The Banking and Strategy Initiative

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On the cash you get from warrants | O’nomics

On Thursday, the Treasury Department will auction off the stock warrants it received from the bank as part of its $25 billion Troubled Asset Relief Program loan.The warrants could be worth as much as $1.5 billion to taxpayers, according to one estimate — though the results of an auction held last week suggest the feds may not get quite that much.JPMorgan JPM, Fortune 500 repaid its TARP loan in June, but the New York-based firm declined to repurchase the warrants, which the government received for free as part of the deal. Warrants give the holder the right to buy stock at a certain price within a certain period.Under the terms of TARP, banks have the right to repurchase the 10-year warrants they gave the government, with the proceeds going to taxpayers as profits. A number of big banks including Goldman Sachs GS, Fortune 500 and Morgan Stanley MS, Fortune 500 made large payments to the government this past summer to buy back their warrants.A bank that declines to repurchase its warrants, for whatever reason, triggers an auction at which the government sells the warrants to private sector bidders.Treasury held its first warrant auction last week, reaping $147 million via the sale of warrants to buy shares in credit card lender Capital One COF, Fortune 500. Thats a nice chunk of change, though it was less than one researcher was expecting.

via Treasury cashing in on JPMorgan stake – Dec. 8, 2009.


This entry was posted on December 9, 2009 by in Financial Markets, Obamanomics, TARP, Uncategorized, US and tagged , , , , , , , .


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