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Panel: Paulson Overpaid for Bank Stocks

Treasury spent $254B for a $176B value, Congress learns

By Kevin Spak, Newser Staff

Posted Feb 6, 2009 11:29 AM CST

(Newser) – Henry Paulson overpaid for the preferred stock he bought from banks with TARP funds, after promising Congress he wouldn’t, a congressional oversight panel says. The government handed banks $254 billion in exchange for stock that was then worth just $176 billion, the Washington Post reports. “Treasury simply did not do what it said it was doing,” the chairwoman of the panel told Congress yesterday.

The government hasn’t actually lost money on the investment yet, since the banks must repay the amount invested plus interest, but underpaying puts the government at greater risk should the companies default, the Post explains. Lawmakers were furious at the report, but the Obama administration urged calm, noting that the purchases have already yielded $271 million in dividend payments.

[Images (4)]

[Quotes (3)]

Treasury Secretary Henry Paulson participates in a discussion about markets and climate change with "Resources for the Future" in Washington, Monday, Jan. 12, 2009. (AP Photo/Gerald Herbert)

Treasury Secretary Henry Paulson, right, and an unidentified man depart the West Wing of the White House in Washington, Monday, Dec. 15, 2008. (AP Photo/Haraz N. Ghanbari)

President George W. Bush shakes hands with Treasury Secretary Henry Paulson outside the Treasury Department in Washington, Monday, Nov. 24, 2008, after making a statement on the economy. (AP Photo/Gerald Herbert)

Treasury Secretary Henry Paulson testifies on Capitol Hill in Washington, Tuesday, Nov. 18, 2008, before the House Financial Services Committee. (AP Photo/Evan Vucci)

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This is an investment, not an expenditure, and there is no reason to expect this program will cost taxpayers anything. - Henry Paulson

Isn't that a terrible way to look after the taxpayers' money and to make purchases anywhere? - Sen. Richard Shelby, R-Ala.

The best way I can explain it would be is if we had 10 paintings in front of us and I announced that I was going to pay a million for each. And one was a Picasso, and, you know, one was a Rembrandt and the other seven were not. - Elizabeth Warren, chairwoman of the oversight panel

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Panel: Paulson Overpaid for Bank Stocks