represents large banks, said the announcement by Geithner today showed the industry is strong.

“The financial services industry is well-capitalized,” said Steve Bartlett, the group’s president. “This is a positive sign for the industry and the economy.”