Donald Kohn to Leave Fed at End of Term as Vice Chairman
Who Obama chooses as his replacement will be very important and is to be watched. Vice Chairman Kohn has been an establishment at the Federal Reserve for over four decades. Even though I personally have issue with many of the policies responses in crisis, Donald does have a wealth of knowledge after being near the helm for over 40 years and they will lose some of that wisdom when he steps down at the end of his term. Mr. President choose wisely, the markets will be watching very closely.
Vice Chairman of the Fed
Business Week - Donald Kohn will leave the Federal Reserve at the end of his four-year term as vice chairman after helping Ben S. Bernanke and Alan Greenspan steer the U.S. through recessions and crises.
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Freddie Mac ends buying interest-only loans in September
It is surprising Freddie was actually purchasing these loans in the first place. I would automatically assume a interest only mortgage was not used by a first time home buyer and more likely used by a speculator that was assuming appreciation through a refinance or flip on the sale. Maybe I am wrong but that seems pretty close to the case. We do not need to be using taxpayer money to support this type of activity. We need to help people trying to stay in there home that intend to stay there.
Reuters - Freddie Mac, the second largest purchaser of U.S. residential mortgages, said on Friday that it would stop buying and securitizing all interest-only mortgages because of the poor performance of those loans.
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Feinberg Says He Spoke With Goldman Sachs CEO About Compensation Plans
It is good we are seeing more compensation that is based on performance of the stock of a firm and not large cash payments that could encourage one-time bumps in earnings for bonuses even if they are putting the firm into more risk. Over time this will also help shareholders because everyones goals will be much more aligned and investors can have more confidence investing in these firms for the long-term, opposed to speculating.
Bloomberg - Kenneth Feinberg, the U.S. special master on executive compensation, said Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein consulted with him on the firm’s pay plans and adopted his “prescriptions.”
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Ex-Fed Chairman Paul Volcker to urge curbing risky trading by commercial banks
I fully support Mr. Volcker’s stance on this issue. Even though it is extremely profitable for commercial deposit taking banks to do trading on their own books, they should either convert into a investment bank or stick to lending which is still very profitable if done properly. As I have stated before on here, our commercial banks should be our most risk adverse institutions and that is why prudent regulations are needed and should be in place to limit this.
Investment banks are on the other hand, not regulated very much so they are allowed to make very risky trades and profit greatly. Conversely, if they make bad choices they should be allowed to fail without the same assistance that our vital commercial banks get if we have a classic “run” on the bank.
Washington D.C., Reuters - White House economics adviser Paul Volcker will urge Congress on Tuesday to rein in risky investing by big banks to help prevent them becoming “too big to fail,” according to testimony obtained by Reuters.
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Bernanke Says Fed Would Welcome ‘Full Review’ of AIG Aid by GAO
I applaud this choice but I want to make sure we are clear that there are major questions about giving “back-door bailouts” to Goldman Sachs and a few foreign banks by giving 100 cents on the dollar for credit-default swaps AIG held. Other counter-parties did take a discount or “haircut” on those debt insurance contracts so there is some explaining to do on those decisions.
To this point both Treasury and the Federal Reserve do not see any problem with their choices on this matter and the amount of U.S. tax payer money they used to bailout this insurance company. Honestly, the financial products division did not need to be bailout out, their normal insurance operations where is separate subsidiaries so even if that company failed they would still be able to make good on their other obligations. The reality is that major investment banks and foreign banks did not do proper due diligence on the ability of AIG to make good on this insurance in the event of a economic downturn and they should of been made to pay in a true free market system.
Bloomberg, New York - Federal Reserve Chairman Ben S. Bernanke said the central bank would welcome a “full review” of its aid to American International Group Inc. by congressional auditors and make all necessary records and personnel available to them.
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GMAC to receive another bailout of $3.8 billion from U.S. government
You have to pay for these 0% APR car financing deals and GMAC found the perfect way, the U.S. taxpayer. It wasn’t enough to bailout GM to save American jobs but now we have to make sure their is financing for these cars even if there is not the demand for them compared to other automakers. How long until we finally let the market forces take their course and let the weak players fail or be taken over?
That means GMAC, like AIG, will get more aid from taxpayers, even though the prospect of repayment is on the wrong side of uncertain. Unlike AIG, GMAC was a disaster before the financial crisis’ darkest days. It finished 2006 losing money. In the third quarter of 2007 GMAC lost $1.6 billion, mostly on bad loans made by its residential mortgage arm. It lost $767 million in the third quarter of this year, $3.9 billion in the second quarter and $675 million in the first.
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U.S. to extend TARP program until Oct. 2010 for banks
This is good news as long as we see the programs fade. It is very hard for investors to gauge the real health of the economy with all of the intervention on the behalf of the government. It is smart that they are retracting the program but keeping it in place just in cause we do see another decline in economic health. If it does go well and we don’t need the assistance, we should use it to pay down the deficit being that we are generating debt at record levels.
Treasury Secretary Tim Geithner notified Congress Wednesday that he is extending the Troubled Asset Relief Program through Oct. 3, 2010.
“This extension is necessary to assist American families and stabilize financial markets because it will, among other things, enable us to continue to implement programs that address housing markets and the needs of small businesses, and to maintain the capacity to respond to unforeseen threats,” Geithner wrote in a letter to House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid.
The Treasury Department will continue to use TARP funds to mitigate home foreclosures, provide capital to community banks and take additional steps to boost lending to small businesses, Geithner wrote. The department also may increase its commitment to efforts to improve the secondary markets for consumer loans, small business loans and commercial mortgages.
Beyond these programs, the department will not use any remaining TARP funds “unless necessary to respond to an immediate and substantial threat to the economy stemming from financial instability,” Geithner wrote. “As a nation we must maintain capacity to respond to such a threat. Banks are still experiencing significant new credit losses, and the pace of bank failures, which tend to lag economic cycles, remains elevated.”
Source: Ohio Business Journal
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