Tags: US | Bailout | Warrants

Treasury to Sell Wells Warrants to Recoup Bailout Costs

Wednesday, 19 May 2010 09:42 AM

The government says it will auction 110.3 million warrants it received from Wells Fargo & Co. as part of its effort to recoup the costs of the $700 billion financial bailout.

The Treasury Department said the auction of the Wells Fargo warrants will take place on Thursday. It set a minimum bid price of $6.50 per warrant. A warrant gives the purchaser the right to buy common stock at a fixed price.

Financial institutions have been eager to cut ties to the bailout program, known as the Troubled Asset Relief Program, or TARP, to escape various restrictions imposed on banks receiving support. Those include limits on executive compensation.

Wells Fargo shares fell 41 cents, or 1.3 percent, to $30.18 in premarket trading.

The Treasury also announced that an auction on Tuesday of 2.53 million warrants of Valley National Bancorp had raised net proceeds of $5.42 million for the government.

The Valley National warrants sold for $2.20 per warrant. Treasury had set a minimum bid price of $1.70 per warrant.

The government received the warrants as part of the compensation for providing support to banks during the financial crisis.

Neil Barofsky, the special inspector general for the bailout fund, issued a report last week that found Treasury had failed to keep minutes or notes from phone calls with banks that received TARP money.

He said there had been undocumented conversations in which billions of taxpayer dollars were at stake.

The Valley National and the Wells Fargo warrants auctions this week followed auctions held in recent weeks for Comerica Inc. and PNC Financial Services Group Inc.

The auction of 16.9 million PNC warrants raised $320.3 million while the auction of 11.5 million Comerica warrants raised $181.1 million.

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