The $700 billion scheme was expected to cost the taxpayer more than $340 billion but government officials believe that the projection can now be lowered by more than 50 per cent.
An insider told Reuters: "That improvement is driven by the fact that Treasury's investments to stabilize the system are delivering higher returns than anticipated and that the Treasury does not anticipate having to draw upon the full $700 billion in TARP authority."
US pay czar Kenneth Feinberg has imposed tough restrictions on remuneration for the financial institutions that took advantage of TARP bailout money, resulting in banks becoming desperate to leave the scheme as soon as financially possible.
Last week, Bank of America became the latest firm to announce it was to pay back its debts to the government.
It had received $45 billion in public funding and, once this is repaid, around $116 billion worth of bailout funds will have been recovered by the US government.
The Treasury believes $175 billion will be back under its control in 12 months time.
Mr Feinberg declared himself delighted with Bank of America's proposed repayment, which is to be funded via the $26.2 billion in excess assets and $18.8 billion in a sale of securities.
As well as escaping government control over its pay levels, Bank of America executives believe that the swift return of TARP funds will save the company around $3.6 billion a year in interest payments to the government.
With the money being returned more quickly than expected, politicians are beginning to debate what should be done with it.
It is believed that the Obama administration want to see it put towards job creation schemes throughout the US, while Republican opponents would prefer to see it used to cut the nation's budget deficit.
By Gary Cooper