Now that 10 banks have been cleared to pay back TARP funds, one question remains unanswered: How much will banks pay to repurchase the warrants the government gave banks, as part of the original preferred share deal? We've noted before that some are quite concerned that Uncle Sam (that is, taxpayers) will get a bum deal.

Fortune notes the case of two smaller banks that bought back warrants: Old National Bank of Evansville, Indiana and Sun Bancorp of Vineland, New Jersey. Old National paid $1.2 million for warrants that one expert valued at $6.1 million. Sun Bancorp paid $2.1 million to repurchase warrants valued at $5.3 million. The reality is that you can really value these warrants in a variety of ways. Time-value oriented measures would likely yield the highest values. What we really need are some standards about how all this will take place. Another question that may be worth asking: Does the government deserve any upside for holding the warrants of banks whose stocks have rallied as of late?

For more:
- here's the article

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