Bank Bets Tied to Government Bailouts Soar Up to 1470% in a Year

The U.S. banking industry is booming—a development that is bringing windfall gains to a small group of investors who had the gumption to buy esoteric bank securities when the outlook for financial firms and the economy were far less clear-cut.

After years of banks grappling with the fallout of the crisis and low interest rates, the bets on what are known as TARP warrants are finally paying off. The investors, which include fund managers John Paulson and Bill Miller, bought these warrants for bank stocks secondhand, after they…

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