Several of the U.S. banks that are seeking to repay their Troubled Asset Relief Program bailout money now have more toxic assets on their books than before the financial crisis began, a new report says.

According to Audit Integrity, an independent financial research firm, four of the six banks attempting to repay TARP money had more so-called Level 3 assets on their balance sheets in the first quarter of this year than they did in the second quarter of 2008. And, four of them also had a higher percentage of Level 3 assets relative to total assets.

The firm notes that these assets are illiquid and nearly impossible to value, concluding, “… an increase in these assets raises the concern that banks are riskier than they were before the financial meltdown.”

“Our research calls into question whether banks should repay TARP money and further expose the economy to their destructive business practices,” said Jim Kaplan, founder and chairman of Audit Integrity. “Ostensibly they are repaying the TARP money to rid themselves of its restrictions, which include limits on executive compensation, at a time when their assets are more toxic than ever before.”

IE