Even after the 10 big banks pay back their bailout money and exit TARP, say analysts, the Treasury stands to make as much as $4.6 billion on the $68.3 billion it loaned them. In exchange for the loans, the Treasury got warrants giving it the option to buy a bank's shares at a set (read: discounted) price until 2018 -- a situation most banks don't like.
The warrants could be a way for Treasury to keep some control over the banks. It's unclear how the government would use any power it keeps through holding on to the warrants. Lawmakers have expressed interest a wide variety of measures, from controlling executive pay to limiting the number of visas for foreign workers and overhauling financial system.
Some of the smaller banks have bought back their warrants from Treasury for a low price. But one bank, Centra, ended up paying $750,000 to buy back its warrants after borrowing $15 million, for just six weeks, from the program. That amounted to an annual interest rate of 60 percent.
categories: Understanding The Crisis
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