Two of the nation’s largest banks announced Wednesday that they plan to return vast sums of money provided to them under the federal government’s recession-fighting Troubled Asset Relief Program, another sign that major lenders are chafing under government efforts to increase oversight on their business practices. Bank of America Corporation has offered to begin repaying part of the $45 billion it received from TARP funds for its January acquisition of troubled investment bank Merrill Lynch & Co. It also is considering a proposal by regulators pay the government as much as $500 million to scrap a deal that would have let the government share BoA’s losses on some of its distressed assets. In a separate move, Wells Fargo & Co. said it would return its $25 billion TARP infusion “shortly” without selling equity, a move intended to prevent dilution of proceeds to current shareholders like Warren Buffet’s Berkshire Hathaway Inc. Sources close to the banks say that, like many recipients of the TARP assistance, they are wary of moves by the government to scrutinize their accounting, trading, lending and pay standards. Oversight of employee bonuses and capitalization “stress tests” have been tops among a number of such issues financial institutions have raised with federal regulators. Should other banks follow suit, the moves could signal an industry-wide lack of faith in the Obama administration’s plans to control systemic risks and excesses in the financial sector. Should the banks succeed in stabilizing their stock values and ledgers without the government dole, the moves could also portend a wider recovery in the market. While some banks, like Goldman Sachs Group Inc., have returned all their TARP money, BoA stressed that it wasn’t disengaging completely from the government. But it is keen to unload a $20 billion aid package tied to the Merrill acquisition. That infusion made the bank an “exceptional” aid recipient, subjecting it to additional examination by Washington, and leaving its employee compensation packages up to White House “pay czar” Kenneth Feinberg. BoA also wants to wriggle free from an agreement in principle that would have let the government absorb much of the losses on a pool of $118 billion in assets shared with Merrill. A person with inside knowledge of the bank’s decision told the Wall Street Journal that BoA thought regulators had “tried to change the game,” and the bank was no longer comfortable with the plan.

But both sides are harping over the government’s demand for an “exit fee” for the plan, which would range from $300 to $500 billion. Initially, the bank said it thought any fee was unfair, but now it is ready to consider a “middle ground” solution, the Journal reported. The TARP payback appears to be more straightforward. The chief executive of BoA, Kenneth Lewis, told shareholders two months ago that TARP could be repaid, but it should be done in two phases, several sources told the Journal. The first phase — the return of the $20 billion Merrill aid — should reduce government scrutiny on the company, while a later payback of the remaining $25 billion BoA received last fall could help the bank further unwind its position with regulators. San-Francisco based Wells Fargo has had its own problems in dealing with government overseers. In May, regulators told the bank that stress tests revealed a $13.7 billion gap in capitalization, putting pressure on the company to execute a stock selloff to raise funds — a move that wouldn’t have sat well with existing shareholders. The stock was down about 11 percent on the year as of Tuesday, Bloomberg reported. In response, Wells Fargo CEO John Stumpf told a reporter Tuesday that the bank would unwind its obligations through the TARP aid. “We will pay it back, but we’re going to pay it back in a shareholder-friendly way,” he said, declining to put a date on the plan. “We are now earning capital so quickly, organically, we don’t want to dilute our existing shareholders.” Wells raked in more than $14 billion in 2009’s second quarter to fill its capital gaps, according to the company, which ranks as the largest home lender in the U.S. on the year to date. Stumpf reassured reporters that disengaging from TARP would be prudent, since the bank’s losses were peaking and its capital flow had improved. In some areas, the bank still was absorbing “very high levels of loss, but they look like they’re flattening out,” he said. Analysts were skeptical, however. Wells Fargo would “probably need a few more quarters to build up their capital levels before I would feel comfortable seeing them pay back TARP,” Jennifer Thompson, an analyst at New York’s Portales Partners LLC, told Bloomberg. “But they certainly are generating a tremendous amount of capital internally.”