NEW YORK — Banks have been eager to pay back bailout money almost since the moment they first accepted it. Now the government is deciding which banks can return the cash — at the risk of setting up a system of winners and losers.

The Treasury gets to determine which banks can quit the $700 billion Troubled Asset Relief Program, loosening the federal grip on the banking sector eight months after Congress approved the rescue package. An announcement could come as early as today.

The repayments, which could exceed $50 billion, reflect a measure of stability that has returned to the banking system in recent months. But experts say the crisis isn't over and warn that the repayments could widen the gap between healthy and weak banks.

"We're going to find out who are the strongest kids on the block and who are not," said Bert Ely, a longtime banking analyst.

Banks started railing against the TARP almost immediately after they accepted the help. One CEO, Jamie Dimon of JPMorgan Chase & Co., called the money a "scarlet letter," referring to the public backlash and federal scrutiny that came with it.

Banks that are expected to get a green light to repay bailout funds include JPMorgan, Goldman Sachs Group Inc. and American Express Co. They would be free of federal rules ranging from caps on executive pay to restrictions on dividend payments.

But weaker banks such as Citigroup Inc. and Bank of America Corp. would remain tethered to the government and face a problem — how to compete for business and top workers against rivals operating more freely.

PLAYING FIELD TILTS

"Banks had been at an equal disadvantage," said Jack A. Ablin, chief investment officer at Harris Private Bank in Chicago. "Now you'll have some that are unfettered and others that are constrained. That will affect the ability to attract customers and talent."

Investors are also keeping score. Stock in Citigroup and Bank of America, which received a combined $90 billion in TARP money, has plunged. Investors will probably keep favoring firms that show they can stand without federal help, Ablin said.

"If you can decide between a weak player and a strong player, just about every advantage goes to the strong," he said.

The push to repay TARP money comes a month after "stress tests" of the nation's 19 largest financial firms found that 10 needed to raise $75 billion more to protect against future losses. All 10 had submitted plans by late yesterday, the Federal Reserve said. The Fed said yesterday that plans submitted by 10 banks to bolster their capital cushions are enough to help them survive a deeper recession.

The remaining nine institutions received a combined $56 billion in TARP money. They had to prove they could raise enough private capital without federal guarantees before they could return the money.

So far, 16 of the 19 banks have raised $75.2 billion, mostly by selling common stock. Meanwhile, about a dozen smaller banks have already repaid TARP money.

Regulators want to avoid letting a bank repay its TARP money only to have it return months later in worse shape, seeking another handout.

TEST QUESTIONED

That's why regulators say they need to determine which banks are truly stable enough to repay their TARP money. Their decisions depend on how accurate the tests were in calculating the banks' capital needs.

"You could easily be off by $300 billion on how much capital these 19 banks needed," said Douglas Elliott, a fellow at the Brookings Institution and a former investment banker. "Maybe we'll get lucky and everything will be fine, but I wouldn't count on it. There are a lot of dangers still out there."

Industry insiders say a big worry is that banks stuck with limits on how much they can pay executives will watch star performers flee to other companies.

Federal rules imposed by Congress limit executive bonuses at banks that receive bailout money and cap total compensation of top executives at $400,000 a year. Administration officials are set to outline stricter rules later this week.

Much of the revenue at banks like Citigroup comes from a relatively small number of trading desks. So losing a few key traders could be a serious drag on the banks' bottom lines.