Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. New Bank Scam: Buy Discount TARP WarrantsThe federal panel investigating the TARP bank bailout has announced that nearly a dozen banks have been buying back government-issued warrants at a steep discount from their face value. Banks that received emergency government funding were required to give the government warrants to purchase the company's stock at a certain price in the future. The banks are now buying back these warrants at only two-thirds of their face value. So far, the transactions have resulted in a loss of $10 million in revenue to taxpayers.Some on the panel are considering a proposal to mandate the sale of the warrants on the open market to maximize the benefit to taxpayers. Link to story in the Wall Street Journal. Labels: baillout, banking industry, banking system, TARP program Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!).
Comments:
Warrants sell at a discount because they are illiquid.
Our analysis shows that, with the exception of Old National Bancorp, bank warrant repurchases have been made at close to “fair value” prices. Pluris Valuation Advisors has just completed a study valuing the warrants of all 265 public banks participating in TARP using data accumulated from several years worth of TARP transactions. A copy of the study is available here: http://www.plurisvaluation.com/site/liquistat.html#2. You can also download a white paper on valuing warrants here: http://www.plurisvaluation.com/site/pressroom/whitepapers.html. Espen Robak, President # posted by
 : Monday, July 13, 2009 8:04:00 PM
All of this money floating around is illiquid. There is not a stack of trillions of dollars, just pieces of paper and wire transactions. This is another 'house of cards', and the American taxpayers are living in it.
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