Tag: TARPs

So You Want To Return The TARP Money?

Banks that want to pay back their federal bailout funds and free themselves from government restrictions on compensation and dividends will have to sever their ties to another financial assistance program.  Financial firms eager to return infusions from the $700 billion Troubled Asset Relief Program will have to demonstrate that they can operate without debt guarantees provided by the Federal Deposit Insurance Corp., a senior government official said.

The new requirement will make it harder for some institutions to get out from under government rules attached to the bailouts, another shift in a changing landscape for banks. It also illustrates the government’s desire not to have banks abandon the bailout program if they are not financially prepared to do so.

The bailout program has been unpopular in Congress and prompted a new round of conditions earlier this year following news reports about lavish spending on perks, retreats and corporate planes.

Initially, the government required banks that wanted to repay early to raise money from the private sector. Then Congress eased that rule but attached greater restrictions on the government funds. Among the rules restricting banks were conditions on employee compensation, bonuses and dividend payouts. Congress also required the Treasury to review previous compensation payments.

Banks have become increasingly wary of the bailout funds, chafing at the restrictions and worried that acceptance of the money somehow tagged them as troubled institutions. As a result, a handful of banks have returned a small amount of money and bigger institutions have indicated a desire to repay.

The Senate approved an amendment to broader legislation that could make it less costly for financial institutions to exit the Troubled Asset Relief Program.

The measure, passed by unanimous consent, addresses the warrants the Treasury received in exchange for purchasing preferred stock in hundreds of banks. The warrants give the Treasury the right to purchase common stock at a later date so taxpayers can receive more of a return on their investment when the banking industry recovers.

The legislation removes the program’s requirement that Treasury liquidate the warrants within ten days after a TARP recipient repays the government. Treasury could hold on to the warrants and extinguish them at a later date, or not at all.

Is The Bank Crisis Deepening?

Two reports warning of the enormous cost to taxpayers of insolvent banks were released this week. They fueled stronger calls for bank nationalization as the only solution to the paralysis in the nation’s financial system.

The first, a 250-page report released April 19 by Neal Barofsky, inspector general of the Toxic Assets Relief Program (TARP), revealed that his agency has launched 20 criminal investigations of fraud, insider trading and illegal mortgage modification in the $700 billion program.

“The sheer size of the program … is so large and the leverage being provided to the private equity participants so beneficial that the taxpayer risk is many times that of the private parties thereby potentially skewing the economic incentives,” the report states. “In light of the fact that the American taxpayer has been asked to fund this extraordinary effort to stabilize the financial system, it is not unreasonable that the public be told how these funds have been used by TARP recipients.”

The second report came from the International Monetary Fund (IMF), warning that the U.S. financial system is likely to lose $2.7 trillion this year from the global credit crisis.

Even so, Treasury Secretary Timothy Geithner gamely testified April 21 before the TARP Congressional Oversight Committee that he sees light at the end of the tunnel. He reminded the lawmakers that more than half the $700 billion TARP money was spent by the Bush administration even before President Obama took office. “Today,” he testified, “Treasury estimates there is at least $134.6 billion in resources … still available.”

He argued that the “vast majority” of banks have enough capital and that frozen credit markets are showing signs of thawing.

Really?

What A Difference A Hearing Makes

First, it was the good news from Wells Fargo…they made $1+ billion in profits and then Goldman-Sach’s comes out with their news of a profit of $1.8 billion.  All looks well, eh?

Next, I ask, how much of that profit is the taxpayer’s money that was thrown at them?  Now some of these TARP recipients are trying to quickly pay back the TARP cash and get out from under the governments thumb.  Why?

Is it a coincidence, that after the hearings on bonuses and the consideration of limiting those bonuses on any companies that get TARP funds have anything to do with this sudden rise of success from these failing companies?

Personally, I do not believe in coincidence in government or economics.  These bandits are trying to get from under the government scrutiny and the government is helping them do so….

