We should all be standing up and cheering. In fact, we should throw a party, maybe one funded by stimulus dollars. I hear there are a lot of those still lying around. Treasury Secretary Timothy Geithner and his boss President Barack Obama are getting better all the time. They only lost 32 percent of your money this time.
As part of the monstrosity that was TARP (Troubled Asset Relief Program) the Treasury Department has purchased over $11 billion worth of warrants on hundreds of U.S. banks.
A warrant, like an option, gives the holder the right, but not the obligation, to buy a stock at a certain price, quantity, and future time. However, unlike an option, which is bought on the stock exchange, a warrant must be obtained directly from the company.
These warrants are being sold back to the companies that originally gave them to the government, except, you guessed it: the warrants are being sold back for much less than the taxpayers bought them for and even less than what they are worth on the open market.
Linus Wilson, a finance professor at the University of Louisiana at Lafayette has been extensively studying TARP warrants and has released critical data in uncovering the TARP madness that exists in Washington, D.C.
According to Wilson, Morgan Stanley, one of the chief beneficiaries of TARP, recently bought back warrants that were held by the U.S. government for just 68 cents on the dollar, resulting in a taxpayer loss of $400 million.
Bank of New York Mellon Corp recently bought back their warrants for $136 million. Wilson’s best estimate was that those warrants were worth $204 million. That means that the Treasury gave up 33 percent on that deal as well.
This problem is not something that was dreamed up by one professor. Even Congress has recognized that this could be a potentially dangerous problem costing taxpayers millions.
The Congressional Oversight Panel for TARP, chaired by Harvard University Professor Elizabeth Warren, even warned that taxpayers could be out an additional $2.7 billion if the Treasury sold its existing warrants back to their respective banks at 66 percent of the purchase value.
In all fairness, the Treasury did negotiate fair deals with two TARP banks. The Treasury recouped 98 cents on the dollar from Goldman Sachs and recouped 107 cents on the dollar from American Express.
However, those are the only two examples of good deals negotiated by Geithner and the U.S. Treasury.
The Treasury has negotiated atrocious deals for taxpayers including the warrant buyback from Old National Bancorp of Evansville, Indiana where taxpayers lost 80 cents on the dollar from their investment into warrants.
This is an outrage. Americans have been so desensitized with billions and trillions that the numbers don’t seem real anymore. If we read a headline that has taxpayers losing billions, we don’t think twice about it.
The insanity has to stop in Washington, D.C. Geithner, the U.S. Treasury, and the Obama administration have grown so drunk with power that they don’t care how much money they lose taxpayers as long as the cash keeps flowing to big government.
Until the public realizes that the madness has to stop, they will support Obama, Geithner, and the rest of the administration with whatever ideas they come up with, no matter what the cost is to the American taxpayer.
The problem is that Geithner and Obama aren’t spending their own money; they are spending your money. Ask any small businessman or woman, they don’t see the cost of business, they feel the cost of business. Every check that you write, every bill that you pay, anyone who has to run a business feels that cost everyday because every penny is vital to the existence of their business.
That’s not the way government works. They spend your money, and when they are done they ask for more. Maybe if we told Obama and Geithner that they had to use their own money to finance all of this government waste, they might manage things a little differently.
More like a business, less like a big, over-taxing, over-expansive, Geithner- and Obama-nation government.
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