VIDEO: Banks risk ‘stigma’ if they can’t repay TARP, senator warns

Banks risk being stigmatized if they are prevented from repaying their loans, Sen. Kit Bond (R-Mo.) cautioned Wednesday.

“I do know there are a lot of banks who really chafe under the stigma of having TARP money,” Bond told CNBC this afternoon. “And it’s about time we let the banks that are healthy get back out and do what banks do.”

At issue is whether or not the Treasury department allows financial institutions that received funds in the Troubled Asset Relief Program (TARP) to repay loans as quickly as some companies have wanted. Treasury Secretary Tim Geithner warned earlier today that if financial institutions rush to reimburse the government too quickly, the growing liquidity in the credit market could quickly vanish.

“I think it’s time to get the TARP out of the business of running banks,” Bond argued. “The federal government doesn’t do a good job of running its business; certainly us in Congress leave a lot to be desired.”

The Missouri Senator, who will retire at the end of this term in Congress, advocated using the Federal Deposit Insurance Corporations’s (FDIC) process to restructure banks if they’re unhealthy.