Is Goldman Screwing Taxpayers in TARP Negotiations?
Alas, no one would tell me what the government is asking for the warrants or what Goldman is offering for them. “We are in discussions with the Treasury on the buyback of the warrant,” said Goldman spokesman Lucas VanPraag. “The purchase price has yet to be determined…. We believe that taxpayers should get a decent return, and we hope that our discussions with the Treasury will do just that.” The Treasury declined comment.
My estimate — okay, my SWAG (for scientific wild-assed guess) — is that the Treasury is asking for $1 billion to $1.5 billion and Goldman is offering $500 million or so.
Under the law, Goldman, like other early TARP repayers, has the right to force the Treasury to sell back the warrants after a lengthy set of price arbitrations.
So as part of the TARP deal the government holds some very valuable stock purchase warrants that Goldman eventually has to buy back from the state in order to be fully free and clear of its obligations (in fact technically its payment of exorbitant bonuses before this matter is settled is illegal — or could be, if the state chose to interpret the TARP that way). Sloan here is guessing that Goldman is underbidding to buy back those warrants by $500 million or more; neither he nor anyone else has any real evidence on this score, but rumors that the banks have been taking a hard line in these negotiations have been circulating for weeks.
Another part of this article details yet another hidden subsidy to Goldman in the past year — the state’s rapid intercession to give Goldman access to liquidity that prevented a run on the bank:
I’m also talking about the Federal Reserve Board moving with lightning speed last fall to allow Goldman to become a bank holding company. By giving Goldman access to vast amounts of money it was making available to bank companies, the Fed ended panicky demands from Goldman customers that the firm immediately return the cash and securities it was holding for them. That was the equivalent of a run on the bank, which no institution can survive. Stopping it saved Goldman.
The press is starting to pile on now, and Goldman is taking it from all sides, which is sort of interesting. Let’s see how long it lasts.