Tag: Treasury Dept

Today Is The Day!

Hold your breathe for today is going to be interesting….or even comical….either way the theater will be massive…..

Today’s a milestone day for the Treasury Department, though it’s one it had hoped wouldn’t arrive. Thursday marks when the United States is expected to hit its $31.4 trillion debt cap, a borrowing limit set by Congress that means Treasury will now have to get creative with other ways to pay the nation’s bills. Per the New York Times, the development is expected to set off a contentious debt-ceiling fight between Democrats, who want to lift the cap, and Republicans, who say no way unless President Biden OKs significant spending cuts. “At a moment of heightened partisanship and divided government, it is … a warning of the entrenched partisan battles that are set to dominate Washington in the months to come, and that could end in economic shock,” the paper notes. More on what’s ahead:

  • A feud that may ‘cross the Rubicon’: That’s how Axios paints the “fraught and perilous” debate, in which it anticipates neither side will do much negotiating. That’s not good news when the US is perched on the precipice of a recession. The outlet notes it could also be “an avatar of what some have argued is a US democracy that’s become increasingly polarized, ungovernable, incapable of tackling major challenges—and could be on the verge of outright destabilization.”
  • What it means for Americans: CNN notes that “every American could feel the pain” of what’s to come, and USA Today delves further into the ways the debt-ceiling fight could impact our finances, from how it will affect tax refunds and 401(k) accounts to what it means for Social Security, Medicare, and Medicaid.
  • What it means for investors: The New York Times offers its take on where to put your money during such turbulent times. One takeaway: Sticking with stocks and bonds over the long haul will probably serve you well.
  • Looking to the past for precedent: CNN takes a look back at other debt standoffs, including in 1995, when the debt was a mere $4.9 trillion. NPR, meanwhile, talks to two key players during the 2011 debt-ceiling impasse—Jason Furman, an economic adviser to then-President Obama, and Rohit Kumar, an adviser to Mitch McConnell, the Senate’s top Republican that year—to see if there are lessons to be gleaned.
  • But this isn’t 2011: Participants in a roundtable discussion at the Times note that things are very different than they were a decade ago—including “a worrying trend of edging closer and closer to red lines because lawmakers think there’s political benefit and that there won’t actually be consequences.” In other words, it’s become a high-stakes game of chicken that could have far-reaching repercussions.

Let the games begin!

House GOP will inflict as much pain as they can on Americans…..

Thursday, January 19, 2023 as the day the United States is likely to reach its debt limit, although she has also said that she can keep the federal government open through June by resorting to “extraordinary measures.” Yellen has stressed that the sooner Democrats and Republicans in the U.S. House of Republicans can reach some type of agreement on the debt ceiling, the better. But the two major parties appear to be at a stalemate in the House, where Freedom Caucus and Tea Party Republicans are demanding major spending cuts and Democrats are maintaining that vital programs like Social Security, Medicare and Medicaid should not be on the chopping block.

Meanwhile, countless economists are warning that if the U.S. defaults on its debt obligations, the results would be disastrous economically and trigger a painful recession. Liberal economist Paul Krugman, in his New York Times column, has warned that House Republicans are happy to risk a financial calamity in the hope of butchering Social Security and Medicare. And Never Trump conservative Charlie Sykes has argued that House Republicans aren’t being “fiscally conservative” when they play “chicken” with the U.S. economy and risk a default on the United States’ debt obligations — they’re being reckless and irresponsible.

https://www.alternet.org/debt-ceiling-2659280721/

May I suggest that you invest in some Vaseline and just bend over….for the Repubs are coming.

I Read, I Write, You Know

“lego ergo scribo”

Are You Kidding With The “Stress Tests”?

Thursday, after the markets closed, the government released its “bank stress tests” results.  I have poured over as much info as I could to try and get a grip on just what the hell is going on.

The government’s report states that while ten of the 19 biggest US banks, all of which have received taxpayer funds under the Troubled Asset Relief Program (TARP), require a combined $74.6 billion in additional capital to withstand a deeper recession, all of the banks are at present adequately capitalized and the financial system as a whole is sound.

Federal Reserve Chairman Ben Bernanke said in a statement, “The results released today should provide considerable comfort to investors and the public.” The only basis for such “comfort” is the assurance given by the Obama administration that it will not allow any of the banks to fail and will provide whatever public funds are necessary to keep them afloat.  But with the “good” news the markets still tumbled….so there seems to be some investor that are not convinced that all this test stuff is on the up and up.

The report lays out provisions for the “healthy” banks—such as JPMorgan Chase and Goldman Sachs—to pay back their TARP money so they can escape the minimal restrictions on executive pay and curbs on dividends and stock repurchases attached to the government handouts. This amounts to a blank check to fully resume the speculative practices that precipitated the crash in the first place.

