Surprise: Goldman Got Played On Its TARP Warrants

For once, Goldman Sachs (GS) did a deal and ended up on the short end of the stick:

New York Times: Goldman Sachs seems to have uncharacteristically misjudged a market. The security in question is 10-year warrants linked to the government’s rescue of banks. The Treasury received what are effectively options to buy stock when it invested in the banks at the nadir of the crisis; now, they are being sold.

Having repaid funds from the Troubled Asset Relief Program, some firms are buying back their warrants, too. Goldman paid Treasury’s $1.1 billion asking price. Others opted for Treasury to sell them to the highest bidder. Two recent auctions imply that Goldman, for one, overpaid.

Actually, this isn’t a surprise at all. Back in July, TARP warrants guru Linus Wilson estimated that the bank had probably overpayed when it bought back the warrants from the government.

That being said, this is a case where they’re probably happy to overpay — taking a small financial hit — in exchange for not being called a vampire squid for once.

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