Another Industry Joins The TARP

Shares of large U.S. life insurance companies surged Wednesday following news they may receive aid from the government’s $700 billion financial industry rescue program. But the Treasury Department said only life insurers that own banks or saving and loans qualify for assistance, and that no new programs for the industry were being considered.

The bailout fund approved by Congress last year, known as the Troubled Asset Relief Program, or TARP, was intended to help banks weather the credit crunch, though it has also been used to make loans to auto companies and insurance giant American International Group Inc.

Life insurers have $5.1 trillion in assets and are major players in the credit markets, said Frank Keating, president of the American Council of Life Insurers. The companies own 18 percent of all corporate bonds so aiding them is consistent with the bailout program’s goal of unclogging credit markets, he said.

Insurers have been under pressure to maintain solid capital positions to avoid damaging downgrades by ratings agencies. Keeping high ratings is key for insurers because lower ratings can mean higher costs or a loss of business.  (sound of squealing tires……is that not the way it is suppose to work in a “free market”?)

Where does all this end?  Where does the taxpayer money stop?  What will it take for the money to be diverted to the people on Main Street?  Does this mean that any company that has a holding of a corporate bank bond can get TARP funds to keep it from failing?  Where does this madness end?  At least the investors are jerking off at the prospect of the infusion of taxpayer money…the taxpayer, ah, yes, the new Wall Street cash cow…..

What To Do With Toxic Assets?

Geithner is expected to announce the creation of a new government entity, called the Public Investment Corporation, which will oversee the bailout. This agency will be backed by $100 billion not yet allocated from the $700 billion Troubled Asset Relief Program (TARP) that was proposed by the Bush administration and authorized by the Democratic-controlled Congress last October.

The first prong of the three-part plan involves the Federal Deposit Insurance Corporation (FDIC), the agency created in the 1930s to insure the savings of ordinary bank depositors. The FDIC will establish partnerships with hedge funds and other private investment firms to buy whole home loans—as distinct from loans packaged into mortgage-backed securities–from banks that agree to sell them. (In this, as in the other parts of the plan, the participation of banks and investment firms is entirely voluntary).

The other two prongs of the administration plan are directed at the banks’ money-losing securities backed by mortgages and other forms of consumer and commercial debt. One will expand a Federal Reserve program, the Term Asset-Backed Securities Loan Facility (TALF), which was launched last week to extend low-cost loans and guarantees against losses to hedge funds and private equity firms that purchase new securities backed by auto loans, credit card debt, commercial mortgages and small business loans.

TALF will be enlarged to include the purchase of previously existing asset-backed securities, including those backed by residential mortgages. In addition, the Fed will be required to offer longer-term loans to private investors than under the original TALF plan, possibly as long as seven years. This is designed to provide sufficient time for markets to recover so that the investors can reap big profits before their loans come due.

Finally, the government will establish a so-called “public-private partnership,” in which the Treasury Department hires a number of investment management firms to buy mortgage-backed and other securities from the banks. The Treasury will match, dollar-for-dollar, money from private investors who participate and will also loan funds to increase the investment funds’ purchasing power.

All this is to free up money so that loans can be made and revivie the economy…..but if no one is working or buying or building….then who will be asking for the loans?

Is It Fake Anger?–Part 2

I recently wrote a post saying that the whole outrage thing in Washington over the bonuses received by AIG was a total fake.  That this was so much political theater.  I watched the game play out yesterday as congressman after congressman spouted one form of opposition to the bonuses.  Then the House overwhelmingly voted to tax the bonuses at 90% to get the money back from those execs who received them.

Good right?  Nope, just part of the game.  These dipsticks in Washington should be well aware of what the US Constitution has to say on this type of thing.

Article 1  Section 9–Limits of Congress

No Bill of Attainder or ex post facto Law shall be passed.

Simply, they cannot target one group over another or they cannot tax a thing once it has been done.

This new tax will NOT hold up in court and the boys and girls in Washington know this…so all this fake outrage and action is nothing but political theater.

So if you, as a voter,  buy into the bullsh*t that these people are truly concerned with what is going on in the bailout and that they are truly outraged,  then you are a lot more STUPID than I gave you credit.

