Tags: treasury

Oversight Panel: Treasury Selling Bank Warrants Cheaply

By Dan Weil   |   Monday, 13 Jul 2009 01:55 PM

The Treasury department is charging banks too little for buying back warrants the government obtained from the banks as part of the bailout last fall.

That’s according to the Congressional Oversight Panel, which oversees the bailout. It said the government should have recovered a third more, or $10 million, from recent warrant sales to 11 small banks.

Taxpayers stand to lose out on as much as $2.7 billion, if that 66 percent threshold is applied to the entire population of banks for which the Treasury holds warrants, the panel said.

The warrants are part of the Troubled Asset Relief Program (TARP), the $700 billion bailout begun last October to prevent banks from collapsing.

Many banks seek to buy back the warrants to exit TARP. Some big banks already have repurchased the government’s preferred shares.

"With the first 11 repurchases, Treasury could have done a better job," Linus Wilson, a finance professor at the University of Louisiana who has analyzed the warrant repurchases, told CNNMoney.com. "The way for Treasury to make their job easier is to adopt an optimistic value of the warrants. Otherwise taxpayers will get a very bad deal."

The panel’s chairwoman Elizabeth Warren told Bloomberg that the group decided to write its report early in the banks’ process of leaving TARP to demonstrate that “we’re going to be here crunching every one of these numbers,” as the Treasury continues to sell warrants.

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The Treasury department is charging banks too little for buying back warrants the government obtained from the banks as part of the bailout last fall. That’s according to the Congressional Oversight Panel, which oversees the bailout. It said the government should have...
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