“For once we’d like to get a fair value when we come into contact with the banking system,” said Representative Brad Miller, a North Carolina Democrat and chairman of the Investigations and Oversight Subcommittee of House Science and Technology Committee. “We don’t want a ruthless bargain.”

Miller is saying he wants to cut a fair deal, not a ruthless bargain, on behalf of taxpayers.

You all probably know that one of the purposes of TARP is “to ensure that [TARP] facilities are used in a manner that maximizes overall returns to the taxpayers of the United States.” EESA § 2(2)(C). So Treasury is not supposed to give away the store for sure. Of course the first purpose is “to restore liquidity and stability to the financial system of the United States.” EESA § 2(1). “Maximize” is a strong mandate yet Treasury can always accept less returns on the theory that it makes the participant banks more stable.

In my mind there is a big difference. I have no problem with the government breaking even on the deal even if it means the banks made money by getting access to absurdly cheap capital. I don’t like the banks any more than the next guy but also understand that we need a strong, or at least solvent, banking system and as long as the taxpayer isn’t actually losing money in the transaction, having the banks become fully independent sooner rather than later is a good thing.

After looking at this a few times I think the Treasury got a decent deal. Of course it depends very strongly on your assumptions, and so reasonable folks can disagree.

No idea though why the treasury forced the sale.

Maybe somebody here could answer a question that’s been bugging me for a while. Is the FDIC’s TLGP a money maker? Participants are paying a fee for the guarantee. So far as I know there have been no defaults on these effectively subsidized obligations. Is that costing the taxpayers money? I think Bernanke said it was going to make money.

if it was a bad deal, that was because these are long dated options and so should be worth much more than short dated options.

Now we see that not only was this, like every other TARP-related assurance, a fraud, but it’s even being used as another illegal laundering mechanism.

Treasury made an equivalent 7.4% annual yield on their ONB investment – is that bad in this environment? Will we see that from all the tarp funds? Is this nearly as important as the preferred -> common swap?

Holding them to maturity would also be fine.

Weren’t these warrants pitched as a way for the “taxpayer to participate on the upside, if any”? Oh well, never mind, move on.

as far as i can tell the only reason the treasury is selling them is to release the TARP restrictions, which they could do by fiat.

Yes. I was shocked by the warrant sale at this point in time. I thought that the idea was that, assuming that the bailouts and other government action enabled a recovery, the sale of the warrants ***after the recovery*** would help the taxpayers recoup. Wrong again!