Sale of Bank of America TARP warrants generates record response

The U.S. Treasury raised a record $1.54B in an auction of Bank of America bailout warrants. And Uncle Sam has three more sales scheduled for this month.

The Treasury Department has received a record $1.54 billion from the sale of warrants it received from Bank of America as part of the support it provided during the financial crisis.

The Treasury said Thursday it sold 272.17 million warrants in an auction. Officials at the department said they held an auction because Bank of America and the government could not agree upon an acceptable price. Warrants are financial instruments that allow the holder to buy stock in the future at a fixed price.

The $1.54 billion total is the largest amount raised from a single institution from the sale of warrants as part of the government’s $700 billion financial rescue effort.

The amount raised in the Bank of America auction exceeds the $936.1 million raised from a December auction of JPMorgan Chase & Co. warrants and the $1.1 billion raised from the sale of Goldman Sachs warrants.

Goldman Sachs bought back its own warrants after the company and Treasury were able to agree upon a price. The warrant auctions are being held in cases where the government and the financial institution are not able to agree upon a price.

Treasury held the first three warrant auctions last year. Bank of America was the first of four auctions that are scheduled to be held this month.

Treasury split the Bank of America warrants into two groups representing the two blocks of support Bank of America, based in Charlotte, N.C., received during the height of the financial crisis in late 2008 and early 2009, an amount that Bank of America has repaid.

Treasury said that one batch of warrants brought a price of $8.35 and the other group brought a price of $2.35 to bring the total to $1.54 billion.

The administration in January said in a report to Congress that it had made $4 billion from the sale of warrants in 2009. Of that amount, $2.9 billion came from 31 institutions that repurchased their own warrants and the other $1.1 billion came from the JPMorgan auction and two other auctions.

The warrants represent the last tie the financial institutions have with the controversial $700 billion bailout fund, known as the Troubled Asset Relief Porgram.

Financial institutions have bene eager to exit from the TARP program to escape various restrictions imposed on institutions receiving the government support including limitiations on executive compensation.