Treasury overpaid for bank stocks

[StrangeSox]

http://www.breitbart.com/article.php?id=D9...;show_article=1

 

WASHINGTON (AP) - A government watchdog group says the federal government overpaid for stocks and other assets from financial institutions under its $700 billion rescue program.

 

The chairwoman of the Congressional Oversight Panel for the bailout funds told the Senate Banking committee Thursday that Treasury in 2008 paid $254 billion and received assets worth about $176 billion.

 

The figures were reached by extrapolating the results of a study of 10 government transactions.

 

The Treasury by Jan. 23 had spent about $294 billion on more than 300 companies under the Troubled Asset Relief Program. In one bright spot, the inspector general in charge of reviewing the funds said the federal government has received more than $271 million in dividends from preferred shares obtained through the program.

[NorthSideSox72]

http://www.breitbart.com/article.php?id=D9...;show_article=1

 

WASHINGTON (AP) - A government watchdog group says the federal government overpaid for stocks and other assets from financial institutions under its $700 billion rescue program.

 

The chairwoman of the Congressional Oversight Panel for the bailout funds told the Senate Banking committee Thursday that Treasury in 2008 paid $254 billion and received assets worth about $176 billion.

 

The figures were reached by extrapolating the results of a study of 10 government transactions.

 

The Treasury by Jan. 23 had spent about $294 billion on more than 300 companies under the Troubled Asset Relief Program. In one bright spot, the inspector general in charge of reviewing the funds said the federal government has received more than $271 million in dividends from preferred shares obtained through the program.

The term "overpaid" could mean many different things. I'm curious what they mean in this case.

 

[Balta1701]

The term "overpaid" could mean many different things. I'm curious what they mean in this case.

Here was a straight up comparison between the Paulson purchases and purchases made by Warren Buffet from a month ago.

Henry Paulson’s bank bailouts, done under “great stress” during the worst financial crisis since the Great Depression, failed to win for U.S. taxpayers what Warren Buffett received for his shareholders by investing in Goldman Sachs Group Inc.

 

The Treasury secretary made 174 purchases of banks’ preferred shares that include warrants to buy stock at a later date. While he invested $10 billion in Goldman Sachs in October, twice as much as Buffett did the month before, Paulson gained certificates worth one-fourth as much as the billionaire, according to data compiled by Bloomberg. The Goldman Sachs terms were repeated in most of the other bank bailouts.

.,..

Paulson’s warrant deals may give taxpayers less profit from any recovery in financial stocks than shareholders such as Goldman Sachs Chief Executive Officer Lloyd Blankfein and Saudi Arabian Prince Alwaleed bin Talal, owner of 4 percent of Citigroup Inc., said Simon Johnson, former chief economist for the International Monetary Fund.

 

The transactions are “just egregious,” said Johnson, a fellow at the Peterson Institute for International Economics in Washington. “You want to do it the way Warren does it.”

 

Paulson said “he had to make it attractive to banks, which is code for ‘I’m going to give money away,’” said Joseph Stiglitz, who won a Nobel Prize in 2001 for his work on the economic value of information.

 

“The worst aspect of this is that they were designed not to do what they were supposed to do,” he said in a telephone interview from Paris Jan. 7. “In many ways, it’s not only a giveaway, but a giveaway that was designed not to work.”

 

The Treasury would have held warrants for 116 million shares of Goldman Sachs under Buffett’s terms, which would be equivalent to a 21 percent stake when added to those currently outstanding. Instead, the dilution is 2.7 percent under the Treasury plan. Blankfein is the company’s biggest individual investor, with 2.08 million shares worth about $178 million today, according to Bloomberg data. His 0.47 percent interest would have declined to 0.36 percent under Buffett’s terms and would be 0.44 percent if the Treasury’s warrants were exercised.