Treasury: no decision yet on bank stock warrants

The Treasury Department and the nation's largest banks are still negotiating what price the government should receive for stock warrants that represent the banks' final ties to the $700 billion bailout program.

Treasury Department spokeswoman Meg Reilly said Friday that the announcement is expected no earlier than Monday.

The department also formally acknowledged that it had received $68 billion in repayments of bailout funds on Wednesday. The largest amounts were $25 billion from JPMorgan Chase & Co., and $10 billion each from Goldman Sachs Group Inc. and Morgan Stanley.

The stock warrants allow Treasury to buy the banks' stock at a fixed price at some future date.

Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, an industry lobbying group, said the negotiations with Treasury had taken longer than expected.

That's partly because the value of the underlying bank stock has fluctuated during the financial crisis. Treasury has wanted more money for the warrants it holds than the banks have been willing to pay.

Taxpayers are expected to receive billions of dollars in exchange for the warrants once Treasury and the banks agree how to price them.

The Government Accountability Office released a report this week calling for more transparency regarding the warrants and the repayment process. The GAO also called on Treasury to create consistent rules for evaluating bank requests to buy their way out of the financial rescue program.

Until the banks buy back the stock warrants that Treasury holds, they remain entangled in a program that has subjected them to limits on executive pay and other restrictions. The banks have complained that the government-imposed rules could hurt their profits and prevent them from hiring or keeping top talent.

The 10 large banks that repaid the bailout money on Wednesday had received permission to do so last week. They announced the repayments on Wednesday but the government, under the law that created the bailout fund last October, has two business days to confirm transactions.

Besides JPMorgan, Goldman and Morgan Stanley, the other seven institutions repaying funds were: U.S. Bancorp, Capital One Financial Corp., American Express Co., BB&T Corp., Bank of New York Mellon Corp., Northern Trust Corp. and State Street Corp.

To begin the process of leaving the bailout program, the banks had to clear a series of hurdles designed to ensure they would remain viable despite the financial crisis and the recession.

All but Northern Trust underwent government "stress tests" to ensure they had an extra capital buffer in case the recession worsened. The 10 also were required to raise equity from investors and raise debt without a government guarantee.

Despite their relative strength, the banks still rely on government subsidies, including guarantees on debt they already issued and discounted credit lines from the Federal Reserve.