Bank warrants auction results, a surprise?

December 11, 2009 | By Jim Kim

We know that Jamie Dimon, CEO of JPMorgan (JPM), declined to buy TARP warrants back from Treasury at the Treasury's price, even after Goldman Sachs (GS) did so. Dimon's move looks really good now that Treasury has sold the JPMorgan warrants and fetched $936 billion Treasury. The conventional view is that the amount is less than what Dimon declined. We've already noted that not buying the warrants seems to have been a good call by the bank, and the auctions seems to vindicate us.

Goldman Sachs of course paid a big premium, which gave it the right to note that the government earned a good return on its bailout of Goldman Sachs. All this sets the stage for the Bank of America (BAC) warrant auction. Bloomberg says the auction may fetch up to $1.3 billion. All in all the auctions may be a bit of a disappointment for Treasury. It would have liked the banks to pay up like Goldman Sachs.