These bonuses were part of the original TARP and then carried on into the next phase, the TALF….all concerned knew what was happening and if they truly did not know of the outcome, then it is time for them to be replaced with people who will look after the business of the country.

Is It Fake Rage?

In my opinion is—-yes it is a fake rage.

The main concern of the Obama administration and the congressional Democratic leadership is that the AIG scandal will make it politically more difficult to enact the next round of the federal handout to Wall Street, tentatively budgeted for at least $250 billion by the White House, with the actual cost expected to soar to as much as $1 trillion.

There could also be problems enlisting financial firms to participate in the measures already announced by the Treasury, such as the “public-private” partnerships in which the Treasury would insure profits to speculators who buy toxic assets under the Temporary Asset-Linked Securities Fund (TALF). Given the greater scrutiny of executive compensation that is now likely in the wake of AIG, many big institutions may simply refuse to participate.

The highpoint of hypocritical outrage came at a hearing Wednesday before the House Banking Committee, where AIG Chairman and CEO Edward Liddy was verbally chastised by Democrats and Republican congressmen. Liddy, who was appointed by the Bush administration after the Treasury seized control of AIG last September, refused to make public the names of the executives and traders who raked in the million-dollar bonuses.

In January two congressional Democrats, Joseph Crowley of New York and Paul Kanjorski of Pennsylvania, wrote to the Federal Reserve and Treasury urging scrutiny of the AIG bonus plan. Kanjorski told the Associated Press that he had tried to alert both the Obama administration and AIG to the likely public reaction. The congressman’s concern was not to stop the bonuses, but to manage the release of the news carefully because otherwise “all hell would break loose.” He warned, “We should take every step to put that information out there so we wouldn’t have the shock.”

To me all this outrage in Washington is just simply political theater.  Repubs helped create the problem, but yet are somehow outraged at the outcome.  Dems helped create the problem but yet they are somehow guiltless and pissed at the bonusues.  It is all so much fakery…….and a soap opera….”As the stomach turns”.

I have heard the drama in the Beltway as “circular Firing Squad”.  IMO, it ius political hysteria.  Everybody is throwing someone under the bus.  Repubs are throwing the Dems, Dems are throwing the president, both past and present, Cantor is throwing Dodd, Dodd is throwing the administration and AIG is throwing the Federal Reserve and the media is throwing everybody but those responsible.  This drama is just all too comical for words.

There are two good things to come out of the AIG debacle….one, everybody in Washinton was caught being an acessory to the crime and two, the Repubs have given the tired old mantra of tax cuts a rest, at least for now.

To answer the original question, is the rage fake?  Then yes it is !  But the finger pointing is far from over…the spin is far from over……and the comedy of errors will go on.

In Defense Of The Bonuses

There are those who are defending the bonuses paid to the AIG thieves.  Among them is Andrew Sorkin.

Sorkin argues that the sanctity of contracts and the importance of retaining particular AIG employees weighs heavily in favor of paying the bonuses. We’ve heard both of Sorkin’s arguments before and we’re unimpressed. Let’s take them one at a time.

The sanctity of contracts. Sorkin argues that the economic mess could be made worse if the government introduced further uncertainty by “abrogating contracts left and right.”

AIG’s contracts are so complicated that we need these employees. Sorkin also argues that we need to pay the AIG bonuses because if the employees leave, they might simply turn around and trade against A.I.G.’s book. This could be a huge disaster, in his view.

I can see what Sorkin is pointing out, but……somewhere I recall he was for tearing up the UAW contracts when the auto industry came calling.

In November, Sorkin recommended shoving General Motors into bankruptcy largely so GM could rip up its union contracts, which he said pay workers an average of $70 an hour with benefits.

Apparently, Sorkin has drawn the lines for the battle of the collars.

Let us now talking about Liddy, the CEO of AIG.

Edward M. Liddy, chairman and CEO of American International Group Inc. since last fall, has become the reluctant defender of princely employee bonuses that members of Congress — and much of the American public — find indefensible.

