A Tweak to Bailout Deal Makes Bank Stock Pricier

Publication: Wall Street Journal

Author: Michael R. Crittenden


04/01/2009 - A tweak by the Treasury Department to its contracts with banks could cost taxpayers billions of dollars if the government exercises its right to purchase common stock in the firms.

While ironing out the details of its program to inject as much as $250 billion into U.S. banks in October, the Treasury altered the way it calculated the strike price for warrants it received. Instead of calculating the price based on the date the government closed its investment, the Treasury moved the date earlier, to the day it first approved a firm's application for government funds.

The change was included as a footnote to the warrant contracts posted on the Treasury's Web site. It may have made a significant difference in the value of taxpayers' investment, said John Morton, managing director of economic policy at the Pew Charitable Trusts, whose SubsidyScope project uncovered the change.

"The strike price for the vast majority of the warrants is at a higher price than they would have been had Treasury followed its original policy," he said.

Read the full article A Tweak to Bailout Deal Makes Bank Stock Pricier on the Wall Street Journal's Web site.

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