Day: May 7, 2009

Here It Comes–Bank Stress Tests!

Here it comes–someone’s 19th nervous breakdown.

Today is the day!  The much anticipated results of the Treasury’s bank stress tests.  Have you been holding your breath until this moment in history?

First of all, just what is a bank stress test?  If you have been watch the tube religiously and trying to figure out just what is meant by the term–you are probably really confused at about this point, right?  We will try to help.

What is a bank stress test?

The stress test demands that banks imagine the worst possible economic news, a so-called “stress scenario,” and then calculate if they’ve got the capital reserves to cover losses.  The results will reveal how much more money the banks really need, probably from taxpayers, to stay solvent and keep lending.

Banks are formulating plans for filling their capital requirements, much of which would likely come from conversions of preferred shares.   While banks are trying to avoid the taint of taking federal funds — and the potential pay restrictions and executive firings that come with it — the government will also benefit by handing out less cash. Not including repayments, the Treasury has about $110 billion left in the $700 billion Troubled Asset Relief Program that Congress passed last October.

Any of the 19 banks taking new bailout funds must agree to lend more than before, “to meet the credit needs of their customers, even in a stressed scenario,” said Bernanke in a Capitol Hill hearing.

But there are two big things treasury officials don’t know for certain.   They don’t know whether, instead of instilling confidence, they might actually undermine confidence in banks that fail the test.  And they don’t know if the remaining $350 billion in bailout funds will cover what the 19 banks really need.

Are you still confused and dazed?  Good!  That is what the government is shooting for in this exercise.  The admin is being transparent in this, but the problem is that they obfiscate the definition to the point that no one on Main Street has nay idea what the guys in the ivory tower are talking about.

And then there is a Part 2 to this whole bank thing.  And it will be called a “Debt Test”.

Looks like the Treasury Dept. is planning to offer up a new plan for banks.  The  plan is  to require banks seeking to free themselves from the government’s grip to show that they can survive without the taxpayer aid that has helped them through the recent economic turmoil.  The banks also must demonstrate that they will be able to sell stock to private investors and pass a government stress test to show that they are healthy enough to survive without the taxpayer aid.

Banks have grown eager to repay TARP money as quickly as possible, to rid themselves of compensation caps and other restrictions that they complain has hurt their competitiveness.  Actually it has hampered their greed.

2009 Anal-Ocity

Here she goes again…..God love Michele Bachmann…she keeps us bloggers busy and always amused at her rantings.

While speaking to a pack of conservatives on National Debt Day, April 26, Rep. Bachmann said:

“During the last 100 days we have seen an orgy. It would make any local smorgasbord embarrassed.  The government spent its wad by April 26. Every dime government spends after April 26 throughout the rest of this fiscal year is borrowed money.”

An orgy and spent its wad….thinking….now that is just cute.  How does she do it?  Maybe she should rethink her analogies.

Either she is one of the cleverest orator I have ever heard or the dumbest…I prefer to believe the later.

If she keeps up the anal statements at this pace….we may have to give her, her own section in Info ink.

Smoke, Smoke, Smoke That Cigarette!

There are times when this gig is so rewarding…it usually comes in the form of humor or the absurd.

A Chinese local governmental office issued a decree which stated citizens must smoke at least half a million packs of cigarettes to help in bettering the local economy.

The Chinese province of Hubei had issued this decree. All citizens who smoke cigarettes from international or non local brands would be fined. Smoking quotas were also issued to professors at Hubei regional schools.

This move will help protect Hubei’s local cigarette companies as well as fill in the budget gaps of the local administration.

China has around 350 million smokers, of which 1 million die annually from smoking related diseases.

Hubei’s local authorities have taken their recently issued decree very seriously. New ‘smoking patrol’ unit has been formed that will watch out for smokers, how much they smoke and which brands.

Ya gotta love the Chinese…they have an answer for everything.

Foreclosure Help, Is It Coming?

Are you having a problem paying your mortgage payment?  The government is here to help.  But just how will they help the average home owner that is having problems with his mortgage?

In a vote that demonstrates the veto power exercised by Wall Street on US government policy, the Senate on Thursday rejected a measure that would have allowed bankruptcy judges to modify the terms of mortgages to help distressed homeowners avoid foreclosure. The legislation would have enabled bankruptcy courts to lower the outstanding principal as well as interest rates on some home loans.

The provision, put forward as an amendment to a broader housing bill backed by the Obama administration, was defeated in a 45 to 51 vote, with 12 Democrats joining all of the Republican senators in voting “no.” According to Democratic leaders in the Senate, the provision would have enabled 1.7 million homeowners to remain in their homes. This is only a small fraction of the estimated 8 million Americans who will be forced out of their homes by the banks over the next several years.

The opposition of the banks secured “no” votes from Democrats Max Baucus and Jon Tester of Montana, Michael Bennett of Colorado, Robert Byrd of West Virginia, Thomas Carper of Delaware, Byron Dorgan of North Dakota, Tim Johnson of South Dakota, Mary Landrieu of Louisiana, Blanche Lincoln of Arizona, Ben Nelson of Nebraska, Mark Pryor of Arkansas and Arlen Specter of Pennsylvania.

Obama had declared his support for what is known in Washington circles as the “cramdown” provision when he announced his “Homeowner Affordability and Stability Plan” in February. That plan, presented as a boon to homeowners hit by declining home values, the loss of their jobs, and adjustable mortgage rates that had shot up, was, in fact, tailored to serve the interests of the banks, mortgage servicers and big investors.The banks remained opposed and shifted their efforts to kill the measure to the Senate. At that point, the Obama administration caved in and tacitly dropped its support for the provision.

Stripped of the mortgage cramdown “stick,” all that remains in Obama’s “Homeowner Affordability and Stability Plan,” which the Senate is expected to pass next week, are a series of “carrots” for the banks.

One provision inserted into the bill at the bidding of the banks will reduce a proposed premium owed by the banks to the Federal Deposit Insurance Corporation, in return for hundreds of billions of dollars in FDIC guarantees on the banks’ bond issuances, by more than 50 percent. This will save the banks an estimated $7.7 billion.

A second provision will make permanent the temporary increase in bank deposits guaranteed by the FDIC to $250,000 from $100,000.

The bill also includes a safe harbor provision for mortgage servicers—firms that manage loans for investors and lenders—from lawsuits related to loan modifications. This provision, in fact, will provide legal protection for banks that have engaged in lending practices that skirt or violate the law.

I was afraid that the bill in its original form would have a problem in the Senate.  Appears that the banks still have their juice in Washington.  The homeowner in trouble will remain in trouble and only those with prefect credit will be the only ones receiving help.