Federal Taxpayers Likely to Lose, Again, on TARP Refunds.

This is a Postscript to the post here on May 18, 2009:  "Fiduciaries Avoid Federal Pay Limits, Pay Back Low-Interest Bailouts?"

    As a part of the consideration for making low-interest loans from the Troubled Assets Relief Program to failing corporations, the borrowing corporations sold "warrants" to the Federal Taxpayers.  These particular warrants reportedly convey to Federal Taxpayers the right to buy the borrowers' stock at an agreed price even in the future, "in this case, 10 years."  Eric Dash, "Efforts to Repay Bailouts May Undercut Benefit for Taxpayers" p. B1, col. 1 (New York Times Nat'l ed., Tuesday, May 19, 2009).  Some borrowers of Federal TARP money want to pay it back early and are making low bids to pay off the warrants.  See id.  It is also reported that there is confusion about how to value the warrants.

    One of the few banks which has paid back TARP loans including warrants succeeded with a lowball offer.  The borrowing bank recently held its annual shareholders meeting.  The news that the bank's lowball bid had been accepted by the current Federal government was reportedly greeted with applause.  See id.

    Clearly the Federal Taxpayers did not attend that meeting.

    As far as finding a mechanism to put a value on the warrants that TARP borrowers sold to the Federal Taxpayers, what reason exists for being afraid to put the warrants up for sale and let the market forces determine their value?

See a related post at www.insuranceclaimsbadfaith.typepad.com, Categories:  "Fiduciary Duty," "Market Performance".

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