"Banks' repayments of TARP preferred stock and warrants continue to turn a profit for the U.S. Treasury Department, according to analysis by SNL Financial.
As of March 30, the government has made an 8.5% annualized return on the 49 companies that have exited the Capital Purchase Program and the Target Investment Program, which was created to provide additional funding to Citigroup Inc. and Bank of America Corp. SNL defines "exiting" the programs as completely redeeming the preferred stock and repurchasing the warrants. Institutions that had their warrants auctioned by the Treasury are also considered to have exited the programs, as are institutions that declared bankruptcy.
The proceeds from both TARP warrant repurchases and auctions have largely fueled the profitability of the programs. The redemptions of the preferred shares alone generally only provide the government a 5% return, which comes from the dividends. American Express Co.'s and Goldman Sachs Group Inc.'s warrant repurchases in July 2009 helped create some of the largest annualized company returns at 23.3% and 20.0%, respectively. According to Linus Wilson, a finance professor at the University of Louisiana at Lafayette, Goldman Sachs' warrant represented one of the best deals for the American taxpayer, as reported by Bloomberg News on July 22, 2009. Wilson said that based on his calculations, Goldman Sachs paid 98% of the value of the warrants.
Overall, 64 institutions have fully redeemed their preferred stock issued under TARP. Of those, 39 have repurchased warrants, while seven have had their warrants auctioned by the Treasury. In sum, institutions that have exited the programs, plus those 18 that have fully redeemed their TARP preferred stock but still have their warrants held by the Treasury, returned 7.6%, as of March 30."
Full story here.
Wonder if this is going to help Goldman Sachs get themselves out of the fire they built for themselves...
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