Taxpayers Recover Nearly $900 Million From TARP Warrant Sales During Last Six Months

Cumulative Proceeds from Warrant Dispositions Now Reach More Than $9 Billion Since TARP’s Inception

WASHINGTON – The US Department of the Treasury today released the latest TARP Warrant Disposition Report including data during the six months ending June 30, 2011.  During that period, Treasury received more than $886 million in gross proceeds from the disposition of 20 warrant positions through repurchases and auctions of institutions in the Capital Purchase Program (CPP), the Targeted Investment Program (TIP) and the Asset Guarantee Program (AGP). Since the TARP’s inception, Treasury has received more than $9 billion in gross proceeds from the disposition of warrants associated with investments made through CPP, TIP and AGP.    

As a result of these dispositions and other TARP repayments and income, taxpayers have now recovered $314 billion (76 percent) compared to the $413 billion disbursed to date for the program.

“Although the central purpose of TARP was to help stabilize the financial markets during a time of severe crisis, the receipt of these funds is positive news for taxpayers,” said Treasury Assistant Secretary for Financial Stability Tim Massad. “We will continue our diligent efforts to protect taxpayer interests as we wind down the TARP program.”

The TARP Warrant Disposition Report released today provides an overview of the warrants received by Treasury, an explanation of the warrant disposition process and the results achieved on behalf of taxpayers.

The Emergency Economic Stabilization Act of 2008 (EESA) generally required that Treasury receive warrants in connection with the purchase of troubled assets.  A major part of the TARP was the CPP. It was created in October 2008 to stabilize the financial system by investing capital in viable banks of all sizes nationwide. Under this program as well as other programs to support the financial system, Treasury invested $245 billion in more than 700 banks.  Treasury has already recovered $256 billion and will realize a profit on these programs.

Under the CPP, Treasury purchased shares of senior preferred stock or other securities from qualifying U.S.-controlled banks, savings associations, and other financial institutions. As part of its investment, Treasury also received warrants to purchase shares of common stock or other securities from the banks. The purpose of the warrants was to provide taxpayers with an additional potential return on the government's investment.

When a bank repays the CPP investment, it has the right to repurchase its warrants at an agreed upon fair market value. The warrants do not trade on any market and do not have observable market prices. Accordingly, Treasury has established a methodology for evaluating a company's determination of fair market value. If a bank chooses not to repurchase its warrants, then Treasury intends to sell the warrants to a third party.

The first CPP warrant repurchase was completed in May 2009, and Treasury began the public sale of warrants to third parties in December 2009. Treasury follows a consistent process to dispose of the CPP warrants for all banks, regardless of the size of the institution or the warrant position. This process is designed to ensure that taxpayers receive fair market value for the CPP warrants whether they are repurchased by the issuer or sold to a third party.

As of June 30, 2011, Treasury held warrants to purchase common stock in 19 financial institutions that have fully repaid their CPP investments and in 171 publicly traded companies in which the CPP investment is still outstanding. Treasury intends to continue to execute a consistent and transparent disposition process that achieves fair market values and protects taxpayer interests.