Most of the facts for this article come from a Bloomberg article written by Mark Pittman. Mr. Pittman contends the TARP paybacks may short the taxpayers by as much as $10 billion. He bases this on a payback by Old National Bancorp in Evansville, Indians. This bank paid the government back $1.2 million on warrants worth $5.81 million. Anyone surprised?
Who will negotiate better, the banks or the Treasury? One has accountability to shareholders and depositors. The other has no accountability.
Using the Old National formula, Pittman lists savings: Bank of America $2.03 billion, Wells Fargo & Co. $1.48 billion, Chase $1.46 billion, Morgan Stanley $983 million, Citigroup $965 million and Goldman $693 million. The 20 largest banks would save $9.985 billion.
Old National hired an appraiser to establish the value of the warrants. The Treasury rejected the first appraisal of $600,000, but accepted the $1.2 million.
Need another example of Treasury stewardship? Buffet invested $5 billion in Goldman Sachs in September of 2008 and got 43.5 million warrants valued at $3.6 billion. Taxpayers invested $10 billion and got 12.2 million warrants worth $882 million. Such a deal.
You still want the government to run GM, Chrysler, health care, and all the other grand ideas being floated in Washington? Warren Buffet, maybe, but not the government. How much media coverage do you expect for this? When AIG paid $200 million in employee bonuses it was non-stop coverage for over two weeks.
Now, the treasury is going to give the 20 biggest banks nearly $10 billion in taxpayer money because Geithner is in a hurry and out of his league. Nice.
