Treasury’s Warrior at the Negotiating Table

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But one of the biggest tests for the Treasury team has been negotiating with banks over the repurchase of warrants issued as part of their TARP bailouts. After internal calculations of how much the warrants were worth, Mr. Miller helped spearhead a strategy for dealing with banks like JPMorgan Chase and Goldman Sachs.

These firms could name their price — but without guidance from the government, which would simply reject the bids if they fell short. Some banks rebid several times before reaching a deal with Treasury officials, according to Mr. Allison. Some banks’ starting offers were as little as one-third of the department’s own valuations, he added.

“We had developed quite a sophisticated approach to negotiating with the banks,” Mr. Allison said. “In a number of cases, banks paid us more than we calculated what the warrants were worth.”

An analysis by the special inspector general for TARP published last May found that, on average, the department had done well by taxpayers. “To its credit, Treasury has generally succeeded in negotiating prices from recipients for the warrants at or above its estimated composite value,” the report said.

http://dealbook.nytimes.com/2011/01/31/treasurys-warrior-at-the-negotiating-table/