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TARP warrants show banks may reap ruthless profits

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Can our government waste the taxpayers money or what? This time its a mere $10 billion. Banks are negotiating to reclaim warrants they granted in return for the TARP monies. Old National Bancorp (NYSE: ONB) was the first to negotiate a deal with the Treasury. The bank bought back its warrants for $1.2 million. They may have been worth $5.81 million. Now, isn't this the sweetest deal you can imagine. The banks are getting a pile of free money.

If the Treasury follows the Old National Bancorp deal, it would save Bank of America Corp. (NYSE: BAC) $2.03 billion, Wells Fargo & Co. (NYSE: WFC) $1.48 billion, JPMorgan Chase & Co. (NYSE: JPM) $1.46 billion, Morgan Stanley (NYSE: MS) $983 million, Citigroup Inc. (NYSE: C) $965 million, and Goldman Sachs Group Inc. (NYSE: GS) $693 million.

The 20 largest banks would save a total of $9.98 billion. Isn't this cool. These banks don't have to do anything and the money just keeps pouring in.

Now enter the politicians. Senator Jack Reed said, "We need to ensure that the financial industry recovers and that banks can start lending again, but taxpayers must be fairly compensated as well." Linus Wilson, professor of finance at the University of Louisiana said, "Lenders shouldn't be trusted to make suppositions that would be to the advantage of taxpayers."

So there you have it. Another $10 billion down the drain. This endless wastefulness never seems to stop. The Treasury has declined comment.

Do you believe that this is a fair deal?

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Last updated: November 26, 2009: 08:12 AM

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