The Treasury spelled out Friday how publicly traded banks can repurchase warrants issued to the government as part of their participation in Troubled Asset Relief Progam's capital injections.
Banks that repay the Treasury capital investment are entitled to repurchase the warrants at fair market value via an independent valuation process. Now that a number of banks have started repaying the government capital, they also want to buy back warrants entitling the government to purchase stock in the institutions at a fixed price. According the Treasury's rules, within 15 days of repaying TARP capital, a bank wishing to repurchase the warrants should submit a determination of fair market value to Treasury.
Treasury then has 10 days to decide whether the bank's offer is sufficient to provide taxpayers an adequate return for their investment and whether it will be accepted. If Treasury
rejects the bank's valuation and cannot reach agreement with the bank in
subsequent negotiations, the bank and Treasury will each select an independent
appraiser, who will conduct their own valuations and attempt to agree upon a
fair value. If the appraisers fail to agree, a third appraiser is hired, and subject to some limitations, a composite valuation of the three appraisals is used to establish the fair market value.
If a bank doesn't choose to repurchase the warrants, Treasury has discretion to dispose of the warrants as it sees fit over time. In these instances, Treasury will sell the warrants through an auction process over the next few months. Treasury is currently establishing guidelines for these auctions, which it will publish later. - Bill McConnell
Treasury's warrant repurchase procedures
Continue reading below
The government should not be in the business of managing a portfolio of warrants not does it know how to do it.. At the first opportunity they should be auctioned off.
Walter Kurtz
http://www.SoberLook.com