Good investment? U.S. makes $4 billion profit on $700 billion TARP

The $700 billion Troubled Asset Relief Program (TARP), which former Treasury Secretary Hank Paulson set up in October 2008 to buy financial toxic waste, has made the U.S. a $4 billion profit on $240 billion that it invested in hundreds of banks. Never mind that TARP has not purchased any toxic waste. The TARP's yield so far is about 15 percent annualized -- roughly triple the five percent expected last October.

The source of these profits has mostly been so-called warrants, which are essentially options to purchase common shares at a low, predetermined price. Since that price is much lower than the banks' current market prices, the U.S. has been able to negotiate much higher prices for the warrants from the banks that took TARP money.