Bank group urges government to move quickly on TARP

WASHINGTON (Reuters) - The largest U.S. financial services firms on Friday urged the government to move quickly on the second stage of its $700 billion financial services rescue package.

"I believe there is some urgency," said Steve Bartlett, president of the Financial Services Roundtable, which represents the biggest financial services firms such as Bank of America (BAC.N) and insurer Allstate Corp (ALL.N).

"While capital markets have improved (since last year), they are less than robust. The economy is fragile," Bartlett told reporters.

The Obama administration is working on a plan to help stabilize the U.S. banking industry.

According to a source familiar with the government's thinking, it will include creating a "bad bank" to soak up distressed assets hurting banks' balance sheets, offering federal insurance for other problem assets, and injecting taxpayer dollars into banks in exchange for common stock.

Under the Troubled Asset Relief Program (TARP), the Treasury Department already allocated $350 billion to shoring up the banking system. It also funneled money into troubled insurer American International Group (AIG.N) and some for the auto sector.

Bartlett said the remaining $350 billion in TARP money may be enough to cover losses in banks' assets.

Sen. Charles Schumer, a New York Democrat, said on Thursday that some experts think creating a "bad bank" to buy toxic assets could require as much as $4 trillion.

Bartlett said the first phase of TARP was successful in stabilizing the situation. When former Secretary Treasury Henry Paulson approached Congress about the $700 billion bailout package last fall, markets were in a tailspin, banks were not lending and there was a fear that the country's financial sector would collapse and wreak havoc on global economies, he said.

(Reporting by Rachelle Younglai; Editing by Tim Dobbyn)