The Congressional Oversight Panel just released its July report on the progress of TARP fund repayment, and the numbers aren’t pretty.  Like the Treasury is only getting paid two-thirds of it’s money back not pretty.  Andy Kroll at Mother Jones’s MOJO blog explains:

The Treasury, the panel estimates, sold warrants ["options to buy stock for a set price over a predetermined time period for banks exiting TARP"] back to the 11 small banks who’ve so far completely exited the bailout for only 66 percent of their value. If the Treasury had sold them for closer to market value, taxpayers could’ve recouped $10 million more—a small sum compared to the entire bailout, but nothing to scoff at. And though the warrant-repurchasing process will differ for megabanks like JPMorgan Chase, Wells Fargo, and several others currently trying to buy back their warrants, applying that 66-percent rate to all government-held warrants could result in a loss of $2.7 billion.

Kroll adds that such returns are likely to continue.  “The panel’s widely cited February report” he said, “found that the Treasury had received, on average, only $66 for every $100 spent, resulting in a $78 billion shortfall.”  Given such problems with small banks much more nimble in interaction with government, the expectations for return pay from the behemoths are understandably much poorer.

He concludes with an interesting idea that might help:

What the Treasury should do, as MIT’s Simon Johnson and other experts have pointed out, is sell the warrants in an open auction. That way the Treasury would likely receive a more fair price, one closer to market value, and banks trying to repurchase their own warrants could bid on them like every other interested party. An open auction would also inject a healthy dose of transparency into an otherwise opaque process, one in which trillions of taxpayer dollars have changed hands with little public acknowledgment by the government.

Popularity: 1% [?]