Discover buys back Treasury warrant for $172 million

Discover Financial Services paid $172 million to buy back a warrant issued to the U.S. Treasury Department's bank-bailout program, closing out the government's stake in the credit-card network.

The warrant, repurchased today, conveyed the right to buy 20.5 million common shares, according to a regulatory filing. The Riverwoods-based credit-card company sold the 10- year warrant to the Treasury in March 2009 and became a bank to gain access to $1.2 billion in federal rescue funds.

The Treasury is trying to fulfill President Barack Obama's vow to recoup "every single dime" of taxpayer funds contributed to the $700 billion Troubled Asset Relief Program, while divesting stakes in U.S. lenders as soon as possible. The U.S. bought stakes in financial firms with TARP funds to bolster their financial health, and demanded warrants in return to compensate taxpayers for taking the risk.

Discover repaid its TARP money in April and said it would try to negotiate a buyback of warrants. Discover was the last of the six biggest U.S. credit-card issuers to repay TARP funds.