updated 7/29/2009 2:10:16 PM ET 2009-07-29T18:10:16

American Express Co. said Wednesday it repurchased outstanding warrants issued to the government as part of the Troubled Asset Relief Program for $340 million.

New York-based American Express issued the warrants, which could have been converted to common stock, to the Treasury Department as part of the loan package it received last fall from the government.

American Express was one of hundreds of financial firms that received funds as part of TARP's capital purchase program amid the mushrooming credit crisis that led to the collapse of investment bank Lehman Brothers Holdings Inc. and a bailout of insurer American International Group Inc.

As part of that program, American Express received $3.39 billion in funding from the government to help bolster its balance sheet as credit markets essentially shut down. In return, American Express issued the Treasury Department warrants to purchase common stock at a set price over the next 10 years and preferred shares that carried a 5 percent annual dividend rate.

In June, American Express repaid the $3.39 billion loan, eliminating the outstanding preferred shares. Since being issued the loan package, American Express paid $74.4 million in dividends to the government.

Between the dividend payment and repurchase of the warrants, the government earned an annualized 26 percent return on its investment.

The repurchase price for the warrants "reflects, in part, the appreciation of American Express' share price since the preferred shares were issued in January of this year," the company said in a statement.

Shares of American Express have gained 49 percent since the beginning of the year. It shares rose 18 cents to $27.86 in afternoon trading Wednesday.

Other large financial firms that also repaid TARP funds last month have begun to repurchase warrants as well. Last week, Goldman Sachs Group Inc., which received $10 billion in TARP Funds, bought back its outstanding warrants for $1.1 billion.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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