Tag: TARPs

Now Explain The Bank Bailout Again

I thought it was to get these institution to start lending again to make the economy strong and help create demand…again.  As usual…I was mistaken.

The largest U.S. banks reduced the availability of money for consumers and businesses during the final months of 2008 even as the government invested tens of billions of dollars to help them make new loans, according to data released yesterday by the Treasury Department.

The banks that got the most government money, Bank of America and Citigroup, led the retreat. Mortgage loan originations by the two companies in December fell $3.6 billion, or 15 percent, compared with October. New lending commitments to commercial and industrial customers dropped by $2.4 billion, or 11 percent. And the companies reduced the collective spending limit of their credit card holders by $45 billion, about 2 percent.

But yet they found the time and money to buy other banks to enhance their balance sheets…..when will the American people realize what is happening here?  The only thing that the bailout is about is the survival of the banks not the economy.

My Problem With The TARP

Since the beginning of all this crumbling economy I have been saying that none of this is working and that it is the wrong approach.  The only way to stop this slide into darkness is to replace the lost money from the write downs of the banks.  That is the only way for the TARP to work.  Once money becomes a premium, prices decline, people stop spending, unemployment will rise, burrowing will slow, and economic growth will grind to to a halt…a recession.  I know…all this is just sounding familiar.

All the TARP is accomplishing is moving cash around the economy and not accomplishing a whole lot in the interim.  It is not helping in the creation of any new money to replace that which was lost during the massive write downs in September.  The TARP is NOT helping to replace the money that has been lost, for that reason it will do little to return confidence in the economy.  Banks are told to be capital strong and to do that they will horde their TARP money to make their balance sheet strong…no loans….

In order for the TARP program to work it would have to have create new money to replace the lost. If the lost money is replaced then all money in existence stops gaining in value and consumers will go back to spending money, prices will stop falling, asset prices will stop declining, unemployment will stop rising, demand for borrowed money will return and economic growth will once again turn positive.

I know after all that you want to ask, then how does the government create new money, professor?  Good question, Irene.  Sorry to say that it will mean higher taxes.  But in reality, somewhere down the line everybody’s taxes will go up….it will hurt the low and middle class more than the wealthy, but they will go up.  All the programs and packages will need to be paid for eventually or the economy will suffer the consequences.

They Just Do Not Get It!

The nation’s top bankers came to account for themselves Wednesday to a wary public, displaying a blend of financial might and humility as they pledged to build public trust with greater lending and fewer perks.

Eight chief executives sat at a witness table for more than six hours Wednesday assuring lawmakers that an infusion last fall of $165 billion in taxpayer money to their banks was good for consumers. The money was part of a $700 billion financial rescue approved by Congress in October.

And while some lawmakers said they hoped that by their testimony the bankers could gain some credibility, some of their inquisitors weren’t convinced.

“America doesn’t trust you anymore,” declared Rep. Michael Capuano, D-Mass.

Added committee Chairman Barney Frank, D-Mass: “There has to be a sense of the American people that you understand their anger.”

In that lies the key to it all.  The bankers know the public is angry but they do not understand why.  They do not understand that the people’s money has been handed to these guys and they have done little to help the common man out.

They just do not get it!  The people see them as “robber barons”.  They have shown no remorse for the situation they have put the country in.  They show NO gratitude for the taxpayers help.  The worst part of it is that they cannot answer the question, how did the best financial minds in the country not see this economic crisis coming?

I can answer it for them….GREED!  They were making millions upon millions and did not think that they would be held responsible for anything because they all were doing it.  Arrogance has clouded their greedy judgement…they just do not get it……….buit in the meantime they make sure that they keep giving it to the public while retaining as much of the ill gotten gains as they can……renaming their bonuses is the first plan of action.

What Is Behind The “Bad Bank” Idea?

The deepening recession is at least partly a product of a prolonged crisis in credit markets. Major banks have cut back on lending, unable or unwilling to part with their deposits. Even banks that have received billions of dollars in fresh capital from Washington have been slow to lend. That’s because their balance sheets, like those across the financial industry, are tainted by investments in complex securities that almost no one wants to buy, most of them tied to bundles of mortgages with rising default rates. Illiquid and losing value, these assets make it hard to judge a bank’s health. That uncertainty, in turn, makes it difficult for banks to raise money for new loans and investments.

The Bush administration sought to attack this problem in the fall with a new, $700-billion Troubled Asset Relief Program to buy the banks’ dicey holdings. It never followed through on that idea, but now the Obama administration is considering a similar approach that could be even more expensive. One plan being floated would have the government create a “bad bank” that would acquire troubled assets from commercial banks, insurance companies and segments of the credit market. The strategy is aptly named, because it’s a bad idea.

Like the original TARP, the bad-bank idea has some merit. Rather than unloading assets (which might include securitized car loans and credit card debt in addition to mortgage-related investments) at fire-sale prices, this bank would wait for markets to recover, then sell them gradually. The theory is that many of the assets have real value, which would become easier to divine over time as foreclosures ebb and the economy rebounds. Meanwhile, scraping the sludge off lenders’ books would eliminate much of the mystery about their condition, enabling credit markets to return to normal and hastening the end of the recession.

