The Treasury Department has allowed 10 banks to exit the Troubled Assets Relief Program (TARP), by paying back the funds they received last year. Some have looked at this as a strong sign that the US banking system is well on its way toward recovery.  But the Congressional Oversight Panel (COP)--established to evaluate the effectiveness of TARP--wants to be sure that the American taxpayer is not losing out in the process.  After all, taxpayers put up the money for TARP, and assumed significant risk in the process.   Theoretically, taxpayers are entitled to a return on their investment.  From the COP July Report:

When Congress authorized the commitment of $700 billion to rescue the financial system, it decided that taxpayers should have the opportunity to share in a potential upside if the banks returned to profitability.  The opportunity to profit from TARP investments comes through special securities called warrants. Banks that received financial assistance were required to give the government warrants for the future purchase of some of their common shares. Simply put, warrants are the right to buy shares of a company at a set price at some point in the future. For example, a warrant might allow Treasury to buy shares of a bank for ten dollars at any time in the next ten years. If the share price rises above ten dollars, Treasury could pay less than market value for the shares, then sell them and turn a profit. In this way, the banks were repaying the taxpayers for their investment by sharing some of their future profitability.

Now some members of the panel are concerned that the early repayment might cut taxpayers out. COP Chair Elizabeth Warren explains:

Read the full COP July Report here.