The Deal
Sunday, November 8, 
3:54 pm

Private appraisals for TARP warrants a bad idea

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treasury_building125x100.jpgEconomist Simon Johnson lambasted in his blog The Baseline Scenario Tuesday the Treasury Department's plan for pricing warrants that banks want to buy back from the government after returning capital provided from the Troubled Asset Relief Program.

Johnson says the Treasury plan to turn pricing negotiations over to private appraisers if a bank and the agency can't reach terms on their own is susceptible to political influence and corruption.

He writes:

The only sensible way to dispose of these options is for Treasury to set a floor price, and then hold an auction that permits anyone to buy any part - e.g., people could submit sealed bids and the highest price wins. In Treasury's scheme, there is significant risk of implicit gift exchange with banks - good jobs/political support/other favors down the road - or even explicit corruption. For sure, there will be accusations that someone at Treasury was too close to this or that bidder.

- Bill McConnell

See Johnson's article from The Baseline Scenario
Dealscape: Details on TARP warrant repurchases offered
Valuing TARP warrants a tricky science

Continue reading below

Also on Dealscape





Comments

From: Erich Riesenberg,

How could Treasury possibly conclude the appraisal method is preferable to an auction?


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