Stuff like how the various bailout schemes are silently ripping off taxpayers doesn’t usually get that much play on CNBC, unless it’s Santelli, though the message usually gets lost amid all his other rants.
So we were pleasantly surprised to see this debate on the fairly wonky subjects of the TARP warrants, and how Treasury can sell them back to companies without penalising companies too much, while also offering taxpayers some of that promised “upside”.
It’s a little long (7 minutes), but the stuff with Bob Jones, CEO of TARP repayee Old National Bancorp is pretty interesting. His company paid $1.2 million to buy back the Treasury’s warrants. That’s double their initial bid of $600k, though still well below the $3 million that they were appraised at independently.
Finance Professor Linus Wilson wrote a whole paper on this transaction concluding that Taxpayers got ripped off.
One interesting idea that was floated was selling the warrants in an open auction, so that anyone, not just the company can buy them.
It may be worth exploring, because the current system, as described by Jones, seems totally arbitrary.