Treasury to Auction Off Investments in Three Banks

The Treasury Department will auction off its remaining investments in three banks, freeing them from the federal bailout program, it was reported Friday.

As part of last year's Troubled Asset Relief Program, the Treasury received warrants from JP Morgan Chase, Capital One Financial, and TCF Financial. By selling those warrants, which are similar to stock options, the government will release the lenders from TARP and raise up to $3.1 billion, the New York Times reported.

One analyst predicts the warrants on JP Morgan alone could collect as much as $2.75 billion, which would bring a profit for taxpayers.

Other banks, including Goldman Sachs, negotiated special deals to buy back their warrants directly. But in the case of JP Morgan, Capital One and TCF, the government decided to let private investors determine their value.

Deutsche Bank will handle the auction, setting minimum bids and soliciting bids from investors, according to the Times. That will enable the three banks to bid for the warrants themselves, though it is unclear if they will do so.

In the early 1980s, the Treasury conducted a similar sale of warrants connected to the government's rescue of automaker Chrysler.