Banks Lowball Taxpayers on TARP Payback

Feds hold stake after emergency loans, and could profit by waiting

By Kevin Spak, Newser Staff

Posted May 19, 2009 10:55 AM CDT

(Newser) – US banks are eager to repay their TARP money, but doing so might rob taxpayers of the upside they were originally promised, the New York Times reports. In exchange for emergency loans, the government got 10-year warrants to buy stock in the banks. If repaid, it must sell those warrants. But at what price? Should it try to maximize taxpayer profit, or minimize pain for banks?

One bank, Indiana’s Old National, has repaid its debt and bought back its warrants, paying $1.2 million for investments analysts say were worth up to $6.9 million. “It’s a great deal for Old National,” said one professor. “Treasury accepted a lowball offer.” He values the Treasury’s warrant portfolio at up to $10.9 billion, and thinks it should sell the assets to the highest third-party bidder.

JP Morgan CEO Jamie Dimon, left, and Goldman Sachs CEO Lloyd Blankfein leave the White House, March 27, 2009, following a meeting with President Barack Obama. (AP Photo)

In this Feb. 11, 2009 file photo, Goldman Sachs CEO Lloyd C. Blankfein, left, and JPMorgan Chase CEO James Dimon testify on Capitol Hill. (AP Photo)

In this Feb. 26, 2009, file photo, Bank of America CEO Ken Lewis arrives at the building that houses the office New York Attorney General Andrew Cuomo. (AP Photo)

Treasury Secretary Tim Geithner participates in a question and answer session with Newsweek editor Jon Meacham, not pictured, yesterday in Washington. (AP Photo)

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COMMENTS

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gilgordan

May 19, 2009 6:12 AM CDT

This was nothing more than an orchestrated Ponzi scheme cooked up by two excellent chefs of wall street, Paulson and Bernacki. Fast way to build wealth recuperation on the backs of others who must pay the bill. As for the Old National, one might think congress might want to investigate this scheme and clawback some of those investment profits, the money certainly didn't go to main street lending.

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Banks Lowball Taxpayers on TARP Payback

Feds hold stake after emergency loans, and could profit by waiting

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Treasury Department • stock options • banking industry • Troubled Asset Relief Program • TARP • Old National Bancorp

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Taxpayers Still Have $132.9B Stuck in TARP

Government trying to unwind stock without losing on the deal

98 TARP-Funded Banks Risk Failure

Smaller banks under stress, finds WSJ analysis

Taxpayers Will Score $12B on Citigroup Bailout: Treasury

Government strikes deal to sell remaining 2.4B shares

GM Doesn't Have to Pay Taxes

Little-noticed ruling costs government $45.4 billion

Bailed-Out Companies Throw Cash to GOP

Even though Dems led push for TARP

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Banks Lowball Taxpayers on TARP Payback

Feds hold stake after emergency loans, and could profit by waiting

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Treasury Department • stock options • banking industry • Troubled Asset Relief Program • TARP • Old National Bancorp

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Taxpayers Still Have $132.9B Stuck in TARP

Government trying to unwind stock without losing on the deal

98 TARP-Funded Banks Risk Failure

Smaller banks under stress, finds WSJ analysis

Taxpayers Will Score $12B on Citigroup Bailout: Treasury

Government strikes deal to sell remaining 2.4B shares

GM Doesn't Have to Pay Taxes

Little-noticed ruling costs government $45.4 billion

Bailed-Out Companies Throw Cash to GOP

Even though Dems led push for TARP

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