Five lessons for the next time banks come begging

The last of America's largest, systemically dangerous banks are about to repay their government rescue money. And while the public's anger at bailing them out has only grown since last year, there at least are plenty of lessons to take away from it all.

Bank of America Corp is out of the Troubled Asset Relief Program's (TARP) clutches. Wells Fargo & Co is on its way. Citigroup Inc has unveiled its own plans for raising money to repay the government. We can only hope Treasury Secretary Timothy Geithner knows what he's doing by releasing them, though that's probably too much to assume of any government regulator. The worst-case scenario is that one or more members of the too-big-to-fail club may limp back for another gorging at the government trough someday. Here are some things to keep in mind should any of them ever come back begging for TARP 2.0.

Lesson No 1: Preferred stock is debt, not equity. When the Treasury Department began injecting money into US banks last year, it did so by buying preferred stock. Aside from providing liquidity, the major benefit was that the banks got to label the money as capital. That's because the accounting rules let them count it as equity. It wasn't equity in substance, though. It was debt. Each of the original nine TARP recipients has paid back the money, or soon will. That's what they said all along they would do, even though they supposedly could have held it in perpetuity by paying interest of as much as 9 percent a year. The cash also came with restrictions on dividends and executive compensation.