Trapped In The TARP

Courtesy : Forbes

Blunt as always, JP Morgan's Jamie Dimon says his bank is ready to be done with help from Uncle Sam.

It's getting itchy under the TARP. Calling funds from the Treasury Department's Troubled Asset Relief Program a "scarlet letter" for banks, JP Morgan Chase Chief Executive James Dimon said Thursday that his firm is eager to return the $25 billion they've received from the government, and will do so as soon as possible.

"We could pay it back tomorrow," Dimon told reporters Thursday morning. "We're waiting for guidance from the government."

Just when that that guidance will come, however, is unknown. Most likely, exits will have to wait for the conclusion of government-run "stress testing" on the financial stability of America's 19 biggest banks. That isn't expected to be finished before month's end.

Many banks are eager to get out from under the government's thumb. Earlier this week, Goldman Sachs ( GS - news - people ) announced plans to sell $5 billion in new shares to help repay its $10 billion in TARP funds sooner rather than later. Goldman would be the first bank to repay the money and escape the program's stringent controls on executive compensation. Dimon says one bank shouldn't get to pay back government money before any other bank.

JP Morgan Chase ( JPM - news - people ) beat first-quarter earnings expectations Thursday. Like Goldman, its first-quarter profits got a big boost from record results in trading credit and other fixed-income products. Earnings of $2.1 billion, or 40 cents per share, beat expectations by 8 cents per share despite $10 billion in credit costs during the quarter, $4 billion of which added to reserves for loan losses.

In his typically blunt fashion, Dimon told analysts not to expect record results from trading to continue. Revenues from investment banking overall were $8.3 billion, including a record $4.9 billion from credit and interest-rate trading. "We don't expect it to be that good going forward," Dimon says.

The Treasury is performing a cautious juggling act when it comes to the TARP banks. Those that repay the money quickly could benefit at the expense of other banks that repay it further down the road, making the latter group appear weaker. The government is weighing whether and how much to disclose about the stress tests, another potential risk to those banks deemed weaker.

Some companies, including Morgan Stanley ( MS - news - people ), have said they won't be repaying the TARP money before the end of the year because of the economic climate and the burden of deteriorating assets on their books.

Dimon contends JPMorgan won't need to sell new shares to repay the government, though he admitted the Treasury may still require the bank to do so. At the end of the first quarter, the bank had $137 billion in Tier 1 capital and $87 billion in tangible common equity, which is 7% of the bank's risk-weighted assets.

For Dimon, the goal seems to be steering clear entirely of the controversial government programs designed to rehabilitate the banking industry. JP Morgan won't be participating at all in the Public Private Investment Plan, the Treasury's program to buy unwanted assets from banks by matching capital from private investors and backing the assets with guarantees.

Dimon wants no part of it. JP Morgan will manage and sell its own assets, he says. "We don't need" PPIP, he says. "We're certainly not going to borrow from the federal government, because we've learned our lesson about that."