Basically, what this is doing is helping banks to stabilize and horde their capital….I still have not found a way this will help anyone on Main Street..,,,Dammit!  You guys need to think demand not liquidity.  How many times has this got to be impressed on you before  real stimulus is tried?

As always Washington is playing a dangerous game with people’s lives and if they are not careful the Repubs will return to power in 2010…is that what you guys really want?

TARP UpDate

Now here something the American people should jump on with both feet……you were PLAYED!

The U.S. Treasury may have significantly overpaid for its investments in financial institutions, a government watchdog said Thursday, as criticism of the $700 billion financial rescue continues to build.

“Treasury paid substantially more for the assets it purchased under the [ Troubled Asset Relief Program] than their then-current market value,” Harvard Law School professor Elizabeth Warren told the Senate Banking Committee.

Warren, who chairs a five-person congressional oversight panel overseeing the Wall Street rescue plan, said a report being released Friday by the group includes an analysis of 10 TARP transactions. Extrapolating that analysis for all of the purchases made by the Treasury in 2008 suggests Treasury paid $254 billion for preferred stock and warrants worth approximately $176 billion, a shortfall of $78 billion

“They did not price for risk, that’s what markets do,” Warren said, suggesting the Treasury’s lack of consistency had made the government funds a better deal for some institutions.

Details of the transactions used to come up with the number were not released.

The Treasury has frequently noted that many of its major investments – those in American International Group Inc. (AIG), U.S. automakers, and a second capital boost to Bank of America Corp. (BAC) – were made to maintain stability in the financial system, and are different than the $250 billion plan to inject capital into the banking system.

“Treasury has made long-term investments to stabilize the financial sector and get credit flowing, but more needs to be done,” spokesman Isaac Baker said.

More broadly, both lawmakers and other government watchdogs were sharply critical about the way the program has been implemented; the ad hoc nature of the Treasury’s efforts to stabilize individual financial firms; and the lack of transparency surrounding the program.

Basically, what we are saying here is that the Treasury just threw money at the banks and told them to have fun.  Taxpayer may be getting more screwed than first thought.

Will It Be More Of The Same For Banks?

To answer the question first…..yep…looks like the banks will get their cash cow…..

U.S. Treasury Secretary Timothy Geithner said the department is considering a “range of options” for its financial rescue plan, with the goal of preserving the private banking system.

“We have a financial system that is run by private shareholders, managed by private institutions, and we’d like to do our best to preserve that system,” he told reporters today in Washington.

“We are putting together what we hope will be a comprehensive plan for helping repair the financial system and bring recovery as a critical component to the president’s commitment to get growth going again and bring the economy back on track,” Geithner said.

Under the plan, which Treasury Secretary Timothy Geithner is expected to announce within the next two weeks, the government will buy up virtually worthless mortgage-backed securities and other “toxic” assets held by the banks and provide guarantees against future losses for much of their remaining assets. It will also continue to inject cash directly into the banks.

Well aware of popular opposition to the Wall Street bailout, the White House and the media are engaged in a calculated campaign to soften up public opinion and pave the way for a taxpayer handout to the financial elite even bigger than the $700 billion already doled out in the Troubled Asset Relief Program (TARP), which was rushed through Congress last autumn with the support of then-presidential candidate Obama. The total cost of government cash infusions, loans and guarantees to the major banks and financial firms, already estimated at $8 trillion, will soar even higher, by far eclipsing the money allocated in the so-called stimulus and recovery program.

Indeed, one of the purposes of the stimulus package is to provide political cover, in the form of aid to “Main Street,” for the offloading of Wall Street’s losses onto the American people. Meanwhile, the stimulus plan, which does nothing to halt the destruction of jobs or the wave of home foreclosures, but includes lucrative tax write-offs for business and funnels government projects to private companies, is being weakened further at the behest of Wall Street and congressional Republicans. It is now reported that Obama has dropped a provision that would allow bankruptcy judges to lower the principal and ease mortgage terms for distressed homeowners.

The new bank bailout, like every measure that has been devised in response to the financial meltdown, will be tailored entirely to the interests of the financial aristocracy. Under the terms of the plan, as outlined in various press reports, the bad assets accumulated through speculation and fraud will be transferred to a “bad bank” owned by the government. The government will buy these assets not at their actual market value, which is pennies on the dollar, but, according to the Financial Times, on the basis of a “valuation model,” guaranteeing premium prices for bank executives and big shareholders.

It is all too easy……that is,  to get the American people confused enough to allow Wall Street a free hand.  They, the Obama group, keep saying that all will be transparent with the website revcovery.gov.  How wonderful…the only problem is that it is not up and running yet….so transparency will have to just wait a little longer.

Geithner Is In

Geithner has be sworn in he will pay his back taxes that he somehow forgot to pay and he will help his buds on Wall Street.  And now for something completely different……

President Barack Obama’s financial rescue plan will be unveiled soon and is likely to be larger and more ambitious than originally planned as the economy and banking system worsen.

The last procedural roadblock is set to be removed today, congressional Democrats said, when the Senate confirms Obama’s choice for Treasury secretary, Timothy Geithner, who will speed the rescue program out the door as soon as this week. Administration officials and members of Congress said yesterday the second $350 billion of the Troubled Asset Relief Program, released by Congress earlier this month, may not be enough to shore up lenders and pull the economy out of recession.

Lawrence Summers, director of the White House National Economic Council, said yesterday those funds would get the rescue plan started, while Vice President Joseph Biden and House Speaker Nancy Pelosi both said there may be a need for more money later.

Obama’s plan will initially include between $50 billion and $100 billion for foreclosure-mitigation programs and an unspecified amount of money to stabilize undercapitalized banks to unlock the flow of credit to consumers and businesses, Summers said. He didn’t provide details of any other measures the administration is considering to help the banking system.

Okay, the first TARP did litle to help the economy and it was aimed almost totally at the banks and now we are asked to do more of the same….I am have a major problem with this whole damn thing.

CITI Wants More—And More And……

These guys never stop begging for cash …….

Citigroup’s new chairman says that if the US government took bad assets off bank balance sheets, banks might be able lend more money.

He acknowledged that Citi was not lending as aggressively as in the past because of “balance sheet issues”.

A shortage of credit is a major factor behind the economic slowdown.

“We can off-load bad assets in return for making commitments to be more robust on lending,” he said.

But he denied a quid pro quo: “It’s not a situation of, you do this for me, and I’ll do that.”

He indicated that the bank could be interested in a government program offered to the sector but Citigroup would not approach the government directly.

Mr Parsons said the money could come from the $700bn financial rescue fund authorized late last year.

Citigroup has already received $45bn of government funds as part of last year’s banking bail-out.

When does it end?  When will CITI finally have enough funds to be solvent again?  How much do we, as taxpayers, need to throw at CITI to help them out of their problems?

Look Where Your Money Goes

Look America!  This is where your tax money goes when it is used in the bailout.

John Thain, the former Merrill Lynch & Co. chief executive officer ousted yesterday, spent $1.2 million redecorating his downtown Manhattan office last year as the company was firing employees, a person familiar with the project said.

Thain hired Los Angeles-based decorator Michael Smith, chosen by President Barack Obama and his wife Michelle to redecorate the White House, CNBC reported. Thain paid Smith $837,000 and his purchases included $87,000 for area rugs, $25,000 for a pedestal table and $68,000 for a 19th century credenza, CNBC said.

Thain, 53, oversaw the sale of Merrill Lynch to Bank of America Corp. last month, and took over the bank’s wealth management and corporate and investment banking divisions. Merrill’s $15.4 billion fourth-quarter loss forced Bank of America to seek additional aid from the U.S. government, which last week agreed to provide $20 billion in capital and $118 billion in asset guarantees.

The antiques Thain reportedly purchased will probably hold their value over time, said Clinton Howell, a New York dealer in English furniture.

In light of Merrill’s $56 billion in losses from subprime loans and the credit crisis, $1.2 million spent on antiques hardly seems worth getting outraged over, Howell said.

See they care less about what you think as long as you keep feeding their greed and their desires for your tax dollar.  When will the American people say enough is enough?  They will but it will be way too late.

Change The FED!

This week, senior officials at the Federal Reserve cited the need for further cash infusions into the weaker financial institutions, even as one of the original TARP recipients, Citigroup announced the sale of a controlling stake in its retail brokerage unit, Smith Barney, to Morgan Stanley to bolster its capital position. Citi has already gotten $45 billion in cash and a government guarantee for up to $300 billion in losses on its balance sheet. So the bank’s need for more cash doesn’t inspire much confidence that the TARP funds have been well spent.

Same plan, different day.

Ben Bernanke, chair of the Federal Reserve, has “warned” Congress that “fiscal stimulus packages,” meaning social spending and tax policies to increase purchasing power, will not be a long-term solution to the “credit crisis.” Rather, he has suggested that more extensive bank bailouts may be necessary.

Bernanke wasn’t opposing the present bailout with his remarks, but it is or should be obvious that he is still thinking in terms of reviving the financial system that he inherited from Alan Greenspan. Notably, Bernanke failed to talk about serious new regulation of the financial services industry or any serious connection between finance capital “bailouts” and the job and income security except “old time trickle down religion” which was good enough for Coolidge and Hoover, Reagan, Clinton, and the two Bush presidents.

Congress should write a new national banking act that makes the chair of the Federal Reserve directly accountable to Congress and the President and gives the President with the consent of Congress the right to remove Federal Reserve chairs. It is also time to have the Federal Reserve work in concert with the Treasury and the federal government as a whole as part of a national economic program.

Return to the drawing board and start over…remember it is time to change…then start with the Fed.