The basic aim of the stress tests was, from the start, to present a picture that understates the critical state of the banks’ finances in order to justify keeping them in private hands while facilitating the continued transfer of government funds to their coffers.

The entire exercise was devised to conceal more than it revealed.

It allowed the banks to provide their own estimates of their losses, based on the scenario presented by federal regulators.

At the insistence of the banks, it based its loss projections not on the banks’ dismal 2008 earnings, as originally planned, but instead on the banks’ earnings reports for the first quarter of 2009. Most of the big banks jigged up their first-quarter reports—already bolstered by government cash, virtually interest-free government loans and government guarantees on their debt—by means of deceptive accounting gimmicks in order to show healthy profits. They did this knowing that their reported results would skew the stress test results in their favor.

The government held intensive closed-door negotiations with the banks over the parameters and results of the tests prior to their public release. Federal Reserve and Treasury officials agreed to put off release of the test results from Monday to Thursday because, they said, some of the banks continued to disagree with the government’s initial conclusions.

What is being obscured is the insolvency of much of the banking system and the fact that the government intends to expend trillions of dollars more in public funds to prop it up. The banks are hoarding billions in bad loans and securities, refusing to sell them at market prices or write them down, and the government is underwriting their actions by placing the Treasury at their disposal.

Other than concealing this reality from the public and propping up the financial markets, the stress tests are aimed at effecting a further consolidation of the banking system, in which the “healthy” banks absorb the rest, placing workers and small businesses more firmly in their vice.

And still all this concern over the credit and when it will loosen up is just so much camoflage.  But yet with all the cash that has been thrown at banks…credit is still tight and almost non existent.  I ask, just what is all this tap dance about?  It appears to me that it is to save the banks and to hell with the middle class.

Banks are still tightening credit standards for small businesses, but not to the degree they did at the end of last year. That’s according to the Fed’s quarterly survey of senior bank loan officers is just out. More than 40% of banks surveyed said they had raised credit standards for commercial and industrial loans to small firms (under $50M in revenue) in the last three months, but that’s down from 69% in the last survey released in January. This is the 10th straight quarter that a net percentage of banks has reported tightening credit to small firms.

Also worth noting: loan demand is still dropping. More than 60% of banks said demand for C&I loans from small firms was down over the last three months. Banks attributed this in particular to decreased investment in equipment, as well as less need for financing inventory, accounts receivable, and acquisitions.

I am still working on just who will benefit from these “stress tests”, other than the banks and Wall Street.

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.

Is It Over?

The Stock Markets are in positive territory for the year and all is being predicted as well.  Yesterday the markets went up, presumably because of the way that Obama is handling the global economic situation.  But that may not be the whole truth.

The Financial Accounting Standards Board (FASB) voted Thursday to let US banks set their own prices for assets in earnings reports, regardless of current prices.

The move, which was heavily lobbied for by Wall Street, is expected to increase bank earnings by 20 percent in the next quarter. Richard Dietrich, an accounting professor at Ohio State University, told Bloomberg News that the decision would allow Citigroup to reduce its reported losses by 50 to 70 percent.

The announcement sparked a rally on the stock market, led by financial companies. Citigroup stock rose 8.6 percent, Bank of America soared 9.6 percent and Wells Fargo rose 10.5 percent. The rally subsided later in the day, but financial stocks retained significant gains and the Dow Jones Industrial Average closed with a gain of more than 216 points.

Banks are currently required to calculate their earnings, under so-called “mark to market” accounting rules, according to the current market value of the securities they hold, but the new measure would allow them to value assets using their own internal models where the assets would otherwise be sold into a “distressed” market. Banks have argued that markets are not pricing financial assets fairly, causing credit to dry up and exacerbating the crisis.

Now, the banks are to be allowed to use the same obscure and discredited financial models to inflate their balance sheets, based on the claim that markets have ceased to “fairly” reflect the real value of their illiquid assets. This is little more than an excuse to line the pockets of CEOs, hedge fund managers and big investors.

Once again the Wall Street thieves get their way, they get to keep their millions and they get to keep their thieving ways.

Don’t Worry, Be Happy

A week or more of rising markets and a one day rise of 500 points and all is gravy fore the big dogs on Wall Street.  Joy, joy…do the dance of joy….well only if you are a Wall Street trader…Main Street still SUCKS!

Everything being done is for Wall Street and those happy go lucky guys that put usd in this pickle that we are clawing our way out of as we speak.

Geithner got his long waited vote of confidence from Wall Street on Monday and Tuesday he profit taking began…..but is the worse over…tee hee…HELL NO!

Paul Krugman sees it for what it is.

“This is more than disappointing,” Krugman wrote in The New York Times. “”In fact it fills me with a sense of despair.”

“The Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt,” the Princeton University economist said, citing weekend reports outlining the plan.

“This isn’t really about letting markets work. It’s just an indirect, disguised way to subsidize purchases of bad assets,” he added.

Krugman called it a recycled idea of former Treasury Secretary Henry Paulson, who later abandoned the “cash for trash” proposal.

The Obama Admin is losing its window of opportunity to take control of the banks.  The economic bubble has a slow leak and soon it will be an out of control balloon filled with crap as it crash against the waiting wall.  And it will be messy, to say the least.

Yes, there is confidence but not where they need it….Main Street is not amusede.

AIG Is Only The Tip Of The Iceberg

The president has told us of his anger at the bonuses being paid to AIG employees, but I am starting to doubt the sincerity of his words.

Lawrence Summers, director of the White House National Economic Council, declared in a CBS television interview, “The easy thing would be to just say, you know, ‘Off with their heads,’ and violate the contracts. But you have to think about the consequences of breaking contracts for the overall system of law.”

With this turn of phrase invoking the guillotine, Summers inadvertently put his finger on an essential element of the AIG bonuses furor. Like the nobility at the time of the French Revolution, America’s ruling financial oligarchy is an entirely parasitic social layer, whose relentless defense of its wealth and privileges stands as the basic impediment to meeting the most basic needs of society as a whole.

In reality, the AIG bonuses are hardly an aberration. Citigroup’s CEO Vikram Pandit hauled in $10.82 million of compensation in 2008, Reuters reported Monday. This payout came as the bank received a $45 billion capital injection from the US government.

Bank of America Corp. CEO Kenneth Lewis fared only slightly worse, getting $9.96 million as his bank also received $45 billion in bailout funds.

Moreover, these obscene pay packages and bonuses are only a small part of the money handed out to the financial elite.

Will You Stay in Your Home?

The administration, launching what it calls the “Making Home Affordable” initiative, said that borrowers will have to provide their most recent tax return and two pay stubs, as well as an “affidavit of financial hardship” to qualify for the $75 billion loan modification program, which runs through 2012.

Borrowers are only allowed to have their loans modified once, and the program only applies for loans made on Jan. 1 2009 or earlier. Up to 4 million borrowers are expected to qualify. Mortgages for single-family properties that are worth more than $729,750 are excluded.

Separately, up to 5 million borrowers who have mortgages held by government controlled mortgage finance giants Fannie Mae and Freddie Mac should be eligible to refinance through June 2010.

House Democrats, under pressure from a group of moderates in their ranks and the banking lobby, agreed Tuesday to narrow legislation that gives bankruptcy judges the power to force lenders to lower the mortgage interest rate or principal balance.

Under the terms of the agreement, judges would have to consider whether a homeowner had been offered a reasonable deal by the bank to rework his or her home loan before seeking help in bankruptcy court. Borrowers also would have a responsibility to prove that they tried to modify their mortgages.

“It is imperative that we continue to move with speed to help make housing more affordable and help arrest the damaging spiral in our housing markets,” Treasury Secretary Timothy Geithner said in a statement.

Geithner’s Bank “Stress Test”

On Feb. 25 regulators laid out details on how they will run the “stress tests” that Treasury Secretary Timothy F. Geithner has promised on the biggest banks. Now those tests, designed to judge whether the banks have the capital to keep lending and absorb losses in a severe recession, face an exam of their own.

Much of the credibility of Geithner’s struggling bank bailout program hinges on what Treasury does with the test results. Many investors believe the banking system is drastically undercapitalized. While no one expects regulators to declare the money center banks insolvent, they are watching to see whether Geithner will allow the weakest of the examined banks to fail. “If everyone passes the test, it won’t provide [investors] any comfort,” says Andy Laperriere, a Washington-based policy analyst with the research firm International Strategy & Investment Group.

Regulators say they plan on more rigorous, more forward-looking versions of the computer simulations that the banks themselves have conducted to project how their capital would hold up through a variety of worst-case scenarios. While the banks’ own tests often focused narrowly on issues such as interest rates, inspectors will consider two other prospects. First, they’ll see what would happen to loan defaults and bank revenues if GDP falls by 2% this year and grows 2.1% in 2010, which is the consensus forecast. Then they’ll look at what would happen should things get dire: if GDP falls 3.3% in 2009, say, and remains flat after that. The feds are projecting home prices will slide 14% this year, and will look at the impact of unemployment at 8% or even 10%. Regulators may also be more skeptical than the banks about the impact of a prolonged recession on the values of mortgage-backed securities, derivatives, and other assets.

