Want Out of TARP? Just Write a 'Dear John' Letter

More financial firms with pending applications for money from the government’s Troubled Asset Relief Program are now expected to reject the funding, in part because of fears that Washington will keep changing the rules and terms for the program, financial industry sources said.

It’s actually quite easy for firms with cold feet to get out of the deal: They can do it simply by writing the Treasury Department “no thanks.”

More firms quitting TARP could limit the effectiveness of the program going forward, analysts said -- the Treasury Department has said wide participation is critical to stabilizing financial markets and firms. Indeed, Treasury has not publicized procedures for exiting TARP.

Banks, insurance companies and other firms with pending TARP applications -- and even those that have been approved but have not yet received the money -- can cancel their request with a letter to the Treasury anytime before the funds have been disbursed, a government official confirmed. He added that for various reasons, “lots” of firms have withdrawn applications “throughout” the life of program, which was launched in October, and said the withdrawal-letter process is routine and well-known in the industry. At least one bank lobbyist who did not wish to be identified agreed.