Friday, August 28, 2009

TARP Making Money So Far

There are a few basic points that seem to get lost in the TARP debate. The first is these are actually preferred shares that pay interest:

Click for a larger image.

And so far, the government is showing a profit:

The actual returns to the Treasury from dividends banks pay on preferred shares issued through the program, in addition to the returns generated through warrant redemptions thus far, have been impressive. In fact, the total rate of return to the Treasury for all companies that have repaid TARP funds and redeemed their warrants associated with the program has been 10.22%, according to SNL data. The warrant redemptions have accounted for a large portion of that return, bringing in a 7.21% return to the Treasury. When looking at the return to the Treasury on an annualized basis, it becomes even larger, yielding 12.74% to the government on the 21 banks that cashed it out in full.


The largest total returns to the Treasury have come from some of the largest recipients of TARP funds, namely Goldman Sachs Group Inc., Morgan Stanley and American Express Co., whose dividends on the government's preferred shares and the redemption of warrants tied to the program yielded returns to Uncle Sam of 14.18%, 12.68% and 12.23%, respectively, according to SNL data.

Here is a chart of the returns the government received from various institutions: