The US government’s “subsidy” – the percentage difference between the value paid and the value received – was largest for AIG at 63 percent and smallest for US Bancorp at 5 percent.

The US Treasury Department bank bailout program received the least value from its investments in the most troubled surviving institutions, American International Group and Citigroup.

It paid $254 billion in 2008 in return for stocks and warrants worth $176 billion under the program.

This conclusion was first disclosed on Thursday by the panel’s chairwoman, Elizabeth Warren, in Senate testimony.

But the new report provided more details on the methodology and it also concluded that the US government received far less value than private investors did in recent major transactions in the financial sector.

The report showed that the Treasury got the worst deal on second-round investments in American International Group for $40 billion and Citigroup for $20 billion under special aid programs tailored for the two institutions.

For each $100 spent on these two companies, the Treasury received securities worth $41, the report concluded.

Earlier investments in eight institutions seen as “healthy” at the time, returned $78 for every $100 spent. These investments included an initial $25 billion for Citigroup, along with funds for Bank of America, JPMorgan Chase, Morgan Stanley, Goldman Sachs, PNC Financial and US Bancorp.

The government’s “subsidy” – the percentage difference between the value paid and the value received – was largest for AIG at 63 percent and smallest for US Bancorp at 5 percent.

The Congressional Oversight Panel hired an independent valuation firm, Duff & Phelps, to devise a methodology for comparing the government’s investment to the value of the preferred stock and warrants received – a difficult task because none of the securities is publicly traded.

Duff & Phelps based its valuation on the market values of similarly structured securities immediately following the announcement of the TARP investments, taking into account how government support for these institutions changed investor perceptions.

In comparing the value of the deals with those carried out by the private sector, the report said the $5 billion investment by Warren Buffett’s Berkshire Hathaway in Goldman Sachs in September immediately returned $110 in fair market value for every $100 invested.

The £7 billion ($10.22 billion) investment in Barclays by Qatar Holding and Abu Dhabi in October immediately yielded $123 in fair value for every $100 invested.

Mitsubishi UFJ Financial’s $9 billion investment in Morgan Stanley in October yielded $102 for every $100 investment, while the US Treasury received only $58 on the same basis in its Morgan Stanley deal around the same time, according to the report.

The use of standardized documents allowed the Treasury to quickly execute transactions, but that meant that it could not address differences in credit quality between institutions.

“Because Treasury decided to make all healthy bank purchases on precisely the same terms, stronger institutions received a smaller subsidy, while weaker institutions received more substantial subsidies,” the panel said in the report.

Source: Reuters