The U.S. Treasury Department said on Monday that it will auction 3.2 million warrants to buy the common stock of TCF Financial Corporation (TCB) on Tuesday. This is the third auction of warrants the government received as part of its Troubled Asset Relief Program (TARP) set up during the height of the financial crisis last year to shore up the financial system.

The Treasury has already completed the auction of warrants received from Capital One Financial Corporation (COF) and JPMorgan Chase & Company (JPM), both of whom received bailout money under the government’s $700 billion TARP. The US Treasury Department transferred $25 billion of funds to JPMorgan on Oct 28, 2008, as part of its participation in TARP. This was the fifth largest amount transferred under the United States 2008 bailout bill.

Earlier this month, the government received $146.5 million from the sale of Capital One warrants at $11.75 each. In a similar transaction held last Thursday, the government received $936.1 million from the sale of JPMorgan warrants at $10.75 each. TCF Financial received $361 million in taxpayer funds in Nov 2008 and repaid that money in Apr 2009.

The Treasury will sell the warrants through a modified Dutch auction, at which investors can submit bids at increments above a set price. The Treasury has set a minimum bid price of $1.50 per warrant.

Banks have been trying to pay back the bailout money as soon as possible to free themselves from government involvement in their affairs and pay restrictions.

Many other financial institutions that have already repaid bailout money include Bank of America (BAC), American Express (AXP), Goldman Sachs (GS), Morgan Stanley (MS), BB&T Corporation (BBT) and US Bancorp (USB). Also, banks such as Wells Fargo (WFC) and Citigroup (C) have said that they are prepared to exit TARP very soon.

We think that the repayment of government money and repurchase of warrants can be viewed as a sign of recovery of the institutions and the economy. The government intends to use the repaid TARP funds to create new jobs and cut the nation’s fiscal deficit.

Zacks Investment Research

1. (JPM) JPMorgan Chase Warrents Sold by U.S. Treasury $936.1 MillionJPMorgan Chase (JPM) warrants held by U.S. government’s bank bailout program were sold for $936.1...
2. (JPM) U.S. Treasury Sells JPMorgan Chase WarrantsJPMorgan Chase (JPM) warrants held by U.S. government’s bank bailout program were sold for $936.1...
3. ($BAC) Bank of America Repays TARP Fund in FullBank of America Corporation (BAC) said on Wednesday that it has repaid the entire $45...
4. (COF) U.S. Treasury Department Sells Capital One Financial WarrantsThe U.S. Treasury Department said on Tuesday that it will auction 12.7 million warrants to...
5. (JPM) Treasury to Auction TARP WarrantsAfter almost a year of initiating the $700 billion Troubled Asset Relief Program (TARP) to...
6. ($JPM) Will the Federal Deposit Insurance Corporation Borrow From Banks?About a year ago, during the height of the crisis, the government started bailing out...

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