The US Treasury said on Wednesday that proceeds from its repurchases of warrants from bailed-out banks have exceeded market indications and third-party estimates last year. In a new report on its warrant dispositions, the Treasury said that through December 31, 2009, it realised gross proceeds of $2.9 billion from 31 privately negotiated warrant repurchases.

This compares to initial bids from the banks of $1.7 billion, estimates of aggregate value of $2.2 billion based on market indications, $2.7 billion based on third-party estimates and $2.6 billion based on Treasury's internal financial models. The Treasury received the warrants to purchase bank stock when it made capital investments in the institutions under the $700 billion troubled asset relief program.

The warrants were intended to allow taxpayers to share in the financial sector's recovery in exchange for propping it up during the financial crisis in 2008 and 2009. The Treasury said the warrant repurchases were combined with $1.1 billion from warrant auctions for total warrant proceeds of about $4 billion in 2009 from 34 banks that have completely exited the Treasury's Capital Purchase Program. Combined with dividends collected on preferred shares, the Treasury said it earned an 8.8 percent return on its investments in these banks.

Copyright Reuters, 2010