Government TARP Investing – Paying off

by The Investment U Research Team

Today the government announced that it would be allowing 10 banks to repay their government TARP investments. While they didn’t disclose which ones, by looking at the list of banks that were deemed not to require more capital we can get a pretty good idea.

Bank of New York Mellon (NYSE: BK), BB&T (NYSE: BBT), Capital One (NYSE: COF) and U.S. Bancorp (NYSE: USB) would probably be on this list. Reuters has a good overview of the banks and their financials for the who’s in the ten guessing game…

What we find most interesting, and gratifying as taxpayers, is that we (meaning the U.S. citizenry) have made a profit on our little investments. Uncle Sam has received $4.5 billion in interest payments from the program – $1.8 billion alone from this first group of ten.

In addition, we still hold warrants on these firms – long-term options to purchase a stock at a specific price. These warrants are going to be worth lots more in the future than they are now. I’d like to think of them as the last hope of the Social Security system staying solvent.

We’ve long talked about the benefits for the United States of investing in American brands – creating its own sovereign wealth fund from U.S. banks, automakers and insurance companies. This investment will pay off for us all. And for 10 banks it already has.

Symbols mentioned in this article: BK, BBT, COF and USB.

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