As big banks repay bailout funds, small banks can ask for more

Treasury Secretary Tim Geithner already has plans for the tens of billions of dollars from the Troubled Asset Relief Program (TARP) that big financial companies like JPMorgan Chase (JPM) and Goldman Sachs (GS) are scrambling to repay.

Geithner told a community bankers' forum in Washington today that Treasury will use the money to shore up the balance sheets of struggling smaller banks. Though they say their problems aren't nearly as big as those of their larger brethren, small banks account for more than half of financial institutions seized by regulators since the beginning of 2007. Geithner's plan may help buoy those in danger of joining them.

"This has been challenging period for community banks, even though, on average, you were better positioned to withstand the pressures of recession," he said, according to prepared remarks.

Geithner didn't provide much detail, but he did lay out the broad strokes of the plan. Banks with less than assets of less than $500 million that have already received TARP funds will be able to apply for more, up to five percent of total assets, from three percent earlier. And small banks that missed the deadline to apply will get another chance.

Of course, taking more TARP money comes with conditions -- executive compensation curbs and closer public scrutiny among them. And it's not just big financial conglomerates that have chafed under them. In fact, several smaller banks were among the first to seek an exit from the program. Now, their peers will have the option of taking even more capital from the Capitol.
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