On March 13, Discover Financial Services announced a $1.2 billion investment from the Treasury Department after the credit card issuer transformed itself into a bank-holding company giving it access to government support.
According to Discover, it sold 1,224,558 shares of its preferred stock to the U.S. Treasury as well as a 10-year warrant to purchase 20,500,413 shares of its common stock at a price of $8.96 each.
The government will earn cumulative dividends at a rate of 5% a year for the first five years and then 9% a year following this, Discover added.
Discover became a bank-holding company under the Bank Holding Company Act of 1956 and a financial-holding company under the Gramm-Leach-Bliley Act, prior to the deal.
That made the credit card issuer eligible for the Treasury's Capital Purchase Program, part of the Troubled Asset Relief Program, or TARP.
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Since the start of the program the government has invested almost $200 billion in banks and other financial-services companies.
Rival credit card issuer American Express became a bank-holding company in November and raised more than $3 billion from the TARP's CPP program soon after.