Treasury Receives $936 Million for JPMorgan Warrants


The Treasury Department has received $936.1 million in the sale of warrants it had received from JPMorgan Chase as part of the support it provided the bank during last year's financial crisis.

Treasury Building

The Treasury on Friday said it sold more than 88.4 million warrants in an auction Thursday at a price of $10.75 each.

It was the second auction of warrants from financial institutions that had received support from the government's $700 billion financial bailout fund.

Besides New York-based JPMorgan , the government last week received $146.5 million in a sale of warrants it had received from McLean, Va.-based Capital One Financial .

The government also has announced that it will hold a third auction later this month for warrants it holds from Wayzata, Minn.-based TCF Financial .

Warrants are financial instruments that allows the holder to buy stock in the future at a fixed price.

Treasury received the warrants as a deal-sweetener when it injected billions of dollars into capital starting in October 2008 at the height of the financial crisis.

Banks have been rushing to pay back the support they received from the government and cut their ties to the bailout, known as the Troubled Asset Relief Program, in part to escape related pay restrictions.

Many banks that received aid from the TARP repurchased their own warrants when they returned the government assistance because they did not want to dilute the value of their stockholders' shares in the future.

But the government has the right to schedule auctions if negotiations with the banks fail to arrive at an acceptable price.

The Obama administration has wanted to avoid criticism that it accepted prices for the warrants that were too low given the political heat it already has taken for the TARP.

Earlier this week, the administration trimmed by $200 billion its estimate of how much the bailout program will lose.

It now projects losses of $141 billion or lower, down from an estimate of $341 billion in August.

The revised figure represents faster paybacks from many banks as the financial system stabilizes and lower use of the bailout program than originally envisioned.