It was announced today that Goldman Sachs' repayment of the $10 billion in TARP funds last month that the government provided to the bank in the midst of the financial crisis last fall, generated a 23 percent annualized return for American taxpayers.
Goldman Sachs agreed to the Treasury’s request for $1.1 billion to repay warrants the government received when it invested $10 billion in the New York-based firm last October. The payment is in addition to $318 million in preferred dividends.
The company’s warrant transaction “was the best deal for taxpayers yet,” said Linus Wilson, a finance professor at the University of Louisiana at Lafayette.
The firm is paying about 98 percent of the warrants’ value, based on Wilson’s use of the Black-Scholes and Merton option pricing models. By contrast, he estimates that BB&T Corp. and U.S. Bancorp have struck deals with Treasury to pay less than 60 percent of the value of their warrants.
The 23 percent annualized return to taxpayers “is reflective of the government’s assistance, which benefited the financial system, our firm and our shareholders,” Chief Executive Officer Lloyd Blankfein, 54, said in a statement. “We are grateful for the government efforts.”