The retention payments — ranging from $1,000 to nearly $6.5 million — were not his idea. Liddy himself is not getting a bonus. The deals were cut early last year, long before then-Treasury Secretary Henry Paulson asked Liddy to take over the company.  But wait!  Some recieving retention payments are no longer with AIG.  Why would we pay someone to stay who has already quit?

Wait!  He is basically working for the government, since it owns about 80% of AIG and yet he did not look after his employers best interests.  How did he get the job?  He is an alumnus of Goldman-Sachs, as was the guy that appointed him, Paulson.  Another failed company and we chose people who were at the helm there to over see the direction of another failed company.  Is there logic in there?

This is all so much BS…….everyone concerned should have been aware of the problems this is presenting….if not then it is time for them to bow out and let someone else handle the business of the country……the fake outrage of Congress is nothing more than political theater…to see it any other way is just moronic.

The battle of the collars has begun.

Why Are You Not Angry?

The continuing saga of AIG.

In a bid to avoid default, the American International Group (AIG) warned regulators that the “company’s collapse could cripple money market funds, force European banks to raise capital, cause competing life insurers to fail and wipe out the taxpayers’ stake in the firm,” reported Bloomberg News on Monday.

AIG is seeking $30 billion in fresh capital to add to the $152 billion of taxpayers’ money already in place. The request came after AIG posted a $61.7 billion fourth quarter loss, the worst quarterly loss in US corporate history.

Quoting from a draft presented by AIG to the Federal Reserve Board and Treasury on February 26, labeled “strictly confidential,” Bloomberg News said the giant insurance firm is appealing for a fourth injection of taxpayers’ money to avoid a “catastrophic” collapse with consequences far worse than the demise of Lehman Brothers six months ago. The AIG statement warns, “What happens to AIG has the potential to trigger a cascading set of further failures which cannot be stopped except by extraordinary means.”

American International Group Inc. used more than $90 billion in federal aid to pay out foreign and domestic banks, some of whom had received their own multibillion-dollar U.S. government bailouts.

The embattled insurer’s disclosure on Sunday came amid outrage on Capitol Hill over its payment of tens of millions in executive bonuses, and followed demands from lawmakers that the names of trading partners who indirectly benefited from federal aid to AIG be made public.

The company, now about 80 percent owned by U.S. taxpayers, has received roughly $170 billion from the government, which feared that its collapse could cause widespread damage to banks and consumers around the globe.

But wait!  The best part of the story is yet to come……

The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year.

Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.

PEOPLE!  Time to wake up and smell the damn coffee…..this continues to be a story of Washington helping Wall Street…..time for ANGER and time to retribution.

AIG Gets More And More And…..

AIG 4th quarter losses was $61 billion…..thinking….but they have had three infusions of cash from the taxpayer and they still lost $60 billion?  And guess what?  They WANT MORE!     That is right they want $30 billion more and will get it…..where will we drfaw the line on these dead companies?

AIG provides insurance to 100,000 entities, including small businesses, municipalities, 401(k) plans, and Fortune 500 companies, which employ more than 100 million Americans, notes a joint statement Monday from the US Treasury and the Federal Reserve about the complex financial transactions involving the company. In addition, AIG has 30 million policyholders and provides retirement insurance for hundreds of thousands of teachers and nonprofit organizations.

For its part, AIG characterized the latest government effort as a restructuring that will strengthen its capital base and reduce the amount of money it owes taxpayers. The latest commitment by the US will allow AIG over a five-year period to raise $30 billion of capital by issuing noncumulative preferred stock to the US Treasury when the company needs the money.

When the US government made its first investment in AIG – some $85 billion – last September, the company planned to repay the taxpayers by selling some of its assets. However, now the company says the sharp decline in global economic conditions has adversely affected its ability to divest those assets.

Just how much will these brain dead companies be allowed to draw from the treasury?  None of the news helps the markets…..none of the cash we have thrown at the Wall Street firms have stabilized anything……how long will we continue to feed a DEAD horse?