Treasury Gets a Pound of Flesh, at Last

Here’s an encouraging bit of news: it turns out Treasury has been smarter than many had expected in pushing the banks to pay up for the privilege of being bailed out.

You can read today’s testimony by the deputy special inspector for TARP (SIGTARP) here, and you can read my article on this Wednesday at the Fiscal Times.

Oddly, the SIGTARP’s main message was to whine about the lack of transparency and how hard it was for investigators to figure out how Treasury was negotiating with the banks. But the striking part is how cagey and successful Treasury officials were in persuading banks to pay top dollar to buy back stock warrants they gave the government when they got their TARP loans.

When American Express offered to buy back its warrants for $260 million, Treasury rejected the offer and Amex came back with $340 million — way more than Treasury itself had estimated the warrants were probably worth. Same thing for Morgan Stanley, which bumped up its offer from $900 to $950 million.

A chart compiled by the SIGTARP shows that Treasury rejected almost all the banks’ initial offers and got them to come up with substantially more money.

Admittedly, it’s just icing on the cake — $6 billion so far from warrant repurchases, on top of about $189 billion so far in principle and interest payments.

But hey — Treasury appears to have reaped at least full value and maybe more on warrants that are notoriously difficult to value and that the banks tried mightily to buy back for as little as possible.

A small victory.

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About Edmund L. Andrews 37 Articles

Edmund L. Andrews spent two decades as a business and economics correspondent for The New York Times. During that time, he covered many of the nation ’s most transforming events, from the Internet and biotech revolutions to the emergence of capitalism in central Europe and Russia and the Federal Reserve under Alan Greenspan and Ben S. Bernanke. In 2009 he published BUSTED: Life Inside the Great Mortgage Meltdown (WW Norton), his own harrowingly personal account of the epic financial crisis. He has frequently appeared on major television and radio news programs, from the NewsHour with Jim Lehrer and Today to 20/20, All Things Considered, Lou Dobbs on CNN, the Colbert Show, BBC Worldwide, MSNBC and CNBC.

Ed began his affiliation with The Times in 1988 when he covered patents, telecommunications, and technology. In 1992, he joined the Washington bureau of The Times as a domestic correspondent and reported extensively on the business and politics surrounding the convergence of cable television, the Internet and broadband digital networks. In 1996, Ed became The Times’ European economics correspondent and its Frankfurt bureau chief. He returned to Washington in 2002 and became the bureau’s lead economics correspondent and The Times’ main eyes and ears on the Federal Reserve.

Prior to joining The Times, Ed worked as a magazine writer specializing in business and economics. Before that, he was an assignment editor for Cable News Network in Washington and an education and city government reporter at The Sentinel-Record in Hot Springs, Ark.

Ed graduated magna cum laude from Colgate University in 1978 with high honors in international relations. In 1981, he received a master’s degree in journalism from Northwestern University. He is married to Patricia Barreiro and has four children – Ryan, Matthew, Daniel and Emily.

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