Morgan Stanley announced today, Thursday 6 August, that it agreed to pay $950 million to buy back warrants it issued to the federal government as part of the government bail-out rescue plan – called the Troubled Asset Relief Program (TARP) initiated last Fall by then Treasury Secretary Henry Paulson.
In a rarely contrite press release statement, Morgan Stanley said that it will have paid the government nearly $1.3 billion for the $10 billion the firm received as part of the Troubled Assets Relief Program, for a “20 percent annualized return on their investment in our company. We appreciate the critical role that the U.S. government played last fall in helping stabilize the banking industry and financial markets at a moment of unprecedented crisis. As we move forward, we believe it is vital for our industry to recognize the lessons of last year’s financial crisis and work with our regulators, legislators and other public officials to make the changes necessary to ensure a similar crisis never occurs again,” said John J. Mack, Chairman and CEO of the Firm. Morgan Stanley paid back the $10 billion in June, as did other firms like Goldman Sachs and JPMorgan Chase. With the repayment of the warrant, Morgan Stanley will loosen itself from another government investment that may inhibit its business. Like Goldman and others, the firm bought back the warrant.
But JPMorgan — headed by brash CEO Jamie Dimon – was a vocal critic of the federal government demands in return for investing taxpayer funds and as the banks largest investor. Dimon, after the taxpayer bailout, claimed that it did not need federal assistance, and chose to let the government auction off its warrant, believing the instrument was overvalued.
