After rescuing the nation's banking system from utter disaster last fall, Washington now faces an arguably much trickier task: putting the bailout genie back in the bottle. Several initiatives are on course to expire later this year, putting regulators and the White House in the difficult position of having to decide whether the nation's banking industry is strong enough to go it alone. "They would love to get out of the middle of all this stuff if they could," said John Douglas, a former general counsel at the Federal Deposit Insurance Corp, who now heads the banking regulatory practice at law firm Davis Polk & Wardwell. "The question really is whether the financial system and capital system is vibrant enough to exit without a government backstop." So far, most of the signs from the banking industry lately have been somewhat encouraging. The credit markets seem to be returning to normal. The London Interbank Offered Rate -- or Libor -- a widely relied upon measure of bank-to-bank lending rates, is now well below the record high it hit after Lehman Brothers filed for bankruptcy last fall. At the same time, most banks are back in the black. Even embattled lenders Citigroup and Bank of America , both of which were widely believed to be on the verge of being seized by the federal government earlier this year, managed to report their second consecutive quarter of profits in the latest quarter. Of course, much of the financial crisis has been defined by false bottoms, with investors thinking that the worst was over, only to face a more severe scenario just months later.