Reed to Treasury: Retain Tarp Warrants

Sen. Jack Reed, D-R.I., sent Treasury Secretary Timothy Geithner a letter Friday asking him to use newly granted leverage to hold on to warrants even after bankers repay rescue capital.

A recently enacted Federal Deposit Insurance Corp. bill included an amendment by Reed that would give the Treasury flexibility to hold on to warrants it took for injecting capital into banking companies under the Troubled Asset Relief Program after they have repaid the funds. In his letter, Reed urged the Treasury to use this new leverage.

"With this new leverage to hold the warrants after financial institutions repay Tarp funds, I believe we now have the tools to ensure that taxpayers are appropriately compensated," Reed wrote. "I will closely monitor the purchases of the warrants. Also, in light of news reports that some financial institutions are lobbying to have the warrants expunged entirely, I remind you that there is no legal authority for the secretary of the Treasury or any other official to surrender these instruments without requiring adequate compensation to taxpayers."

Bankers have been pushing for the Treasury to eliminate the warrants to make it easier to exit the program and to get them out of any future government control.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER