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Despite the repayment of government investments by 10 of the nation's largest financial companies, the U.S. banking system can't walk without the crutches of government help just yet.

The Treasury Department's approval of repaying Troubled Asset Relief Program investments underscores that the crisis that engulfed the banking industry for almost two years has moved into a new phase. The liquidity of the nation's banking system is secure, even if many banks aren't yet over the worst impact of the recession.

Still, concerns linger about banks' access to capital markets - where the government continues to play an important role though its other programs - and the mortgage assets the government once sought to extract from banks' balance sheets.

Treasury Secretary Tim Geithner said in a press release that Tuesday's repayments by JPMorgan Chase & Co. (JPM), Goldman Sachs & Co. (GS), Morgan Stanley (MS), Capital One Financial Corp. (COF), BB&T Corp. (BBT) and others "are an encouraging sign of financial repair, but we still have work to do."

Some banks eager to pay back government capital may well continue to use the Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee Program, said Aaron Fine, a partner with consulting firm Oliver Wyman. Others may sell securitized loans through the Term Asset-Backed Securities Loan Facility.

And some banks, such as E-Trade Financial Corp. (ETFC) and Colonial BancGroup Inc. (CNB), are standing in line to get approval to even participate in the TARP.

The $700-billion TARP initiative last autumn was originally designed to remove soured loans and securities tied to mortgages from banks' balance sheets. It was quickly turned into the Capital Purchase Program, which instead provided direct capital through the purchase of preferred shares in banks by the Treasury.

The banking system, which, by some accounts, was only hours away from a complete meltdown after the bankruptcy of Lehman Brothers Holdings Inc. (LEHMQ), was stabilized within days. For that, bankers and analysts alike consider CPP one of the most important and successful measures the government has taken to resolve the crisis.

FDIC Chairman Sheila Bair has already declared victory - at least over the risk of systemic collapse. "We have moved beyond" the liquidity crisis, Bair said in April. "As I see it, we are now in the clean-up phase. We have to repair...and get out," she said. On Monday, Rep. Jeb Hensarling, a member of the congressional panel overseeing TARP, said he wants the program to close by year-end.

But that is a tight deadline few believe will be met. Scott Talbott of the Financial Services Roundtable, a lobby group of the nation's largest banks, said the $68 billion of repayments by the big banks is the beginning of the government's exit strategy. But TARP is unlikely to be wrapped up by the end of the year.

Instead of helping the overall system, TARP and other government programs will now help individual banks. "We are getting into an economic cycle where smaller banks with significant commercial real estate loans need that money," said Kevin Petrasic, formerly special counsel at the Office of Thrift Supervision and now with law firm Paul, Hastings, Janofsky & Walker LLP.

The Treasury Department now has the opportunity to show that CPP wasn't a "bail out" for the biggest banks, but for all banks, and the fund might also be used to help other industries, such as autos, through the recession, he said.

Also unresolved is what to do with the troubled assets - now called legacy assets - that remain on the books of banks large and small. Some, such as Fifth Third Bancorp (FITB), have started to sell the assets into the private market without government help, while the proposed Public-Private Investment Program is replacing what Talbott calls "TARP classic" to extract "toxic" assets from banks. PPIP, like its predecessor, hasn't gotten off the ground.

PricewaterhouseCoopers LP said in a report published last month that the removal of "troubled assets from bank balance sheets must be accelerated," but that PPIP "will prove inadequate...making some form of bad bank solution inevitable."

Either way, the government will continue to play a substantial role in the banking industry until the crisis can be called officially over.

"Policy makers don't want to end programs until they are sure we don't need them anymore," and no matter how optimistic the capital market looks and how many green shoots are spotted, the banking system hasn't recovered yet, said Richard Spillenkothen, formerly the Federal Reserve's lead banking regulator and now a director at Deloitte & Touche LLP.

-By Matthias Rieker, Dow Jones Newswires; 201-938-5936; matthias.rieker@dowjones.com