Daniel Gross

More TARP Returns for Treasury

Contrary Indicator

As the fourth anniversary of the Lehman Brothers debacle approaches, the government rescue efforts and bailouts continue to wind down.

The central component of the TARP was the Capital Purchase Program (CPP), under which the U.S. Treasury purchased preferred shares in hundreds of banks and received warrants in return. Banks started to return the capital in June 2009, with the largest institutions repaying first. Counting the extra assistance given to Citigroup (C) and Bank of America (BAC), CPP recipients took $242.9 billion in funds. Banks have returned $230.71 billion of that total. Add in dividends ($14.69 billion), gains on the sale of Citigroup common stock ($6.85 billion) and funds received from the sale of warrants ($9.08 billion) and the CPP has turned a "profit" thus far of about $18.4 billion. (Here's the most recent TARP summary.)

Cash continues to return to Treasury through a variety of means. Some banks repurchase the preferred shares that Treasury bought in 2008 and 2009. Treasury sells warrants it owns in companies into the market. And in a relatively new wrinkle, Treasury, having given up hope that companies would buy back their own shares, has simply auctioned stakes in banks to the public -- often at a discount. In the last week of June and the first week of July, we saw examples of all three. A series of transactions involving a dozen banks yielded more than $351 million for taxpayers.

  • Nara Bancorp, based in Los Angeles, in November 2008, took $67 million in CPP funds. Center Financial Corp., also based in Los Angeles, took $55 million in funds in December 2009. In November 2011, the two banks merged to form BBCN Bancorp. On June 27, BBCN repaid both tranches of aid, returning a total of $122 million to Treasury. Treasury still owns warrants in the company.
  • Beach Business Bank, in Manhattan Beach, Calif., which took $6 million on Jan. 30, 2009, has been paying it back in bits and pieces. In June, it repaid the final $300,000 of the preferred shares, and that bought back preferred stock given to Treasury in lieu of warrants for another $300,000, yielding a total of $600,000.
  • Blackridge Financial, based in Fargo, N.D., which took $5 million on May 22, 2009, repaid $2.25 million on June 27.
  • Mercantile Bank Corporation, in Grand Rapids, Mich., repaid the last of its $21 million in CPP funds in June. On July 3, Treasury sold the warrants it had in the company for $7.465 million.
  • United Bank Corporation, based in Barnesville, GA, took $14.4 million in CPP funds in May 2009. On July 3, it repaid the total and repurchased subordinated debentures it had given to Treasury in lieu of warrants for $720,000.
  • Treasury also completed the auction of preferred shares in banks to public investors on June 27.
  • Fidelity Southern, in Atlanta, took $48.2 million in CPP funds in December 2008. The auction yielded $42.76 million.
  • People's Bancorp of North Carolina, in Newton, N.C., took $25.054 million in December 2008. The auction yielded $23.03 million on June 27.
  • Metrocorp Bancshares, Houston, took $45 million in January 2009. The auction yielded $43.49 million.
  • Pulaski Financial, based in Creve Coeur, Mo., took $32.54 million in January 2009. The auction yielded $28.46 million.
  • First Citizens Banc Corp, based in Sandusky, Ohio, took $23.184 million on January 23, 2009; the auction yielded $20.69 million
  • Firstbank Corp., based in Alma, Mich., took $33 million on Jan. 30, 2009. The auction yielded $30.59 million on June 27.
  • Southern First Bancshares, based in Greenville, S.C., took $17.3 million in February 2009, and the auction yielded $15.4 million.

All in, Treasury received $204.42 million in the auctions, about 91 percent of the $224.3 million it paid for these stakes -- which means it didn't get the full value of the initial stake. But at this point, with the CPP solidly in the black, such losses are tolerable. There's more where this came from. On Monday, Treasury announced it would aim to raise as much as $295 million by auctioning off its stakes in 12 banks to the public later this month.

Daniel Gross is economics editor at Yahoo! Finance

Follow him on Twitter @grossdm; email him at grossdaniel11@yahoo.com

Rates

View Comments (2)