Another bank has repurchased the stock warrants it issued the government in exchange for bailout funding.
Illinois-based Northern Trust Corp. said it paid $87 million to the Treasury Department for warrants covering 3.8 million shares.
Two months ago, the bank redeemed $1.58 billion in preferred stock as the first step in exiting the Troubled Asset Relief Program. But valuing stock warrants it granted the Treasury as part of the deal has proved more challenging and led to delays.
Because they permit the Treasury to buy common shares at a specified price, some have argued that the government should hold on to them until the financial sector fully recovers.
Under that scenario, taxpayers might make a significant profit. Selling them at the price they might make on the open market today would mean the taxpayers aren't compensated for the risk they took in accepting them in the first place.
According to terms announced by the Treasury, banks that have already redeemed the stock they sold the government submit their own valuation of the warrants. Treasury then has 10 days to accept the bank's valuation or initiate a two-stage cooperative appraisal process.
In a statement, Northern Trust said its payments to the Treasury for warrants, stock, and accrued dividends totaled $1.71 billion. The bank said the payments represent a 14 percent annualized return on investment to taxpayers.
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