Monday, March 15, 2010
Deciding a big loss is better than a complete loss, the Department of the Treasury chose to buy shares of Midwest Banc Holdings at above market value in order to keep the ailing institution from sliding even further into trouble. The U.S. government will accept $84.8 million of preferred shares from Midwest Banc in exchange for $15.5 million of common shares resulting in an 80% loss for the Treasury and taxpayers.
Analysts said the Treasury Department preferred to take the swap instead of risking that the bank might fold later down the road, making all of its shares worthless.
Midwest Banc is one of about 600 small banks that have received help from the Troubled Asset Relief Program (TARP). Unlike some larger institutions that have paid the government back and gotten out of TARP, these smaller banks remain in the program and owe the Treasury $130 billion.
-Noel Brinkerhoff
Taxpayers Hit as TARP Takes a New Turn (by Dan Wilchins and David Lawder, Reuters)
Midwest Banc Holdings, Inc. Announces Exchange by the United States Treasury of $84.8 Million of Preferred Stock into a New Class of Cumulative Mandatorily Convertible Preferred Stock; Results of Special Meeting of Holders of Common Stock
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