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.