3. Major banks can borrow money from the Fed at 0% or use TARP money to cover these warrants.
The TARP money does not cost 0%. Last quarter, BofA paid over $400Mil on interest alone (per quarter) on the TARP money they borrowed. Its in their 10Q. ($400M * 4Q)/$45B = 3.555% interest. Banks don’t want to risk it because of the risk of default. It is not money-good.
