How much government meddling will our nation’s banks put up with before they start rejecting the federal government’s TARP funds? Looks like we’re starting to find out. Last week ProPublica reported that IberiaBank of Lafayette, Louisiana became the first bank to return TARP cash to the Treasury. From the bank’s press release: “We believe recent actions, interpretations, and commentary regarding various aspects of the program places our Company at an unacceptable competitive disadvantage.”

Now Crain’s is reporting that Northern Trust Corp will soon join IberiaBank:

In a letter Friday to House Financial Services Committee Chairman Barney Frank, Northern CEO Frederick H. (Rick) Waddell said, in effect, that the bank doesn’t need the $1.6 billion it sold in preferred shares to the federal government last fall. … “Northern Trust has engaged our regulators with the goal of repaying Capital Purchase Program funds as quickly as prudently possible under the new guidelines,” [Northern CEO Frederick Waddell] wrote.

It is rapidly becoming apparent that Secretary Timothy Geithner’s TARP is so chaotic and the feds are adding so many potential restrictions and strings to the transactions that any bank that can do so should get out of the TARP program ASAP.