I 111th CONGRESS 1st Session H. R. 3232 IN THE HOUSE OF REPRESENTATIVES July 16, 2009 Ms. Kilroy (for herself, Mr. Sherman, Ms. Sutton, Ms. Fudge, Mr. Boccieri, Ms. Speier, and Mr. Grayson) introduced the following bill; which was referred to the Committee on Financial Services A BILL To amend the Emergency Economic Stabilization Act of 2008 to require certain warrants held by the Secretary of the Treasury to be sold at public auction upon the repayment of the associated assistance provided under the Troubled Asset Relief Program.

1.

Short title

This Act may be cited as the Provide a Return on Financial Investment for the Taxpayer Act of 2009 or as the PROFIT Act of 2009.

2.

Purpose

The purpose of this Act is to maximize the American taxpayers’ return on its investment in troubled financial institutions through the Troubled Asset Relief Program (TARP).

3.

Findings

The Congress finds the following: (1)During the wake of the economic crisis in the fall of 2008, American taxpayers assumed an enormous financial risk when they bailed out troubled financial institutions. (2)To compensate for the risk assumed by American taxpayers, banks that received TARP funds were required to give the Department of Treasury warrants for the future purchase of common shares, allowing American taxpayers an opportunity to profit from the possible upside of their initial equity investment. (3)The price at which the warrants are sold is critical as the warrants represent the only opportunity for American taxpayers to benefit from the risk they assumed in bailing out troubled financial institutions. (4)However, in a July 10, 2009, oversight report, the TARP Congressional Oversight Panel (COP) found that the process used by the Department of Treasury to allow the initial 11 banks to repurchase their warrants did so at just 66 percent of the actual value of the warrants. If these warrants had been sold for their current market value, American taxpayers would have recovered $10 million more. (5)Furthermore, COP found that if the Department of Treasury uses this same approach to repurchase all remaining outstanding warrants, the shortfall to taxpayers could be as much as $2.7 billion. (6)Finally, COP found that the Department of Treasury would be more likely to maximize taxpayer returns if it sold the warrants through an open, public auction, as an auction would allow competitive market pressures in the bidding process to push bids higher, thus maximizing the American taxpayers overall return on its initial investment.

4.

Sale of warrants through a public auction

Section 111 of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5221) is amended— (1)by redesignating subsection (h) as subsection (i); and (2)by inserting after subsection (g) the following new subsection: (h)

Sale of warrants through a public auction

(1)

In general

Each time a financial institution makes a repayment of assistance provided under this title, the Secretary shall sell warrants associated with such assistance through a public auction. (2)

Exception

The requirement under paragraph (1) shall not apply to warrants associated with a repayment made by a financial institution that has received less than $250,000,000 of assistance under this title. .