In other news, Warren Buffett says Berkshire Hathaway will hold its stock warrants in Goldman Sachs anticipating higher returns in the future;
Chairwoman Maxine Waters, Reps. Capuano, Kaptur, Driehaus bring co-sponsors to 10
WASHINGTON—U.S. Rep. Mary Jo Kilroy’s initiative aimed at maximizing taxpayer profit and increasing transparency in deals between Treasury and big banks has gained momentum as the country’s leading bail out watchdogs agreed the public auction process is the best way proceed. The PROFIT Act, which would mandate a public auction process, has also gained four new co-sponsors including the Subcommittee on Housing and Community Opportunity Chairwoman Maxine Waters, Rep. Michael Capuano, Rep. Marcy Kaptur and Rep. Steve Driehaus.
“Treasury would be more likely to maximize taxpayer returns if they sold the warrants through auctions. The reason is straight forward: An auction would cause the warrants to be allocated to the buyers willing to pay the highest price and competitive pressures in the bidding process may push prices up,” Kilroy said referencing the Congressional Oversight Panel (COP) report, while questioning COP Chair Dr. Elizabeth Warren. “Do you agree with that statement, Professor Warren?”
Warren agreed. Neil Barofksy, the Special Inspector General for the Troubled Assets Relief Program (SIG-TARP) went on to say: “I think in particular it addresses a lot of the transparency concerns and a lot of the allegations that may be made when it is a closed door process.”
Kilroy also questioned the witnesses on the recently disclosed deal between Goldman Sachs and Treasury. Kilroy said the deal is the perfect example of why a public auction process would be able to boost profit, while also encouraging public confidence in Treasury officials and the process.
According to the Wall Street Journal, “several weeks ago, Goldman offered to pay $650 million to repurchase the warrants…the government countered, saying it wanted $900 million. Tuesday, with Goldman's share price rising, which makes the warrants more valuable, the offer went up to $1.1 billion. Goldman agreed to pay back the higher price.”
Warren said that greater profit was “certainly possible” on the open market as investors began to see earnings reports from Goldman reaching record profits once again.
On Friday, Warren Buffett announced Berkshire Hathaway would hold onto its warrants gathered in its deal when it invested $5 billion in September 2008. Buffet said “Every instinct in my body tells me that we will want to hold those warrants until they're very close to their expiration date. The preferred pays us the dividend and the warrants are going to make us the money."
View Kilroy’s exchange in the Committee on Financial Services Subcommittee on Oversight and Investigation here http://www.youtube.com/watch?v=OWldW9XhKtg. The PROFIT Act was introduced by Kilroy on July 16th and has ten sponsors including the original co-sponsors Reps. Brad Sherman, John Boccieri, Betty Sutton, Jackie Speier and Marcia Fudge, Alan Grayson.
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