It's understandable if banks want to try to make more profits but in these circumstances it's a slap in the face to the taxpayers who rescued them from insolvency. It also creates an environment of deeper mistrust which is going to make it challenging to help the banks in the future if more problems arise. It's also going to sour the public on helping spur (or save) the economy with the second stimulus plan but maybe that's the plan or maybe they simply don't care. Either way, this is shameful behavior on the part of the banks. Not that they have any sense of shame though.
The Congressional Oversight Panel, which is charged with overseeing the Troubled Asset Relief Program, or TARP, said in a report that a group of 11 small banks that have repurchased government warrants in exchange for taxpayer-funded assistance, have bought-out the stakes at 66% of their face value.
The C.O.P., which employed three Harvard University valuation experts to conduct the analysis, said that taxpayers would have received $10 million more had the warrants been sold back to the banks at their face value.
The report argues that liquidity discounts are a key factor for why the warrants were purchased at such low prices. Should a similar discount be a major factor for warrant repurchases at larger institutions buying out government stakes, the shortfall to taxpayers could be as much as $2.1 billion, the report said.
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