Out From Under the TARP

It's official: It's payback time for the banks. Ten bailed-out banks received the go-ahead from the Obama administration to pay their way out of the TARP program, the nation's business press blare this morning. According to the New York Times, the first to exit will include American Express (AXP), Goldman Sachs (GS), JPMorgan Chase, and Morgan Stanley (MS), which, combined, plan to return $68.3 billion. "That represents more than a quarter of the federal bailout money that the nation’s banks have received since last October, when many feared that failures might cascade through the industry," the newspaper writes. But it's not necessarily a reason to celebrate. Yet. President Obama warned, "This is not a sign that our troubles are over. Far from it." But for the banks, exiting the TARP program will allow them to pay executive what they please, hire whom they please, and spend what they like on corporate events.

And which banks are not yet fit enough to be weaned off the government teat? They would include Bank of America (BAC), Citigroup (C), and Wells Fargo (WFC), now seen as the sickly trio. As the Financial Times writes, "the move raises questions over the competitiveness of other big banks such as Citigroup and Bank of America, which have not yet been allowed to repay the combined $90bn in Tarp money they have received."

There was still more good news yesterday for the bailed-out firms delivered from Washington. The Wall Street Journal reports the White House will now drop a contentious plan to cap salaries at firms receiving government bailout money. It's a partial victory. The Obama administration intends to leave to Congress the decision of whether to place limits on bonuses, the newspaper adds. But fat-cat bankers are not in the clear. The White House will appoint a "pay czar" as "the administration plans to push for broad changes in compensation practices across the financial-services industry," the WSJ writes, citing people in the know.

Meanwhile, the drama at Bank of America continues this morning. BofA CEO Kenneth Lewis insists now that federal officials pushed him to go through with the acquisition of a toxic Merrill Lynch even after he became aware of "significant accelerating losses," Bloomberg reports, obtaining prepared remarks Lewis will make to Congress tomorrow. These comments will likely be at the heart of a brewing congressional investigation into whether BofA was pressured to tie the knot with Merrill Lynch, the Washington Post reports. "A congressional oversight committee issued a subpoena yesterday to force the Federal Reserve to turn over internal documents related to Bank of America's acquisition of Merrill Lynch," the newspaper writes. The subpoena was necessary, the newspaper adds, after the Fed refused to release "internal e-mails and notes related to its role in the purchase."

The Supreme Court yesterday cleared the way for Fiat's takeover of Chrysler assets and cleared a path for the Detroit automaker to make a superquick exit from bankruptcy, Business Week and the NYT report. The court denied a hearing to three Indiana pension funds that sought to scupper the reorganization of Chrysler and in doing so virtually guaranteed that the Italian car giant—owner of the Fiat, Lancia, and Alfa Romeo brands—will complete its purchase of Chrysler assets as early as today. "The deal gives Fiat 20% of the equity in Chrysler in exchange for sharing billions of dollars worth of technology and engineering assets with Chrysler. The company has an option to buy up to 35% of Chrysler down the road after taxpayer loans are repaid," writes Business Week.

Edward Whitacre made a name for himself breathing new life into that old dog AT&T (T) but getting GM (GMGMQ) to rise again will be his toughest challenge yet. Yesterday, the 67-year-old Texan was named GM's new chairman once the automaker comes out of bankruptcy. The decision to bring in Whitacre, an auto-industry outsider, was promoted by Steven Rattner, one of President Obama's main advisers on "rescuing" America's auto industry. While industry veterans may grumble about Whitacre's lack of auto experience, one prominent academic points to the success of former Boeing (BA) boss Alan Mulally, who has saved Ford (F) from the ignominy of its Big Three neighbors, GM and Chrysler.  "At the time, people questioned whether it was the right move to bring in someone with no auto experience. ... Mr. Mulally has proven that decision to be a very wise one," David Lewis from the University of Michigan's Ross School of Business tells the NYT.

Get ready for the latest chapter in Google's (GOOG) battles against the regulators of Washington. Yesterday the Justice Department sent civil investigative demands to Google and a group of publishers about a 2008 deal that would allow the search giant to make millions of books available online, the WSJ reports, based on conversations with "publishing company executives and people briefed on the matter." The settlement, which saw Google pay $125 million to settle claims, cover legal fees, and establish a registry for publishers or authors to get paid when their titles are used online, has been criticized in some quarters as giving "Google broad copyright immunity and mak[ing] it difficult for competitors to enter the market for digital titles," the WSJ writes. For their part, Google, the Authors Guild, and major publishing companies have held the agreement up as a landmark case that will expand digital access to books. This latest investigative foray, coming on the back of antitrust probes of Google's business launched by the department and the Federal Trade Commission, represents "a broad government examination of the dominant technology company of the decade," observes the WSJ.

And finally, the SEC had a busy day on Tuesday trying to clean up the mess of a damning e-mail that found its way to several news organizations Tuesday morning, including the Wall Street Journal. The e-mail blasted SEC Chairwoman Mary Schapiro; it purportedly came from Irene Gutierrez, a senior counsel in the agency's Internet enforcement group, the WSJ reports. But about 90 minutes after the e-mail was received, Gutierrez sent a follow-up e-mail to the same news organizations saying it was a spoof, that her Blackberry had been stolen (later, it was clarified, it had just been misplaced) and that somebody masquerading as her sent the critical e-mail. The SEC dutifully issued a statement confirming the spoof, adding, "The SEC has a great staff of talented and dedicated professionals who are not going to allow anonymous comments to distract them from their mission to protect investors and help to restore confidence in this agency."