But it looks like flunking out is not in the cards. Speaking before Congress on Feb. 24, Fed Chairman Ben Bernanke said “the outcome of the stress test is not going to be pass or fail.” A senior Administration official adds, “There is no explicit cap on the amount of capital we will provide.” Investors are worried. “It’s like a test you get to do again if you didn’t do well,” says Donald J. Rismiller, chief economist of institutional broker Strategas Research Partners. Adds Petrou of Federal Financial Analytics: “The fear is that the tests will simply set the price tag for how much more taxpayers have to put in.”

If you are a regular reader then you know what I am going to say on this point……The Treasury is trying to create liquidity……but what good will that do when there is no demand?

Do you realize that with all the cash that we are pumping into banks……if it had been given to Main Street and mortgages had been paid off……This whole recession thing would not been hurting as badly as it is know…..Washington is still chasing the Wall Street biggies for the hand game…..Main Street keeps getting deeper and deeper into a hole of the government’s making.

Same Song, Different Administration

Rendition….Torture….Bailout…….what is changing?

U.S. Treasury Secretary Timothy Geithner laid out a bank-rescue plan that will rely on public and private funds to take $500 billion of bad assets off banks’ books, sources said.

The plan would also extend a Federal Reserve program aimed at shoring up consumer lending to the troubled mortgage sector, allowing the U.S. central bank to extend up to $1 trillion in loans to holders of a wide variety of asset-backed securities, according to sources.

Geithner will outline the Obama administration’s plan to revamp a U.S. financial bailout program that his predecessor, Hank Paulson, persuaded Congress to approve last year. About half of that money has been committed to pump capital into banks and ailing U.S. automakers.

Industry sources said capital injections will continue under Geithner’s plan, but the Treasury is expected to ask banks to show how the money they receive is leading to more lending.

Geithner will also announce an expansion of a joint Treasury-Fed program currently aimed at stimulating consumer and small business loans by allowing it to extend loans with commercial mortgage-backed securities and private label mortgage securities as collateral, sources said.

The program currently allows the Fed to loan up to $200 billion dollars to holders of top-rated securities backed by credit car, education, auto and small business loans. That program would be expanded to $1 trillion, sources familiar with the plan said.

Treasury also is expected to announce $50 billion aimed at stemming home foreclosures, several sources said. On Monday the director of the White House National Economic Council, Lawrence Summers, said on CNN more measures to help the battered housing sector will be coming within about two weeks.

In recent days, as Treasury worked to finalize details of its rescue package, attention has shifted to how to draw in private-sector investment to help clean up balance sheets littered with growing numbers of non-performing assets.

While Treasury will keep pumping capital into banks, it also is expected to introduce more rigorous stress-testing of lenders. Banks deal with different regulators, but sources said those regulators will agree on common standards for testing so that markets can have confidence they are safe and sound.

Sources have said the administration is also working on a mortgage rescue program under which government-controlled mortgage enterprises Fannie Mae and Freddie Mac would ease payments for hundreds of thousands of borrowers and offer a model for Wall Street to do the same.

Once again, lots of plans for banks and such and the people continue to lose jobs, homes and meals waiting for the promises of the past to be delivered.  Once again this is all in the name of investors and the greed of the banks.  And Main Street suffers quietly.

He did none of the above….he gave a vague outline and NO specifics….that should instill confidence in the Obama economic team.

Treasury Gets Criticized

My first impulse was to yell, “YA THINK?”

Lawmakers criticized the Treasury Department’s handling of its $700 billion financial-industry rescue program, saying the effort had been mismanaged, and warned that no additional money would be forthcoming barring significant improvements.

In a hearing Wednesday, members of the House Financial Services Committee questioned Treasury Assistant Secretary Neel Kashkari over his agency’s handling of the Troubled Asset Relief Program, citing critical reports by the Government Accountability Office and an oversight panel appointed by Congress.

Lawmakers faulted Treasury for what they said was its failure to address the record numbers of foreclosures that continue to weigh on financial institutions and the broader economy after TARP was implemented in October in response to a credit crisis sparked by woes in the housing market. They also criticized what they described as the agency’s reluctance to ensure that banks are using billions of dollars in federal funds to lend to consumers and businesses.

Treasury has used or committed most of the money available in the first tranche of funds under TARP, with $15 billion remaining out of an original $350 billion. With financial markets still weak and the broader economy in recession, Treasury Secretary Henry Paulson has been trying to decide whether to seek access to the second half of the funds.

Geez, where were these people when the bailout was being pushed through Congress?  It is a little late to worry about how the money is being spent.  These guys were inept at handling the crisis which was predicted almost a year ahead of the fact.  If they could not see it coming, why would we trust them to fix it once it was broke.