The federal government should repeat its stress tests of the nation’s largest banks if its assumptions about the severity of the economic downturn prove too rosy, according to a congressional oversight report to be released today, the Washington Post reported.

The Congressional Oversight Panel, which oversees the $700 billion government bailout of the financial industry, generally praised the bank evaluations, which assessed the firms’ financial health, and lauded regulators for using a reasonable model to conduct the tests.

The U.S. Treasury Department also announced this morning it has given 10 banks approval to repay a combined $68 billion of taxpayer money they received to combat the credit crisis, Reuters reported. The department did not name the banks, but many are likely to announce they are making repayments.

Treasury Secretary Timothy Geithner said the money paid back into the $700 billion bailout fund by healthy banks can be used to help smaller banks, including those that have previously received funds.

The stress tests, conducted on the 19 largest U.S. banks to assess their exposure to risky real estate and other loans and to weigh how they might fare if economic conditions deteriorated, determined that nine were considered healthy enough that they did not need to add more capital, while the other 10 were told they needed to raise a combined $74.6 billion in additional capital. On Monday, the Federal Reserve said all 10 of the banks that were ordered to raise capital had come forward with plans that, if implemented, would raise the needed funds.

The panel, headed by Harvard Law School professor Elizabeth Warren, noted that the stress tests assumed an average unemployment rate of 8.9 percent this year under the worst-case scenario. The unemployment rate for last month, however, climbed to 9.4 percent, meaning the assumptions underlying the tests might have been too optimistic.

The 154-page report called for the banks to be subject to further stress tests as long as they continue to hold large amounts of toxic assets on their books. The panel also said that regulators should retain the power to conduct stress tests even beyond that time, and that banks should be required to run internal evaluations between federal tests and share the results with regulators.