Overview of 2009 U.S. bank rescue plan (Bank Bailout)

February 10, 2009 by · Leave a Comment
Filed under: Economic News 

First off, the market is tanking pretty bad.  Not a vote of confidence at any stretch.  At the time of this writing the market is down 4.6%, ouch.  Basically the plan is used to buy toxic assets and use money to help private investors purchase these assets.  

Outside of the mortgage-backed securities, I am not sure what investors are going to buy?  I don’t think I would purchase debt insurance contracts (CDS) in this market, who would want that risk when so many other indicators are pointing towards a global depression.   Plus I still stand by my prediction that the white elephant in the room is the fact that many of these banks are carrying insurance contracts on their balance-sheet (somewhere) that have already gone bust so they are not a real asset, but a liability.  Here is the full overview:

2009 Bank Bailout Overview:

Read more

Treasury demands banks with TARP funds to report lending

January 20, 2009 by · 1 Comment
Filed under: Legal News 

Funny that is it was bad lending and reserve practices that got us in this mess and now we want the banks to resume that activity to try and start a recovery.  The problem is with job losses mounting, more debt for the average citizen is not the answer.  We need to stabilize incomes and create jobs before we start discussing a recovery.  TARP was a bad idea from the beginning when we decided to abandon the free markets right when we were in need of them the most.  Banks are doing what they should of done in the first place, lend to credit worthy borrowers.  

News:

The U.S. Treasury, under pressure to revive lending, is demanding monthly reports from the banks that received the most capital from the government’s $700 billion rescue program.

Neel Kashkari, the official who administers the Troubled Asset Relief Program, wrote to Citigroup Inc., Bank of America Corp. and 18 others on Jan. 16 seeking figures on business and consumer loans. Treasury also wanted details on purchases of mortgage-backed and asset-backed securities, according to documents obtained by Bloomberg News. Kashkari will stay for a few months after President-elect Barack Obama is sworn in today.

Read more

Paulson & Bair Raise ‘Aggregator Bank’ for Toxic Debt

January 16, 2009 by · Leave a Comment
Filed under: Industry News 

So let me get this straight, our answer in this suppose free-market system is to have our government who is essentially backed by the U.S. taxpayer, is to have a bad asset bank setup that will become the dumping ground for all this mal-investment, bad loans and insurance contracts (CDS) gone bust?  How is this good for the nation or for good banks that did not make these choices.  

Why do we just have these banks come clean and market these assets to market and if they have no value then you get no value.  You should be outraged if we give cash at face value on assets during the credit bubble.  That is bad business and will ultimately reward these bad companies and set us up for this to happen again because these same banks will expect the same response.  Bad policy and no real leadership is what we are seeing here.  Everyone wants to be popular but the right choices are usually not the popular ones.

News:

 The heads of the U.S. Treasury and Federal Deposit Insurance Corp. gave further momentum to the idea of a new government-backed bank to remove toxic assets from lenders’ balance sheets.

“A lot of work has been done on an aggregator bank” and other ways of using the $700 billion financial-rescue fund “to let it go further when it comes to dealing with illiquid assets,” Treasury Secretary Henry Paulson told reporters today in Washington. FDIC Chairman Sheila Bair praised the idea in an interview on CNBC, saying it might have “some merit.”

Read more

Bank of America in talks for more taxpayer bailout funds

January 15, 2009 by · Leave a Comment
Filed under: Industry News 

This sounds like a story we have heard before.  Now BofA is coming back to the trough for some more taxpayer porridge.  Until we ween them off and let the cards fall as they may, we will continue to put our nation in more and increasing amounts of debt to bailout financial institutions that have been treating the markets like casino expect when the house wins, we lose.

News:

Bank of America, the largest U.S. bank, is close to getting billions of dollars more in federal support from taxpayers, a person familiar with the matter said on Wednesday.

As Congress debated the future of the government’s $700-billion financial markets rescue program, the source said that Bank of America has struggled to digest its January 1 buyout of former Wall Street brokerage giant Merrill Lynch & Co.

Read more

Fed wants new effort to “cleanse” banks hampered by toxic assets

January 14, 2009 by · Leave a Comment
Filed under: Policy News 

Here we go again, lets reward the banks for making foolish choices because printing good money and throw it at bad assets.  This sets a precedence that will encourage this to happen again in the future and it will prevent asset prices from dropping to a level that matches income so you will also punish the people who saved and made good choices by making assets more unaffordable.

This is not going to succeed because we do not have the income to support these asset price levels.  If you want to cleanse the banks, let them go into bankruptcy and have the banks that are not insolvent, come into the market and take over their assets.  According to “Lombard Street”, you prevent good banks from forming while you send money to support bad banks.  The main reason is because of “risk taking”, a bank that is not prudent, will take undo risks that in effect will make their money “easier” to be got and that makes the good banks uncompetitive.

News:

The Federal Reserve’s top two officials urged a new effort to address the toxic assets held by financial companies, warning that they threaten to prevent banks from resuming lending to households and companies.

Chairman Ben S. Bernanke and Vice Chairman Donald Kohn said in separate remarks yesterday that the illiquid investments raise questions about the “underlying value” of banks and may hinder “private investment and new lending.” They called for the government to remove or insure the assets.

Read more

« Previous PageNext Page »