Breakingviews.com, via the New York Times, reports:
Now the Treasury has hired Deutsche Bank -- one of the few global investment banks that was neither eligible for the Troubled Asset Relief Program nor bailed out by its own government -- to orchestrate an auction, initially of three sets of warrants.
I'm trying to think of a reason why the Treasury shouldn't go this route. It's utterly fair that it is paid market value for these warrants -- just like any other investor would be. Why should it sell them back to the banks at a deep discount? The banks aren't hurt by these warrants being sold in the market; they just aren't helped by getting warrants on the cheap.
Meanwhile, taxpayers are much better off. And they should be: it's their money that saved these firms in the first place. So they should reap the reward for their investments.
Could the Treasury end up selling these warrants for less than the banks offered? That's possible, but considering how well the stock market -- and financial stocks in particular -- have been doing lately, I doubt it. And even if it does, the price was still technically fair, since it will have been market-based.
So I really see only one criticism left: why is the U.S. government using a German bank for the auction? Does it really rather a bank headquartered in Europe get the fees associated with the warrant sales instead of an equally qualified one with management based in the States? Though, I guess people would be even angrier if they had chosen Goldman Sachs.
This article available online at: