With more than $300 billion out the door, the Treasury Department's bailout program has begun to see a return on some of its investments... although it's a sum so far dwarfed by the outlay. Banks began paying dividends on the government's preferred shares in early December, and as of mid-January, the Treasury had collected $271.3 million from five banks, according to a report (PDF) out today by the special inspector general for the TARP.
First to pay up was JPMorgan Chase, on Dec. 1, for $114.6 million. The Treasury Department bought $25 billion worth of preferred stock in JPMorgan in late October. As part of the investments, the banks agreed to pay a five percent annual dividend. The other banks to pay as of Jan. 17 were State Street, SunTrust, Bank of New York Mellon and Morgan Stanley. More banks have announced dividend payments in the past few weeks, as they've announced their fourth quarter earnings, so the Treasury continues to collect more.
The Treasury also received stock warrants in return for its investments in the banks, but according to the report, those are largely "out of the money," meaning the exercise price was above the stock price. As of Jan. 23, all but 13 of the approximately 270 banks that have issued warrants to the Treasury are in that situation. In the case of Bank of America, for example, the Treasury has warrants to buy stock at $30.79 while the stock has been actually trading for under five bucks. As the report (PDF) points out, it's not unusual for warrants to be "out of the money" when they're issued as part of agreements. But thatâs a long way to climb.
It's the special IG's first report on the TARP and a very thorough 188 pages (PDF). TARP Special IG Neil Barofsky provides a general layout of how the TARP has worked and how it could be better. Like others with oversight of the bailout, Barofsky bemoans the current inability to track how companies are using the bailout funds, but says that he plans to send requests to every single institution asking for details.