Posted on 07/01/2009 7:57:09 PM PDT by FromLori
The U.S. Treasury has apparently found another way to lose more taxpayer money. Perhaps $9 billion down the drain, unless changes are made soon.
Last year, when the Treasury doled out some $200 billion from the $700 billion Troubled Asset Relief Program (TARP), it also acquired warrants to purchase common stock in banks that received TARP assistance.
However, as the law was written, the Treasury must sell those same warrants back to the banks once they have paid back their original TARP loan.
What the law does not state is for how much.
One of the first banks to pay back their loan was Old National Bancorp of Evansville, Ind. After paying back the loan, Old National did what it was supposed to do: buy back its warrant.
Linus Wilson, assistant professor of finance for the University of Louisiana at Lafayette, estimates that the Treasury only recouped 20 cents on the dollar of their original investment in Old National Bancorp, calling it "the worst deal the Treasury has made."
If the Treasury were to only recoup 20 cents on TARP warrant purchases, taxpayers could be out as much as $9 billion, according to Linus.
Instead of being forced to sell them back to the banks, Wilson is advocating a free market solution where the treasury would place the warrants for sale to third party investors who would ultimately drive up the price, increasing the return for taxpayers.
Recently, the Government Accountability Office has criticized the Treasury for its limited transparency regarding the process of valuing and selling warrants.
Also the Congressional Oversight Panel and the Special Inspector General for the TARP have increased their oversight of warrant sales by the Treasury.
(Excerpt) Read more at moneynews.newsmax.com ...
Hear Ye! Hear Ye! Hear Ye!
FReeper Convention Ticket Drawing!!
All NEW monthlies of $10 or more submitted by July 31 that include the words “FReeper Convention Ticket Drawing” in the comment section will be included in a drawing for a Freeper Convention ticket!! The winner can use the ticket for himself or give it away to another FReeper!!
Hope to see you in DC!!
45 posted on Wednesday, July 01, 2009 12:41:31 PM by Jim Robinson (Follow me on Twitter: http://twitter.com/jimrobfr)
and there is nothing we can do...
maybe just stop paying taxes...stop working...start hiding income....become devious....barter, don't buy...form neighborhood "groups" or communes.....
it might just be too late for prayer...but I am open to suggestions...
Wow. How do I incorporate myself into a failing bank, hehe.
It’s never too late for prayer.
The sale of these warrants was demanded by Treasury as part of the sales of the preferred issues. The instruments currently are pretty much worthless because the exercise price is way out of the money from the stock prices.
That's not the fault of the sellers; I don't think it would have ever occurred to any of the banks to regard these forced sales of warrants as desirable (and many of the banks weren't happy about being coerced into selling the attendant preferred issues.)
The Treasury should have to act like any other investor that holds a warrant that is out of the money, and not whine about its purchases. It wrote the sales purchase agreements, and it should have to uphold its end of the deal as it was agreed.
The devil is always in the details...especially for those who NEVER read the laws they voted on.
Problem with that is it is not the treasury who is footing the bill it is US.
Excellent post
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