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
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)
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(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.