ABC News’ Matthew Jaffe reports: Goldman Sachs announced today that it has bought back stock warrants from the government for $1.1 billion.
When the government dished out funds from the $700 billion Troubled Asset Relief Program to help ailing banks, the Treasury Department then received warrants to buy common stock in these banks. As banks like Goldman now pay back the bailout money, the government then has to work out deals to repurchase the warrants.
A Treasury official said today, "In just 9 months, the taxpayers have been repaid the full $10 billion that the government originally invested, along with $318 million in dividends; and Goldman is repurchasing the warrants for $1.1 billion, generating a total of $1.418 billion in payments to the government. That amounts to an annualized return of 23.15 percent on the taxpayer's investment."
"The capital infusion has helped drive greater stability in the financial system, private capital has replaced taxpayer investments at many banks, and the taxpayers have gotten a good return on their investment," the official said. "And the process we designed to value the warrants and protect the taxpayers worked well."
Linus Wilson, a professor at the University of Louisiana at Lafayette, has estimated that taxpayers could lose up to $9 billion if the government does not get fair value in its deals with banks to buy back the warrants.
But Wilson applauded Treasury's work on the Goldman deal.
"The Goldman Sachs TARP warrant deal is the best deal that that taxpayers have got to date," Wilson told ABC News. "Since at least April 2009, representatives from Goldman Sachs have said that taxpayers deserve a fair return for their investments. They lived up to their word today."
This afternoon, Treasury official Herb Allison and two oversight groups - the Congressional Oversight Panel and the Special Inspector General for the TARP - testified before Congress at a hearing on the warrants issue.