Why Washington won't take its money back… just yet

On May 4, the Obama Administration will unveil the results of its "stress tests" that it is conducting on the country's 19 largest financial institutions. The goal is to figure out - in the government's worst-case scenario -– how much more taxpayer money Washington may have to put up to prevent a major collapse hitting the financial system.

The government is not likely to detail each bank's financial position - for fear that news of an "unhealthy" bank could trigger a run on that bank by both investors and customers, thereby hastening its demise. But it is likely to say something like, "If unemployment were to increase dramatically, and home prices were to drop by a certain percent more, we’re likely to need X amount of money."

Until the government finishes these tests, it's not likely to even discuss taking back any of the huge sums it invested in those big banks, despite the fact that many of them have reported profits for the first three months of this year, and now say they want to give the money back. If the five largest banks followed through on their announced intentions to return government bailout funds, that could put $88 billion back into the coffers at the so-called Troubled Asset Relief Program (TARP).

That money could be used for other banks in need, preventing the administration from going back to a Congress that admittedly does not have much appetite to spend more taxpayer money to help Wall Street.

It all seems like a no-brainer; and, in most cases, the big banks will probably be allowed to give the money back. But, according to recent reports, the government is likely to want answers to the following questions before allowing big banks to give their TARP money back:

1) If the big banks return TARP funds, how will it affect stability in the financial system overall? The government will want to make that sure that they have plenty of cash on their balance sheets and can demonstrate they can raise fresh capital, to make sure future shocks to the economy do not bring these banks down and the financial system with them.

2) Will such a move encourage banks to engage in reckless borrowing on their own? By owning stakes in the banks, and with the legislative strings attached to the bailout funds, the government has wide latitude to try to discourage some of the risky moves that got the banks in trouble to begin with. Treasury will want to make sure big banks don’t return to their bad old ways, before agreeing to take the money back.

3) Will returning bailout funds leave enough money in the system to provide adequate credit? Remember, the whole reason for the banks bailout was to inject enough capital into the system, so banks could start lending again to businesses and consumers. If by returning their money, big banks are forced to cut back on making loans, then the government will say, "No thanks! Keep our money."

While the Obama Administration will in most cases be prepared to take back bailout money from big banks if they insist, the ultimate decision to so will be made in the context of what is good for the wider economic interest. We'll be following this story as it unfolds over the course of the next few weeks. Stay tuned!

Ali Velshi is CNN’s Chief Business Correspondent