Goldman Sachs ( GS) threw in the towel on Wednesday, extinguishing one of the final vestiges of the federal government's bailout by buying back warrants at full price. The New York-based bank coughed up the full $1.1 billion that the Treasury Department requested to cancel warrants related to preferred stock that Goldman repurchased from the government last month. Buying back warrants has become a
hot debate, especially since Goldman's major competitor, JPMorgan Chase ( JPM), balked at the government's valuation process. JPMorgan instead decided to auction the warrants and pay the market price. But Goldman disagrees with that strategy. "While there are a number of ways to value the warrants, including through a public auction, we believe that in the context of the extraordinary actions taken by the government to help stabilize the financial system, this valuation of the warrants represents full and fair value," the firm said in a statement. Goldman still benefits from government support though debt it issued with the government's backing through the Temporary Liquidity Guarantee Program, or TLGP. General Electric ( GE) earlier on Wednesday said regulators gave it the OK to begin withdrawing from the program. Goldman paid the Treasury back a $10 billion investment from the Troubled Asset Relief Program, last month. The firm also paid $318 million in preferred dividends in related preferred stock over the eight months that the government held the investment. Taxpayers received $1.418 billion altogether, an annualized return of 23%. "We are grateful for the government efforts and are pleased that this additional money can be used by the government to revitalize the economy, a priority in which we all have a common stake," Goldman Chairman and CEO Lloyd Blankfein said in a statement.
State Street ( STT) announced earlier in the week that it has redeemed the TARP preferreds and warrants for $166 million as well. Rochdale Securities analyst Richard Bove says those payments add up to an annualized return of 11.1%, calling it a "taxpayer bonanza." While Goldman is known for having a cozy relationship with regulators -- former Treasury Secretary Henry Paulson, who devised the capital injection plan was a former CEO -- other banks have not been as receptive to government intervention. For instance, Wells Fargo ( WFC) has repeatedly said it accepted the TARP funds under duress and didn't need them in the first place, with Chairman Dick Kovacevich infamously calling the Federal Reserve's stress tests "asinine." Bank of America ( BAC), meanwhile, has
resisted paying the government fees associated with guaranteeing certain losses in an agreement earlier this year. BofA has overhauled its board at regulators' behest. The bank is still weighed down by strict oversight after acquiring Merrill Lynch under pressure from Paulson and Fed Chairman Ben Bernanke.