According to the Wall Street Journal, Bank of America (NYSE: BAC) is offering to repay part of the government bailout money it received last year, and the U.S. isn't ignoring the offer.

Supposedly, the U.S. wants the bank to pay at least $500 million in order to stave off a pact that would result in the government losing on certain assets. People familiar with the matter classify the moves as an "extra measure" of federal aid for Bank of America in order to complete its acquisition of Merrill Lynch. Supposedly, both sets of the discussions would allow Bank of America to "reduce a layer of federal involvement in its affairs."

This morning, the U.S. Federal Reserve is expected announce that some banks will be allowed to repay the money lent to them under the Troubled Asset Relief Program (TARP). Some of the banks expected to receive approval are Goldman Sachs (NYSE: GS), JPMorgan Chase (NYSE: JPM), American Express (NYSE: AXP), Morgan Stanley (NYSE: MS), State Street (NYSE: STT) and U.S. Bancorp (NYSE: USB). All of these banks have expressed interest in repaying the government.

What is interesting is that there will be yet another Czar joining the White House, a "Repayment Czar," (what is the deal with the media's fascination with Russian royalty?) or as the administration will call the position, the "Special Master for Compensation."

Cincinnati-based Fifth Third Bancorp (NASDAQ: FITB) announced Wednesday that it plans to sell stock in order to raise capital. FITB plans to sell $750 million of common stock in order to meet its commitment to push its capital beyond the $1.1 billion it needs according to the recent stress tests.

The bank will perform two transactions to help provide the common equity. FITB plans to sell up to an aggregate of $750 million of its common shares occasionally with an "at the market" offering through Morgan Stanley and Merrill Lynch. The firm expects to use a part of the proceeds of shares issued under the offering to fund the cash portion of its offer to exchange cash and common shares for Series G convertible preferred depositary shares.

Remember way back when the U.S. Treasury said it would no longer keep buying toxic assets, but instead would give TARP money directly to the banks to stimulate lending? The Treasury gave 550 banks $200 billion with the understanding that they would use the money to increase their lending.

Forget about it. Banks are not doing what they were directed to do with the TARP money. The U.S. Treasury reported that lending by the 21 largest banks actually fell by 2.2% across all consumer lending categories in February compared with the prior month. Declines were seen in commercial real estate, general business lending, as well as credit cards and student loans. The only bright spot was mortgage refinancing. With the low interest rates now available, refinancing was up 35% in February.

First of all, let me say that Federal law prohibits the disclosure of all bank "stress tests" and bank examinations, so everything said here is pure hearsay.

Nevertheless, we have some good news: Banks are holding up well under Federal examination. All 19 banks will pass their stress tests. The bad news is that they still may need additional taxpayer money.

Bank of America (NYSE: BAC) CEO Ken Lewis has based what is left of his reputation on the fact that the firm does not need another dime in government money. As a matter of fact, he regrets taking as much TARP cash as he did.

According to Bloomberg, Oppenheimer & Co. believes that "Bank of America Corp., the largest U.S. bank, needs to raise $36.6 billion in equity to bring capital ratios in line with its peers." In this environment, that money is not going to come from the private sector. The only entity with the stones to put it up is the U.S. government.

While the money may not come in exchange for common stock, any instrument is likely to have some conversion provisions, which means that dilution is possible. With a market cap of $44 billion, current Bank of America shareholders will be facing a large haircut if Oppenheimer is right. The stock trades at $7.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Yesterday, there was outrage about American International Group (NYSE: AIG) and the bonus payments the firm said it is legally bound to make. Today, it is Citigroup (NYSE: C) and Morgan Stanley (NYSE: MS) that are looking for new ways to anger the rest of America.

The Wall Street Journal is reporting that officials at both troubled banks are looking into ways to circumvent federal caps on bonuses. Reportedly, Citigroup and Morgan Stanley, along with "other financial institutions that got government aid," are negotiating to raise base salaries for some executives and "other top-producing employees." Remember, the bonus caps were part of the recent stimulus package that President Obama okayed last month.

This whole bank bailout mess is getting ridiculous. The newest wrinkle is that insurance companies are getting approval to acquire banks so that they can get a chunk of the TARP bank bailout money. Why we are bailing out insurance companies is a mystery.

Nevertheless, banking regulators last month approved applications from Hartford Financial Services Group Inc. (NYSE: HIG) and Lincoln National Corp Ind. (NYSE: LNC) to become savings and loan holding companies so they can get a bite of the TARP money. In addition, about a dozen insurers have applied for capital injection.

Insurance companies have been seeking federal funds to boost their coffers after large investment losses.

There is talk by the Federal Reserve, the U.S. Treasury, the U.S. Congress and bankers about creating a "bad bank" and let the government use the next tranche of the bailout money to take the losses from the banks and put them in this bad bank.

First of all, why anyone would want to create something "bad" is beyond a rational person's comprehension. Why not create something "good." Why not take the second half of the TARP money and create a "good bank,"one that is solvent, a bank that everyone can trust, a bank for the future not the past. If we create a "bad bank," there is no future. The money is just wasted again.