Citigroup to repay $20 billion of bailout funds
Well its a race to from under the “Pay Czar” and now Citibank is running as well so they can pay bonuses as well. I guess the bonus race is on these days. My question is if the government will be removing its $300 billion in guarantees for Citigroup loans and securities? If that is not withdrawn then is it clear that they are not from under the TARP program and they should still be under those pay constraints.
It is already bad enough that the U.S. taxpayers has bailed out and provided a backstop for our banking institution but now we are not seeing any real “thanks” for that gesture and more focus on getting clear of the rules that were setup so they can get paid before Christmas. Don’t be too dis-trot, this is greed working its magic, we setup the rules and they are following them so next time if we are satisfied with them, then we need to write better rules and that starts with people intelligently engaging their representatives so your voice and opinion is heard and taken seriously.
Education is the key in complex matters like finance and economics and that means you need to take some of your leisure time and dedicate it to learning about these matters if you want a different outcome than what we have gotten this far. That is a main reason I write this blog is to educate and force myself to be current by reading news on these subjects everyday.
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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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4 U.S. Banks Repay $54.7 Billion in Tarp Bailout Funds
This is a good sign, I am glad to see these fund get repaid back. This is going to create pressure on the banks that do not have the ability to repay these government loans. In a sense, this has now separated the banks into two categories (TARPed and Non-TARPed) and one categoery is clearly stronger than the other. This should let the market now reward or punish the good and bad banks we have.
If you can not repay these loans then clearly you are currently in a weaker position than your rivals. In the business of banking, 95% of the business is based on “trust” and “confidence” and when you are in short supply of both, then you usually go out of business. I want too see only strong and prudent banks surviving. I love good banks and despise bad ones. In all my history on banking I have read, this is the way of the world and it should not change now.
News (Bloomberg):
JPMorgan Chase & Co. and four of the nation’s largest banks repaid $54.7 billion to the U.S. Treasury’s bailout fund in a step toward ridding themselves of government restrictions on lending and pay.
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TRC Worldwide asks for bailout funds for its troubled truckers pension
Not much longer that I published that last article then did I see this Reuters story come over the wire about a trucking company needing a bailout for its retirement pension because of bad investments in either CMBS (Real Estate) or CDS (Debt Insurance) type financial instruments.
The more these reports keep coming out, the more I can feel the coming bout of inflation coming because of the massive money printing that is taking place which will push our trading partners to increase their prices on wholesale goods to compensate for our reckless social policy of bailing out no matter if they were doing the right or wrong choices at the time. It is pretty sad the precedence this country has set for itself. I can just see the next crisis coming up once the dust settles and greed kicks in to find another way to exploit the system.
News (Reuters):
Struggling No. 1 U.S. trucking company YRC Worldwide Inc. plans to seek $1 billion in bailout money from the Troubled Asset Relief Program to help it cover pension obligations, a move analysts say is unlikely to succeed as the company has no financial charter.
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Insurance companies get cleared for TARP bailout funds on bad investments
We knew this was coming, and pensions are next in line. Many of these insurance companies used a lot of this toxic assets as fixed income securities that would help the insurers keep their obligations. At this point, everyone is going to get a bailout in the financial industry so I think that inflation is really going to be the next issue to deal with if this turn around recovery works. If not then we will see many banks and insurers go bankrupt but that seems unlikely with the actions of this administration to safeguard our present financial oligarchs at all costs, even devaluing the dollar.
News (Bloomberg):
Prudential Financial Inc., Hartford Financial Services Group Inc. and Allstate Corp. are among six insurers approved by the U.S. government for bailout funds after investment declines eroded capital across the industry.
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Bank of America Needs to Raise $33.9 Billion in Additional Capital
Well we will see how these “stress test” results look on Thursday. I have heard anywhere from 10 to 16 of the 19 biggest banks we need to raise additional capital to maintain an adequate reserve ratio. The problem I have with these tests are the fact that if you look at the criteria of the tests, they really painted a recovery this year and an additional 7 to 15% decline in housing prices.
Maybe we can keep good economic numbers while we have all of these government backed programs to prop up our failed financial system but once those need to be reigned in and all that cash that has been pushed into the system, starts to flow around. I believe we will be in the same position as last October or even worse. I guess we can keep our fingers crossed and our guns loaded?
News (NY Times):
The government has told Bank of America it needs $33.9 billion in capital to withstand any worsening of the economic downturn, according to an executive at the bank.
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U.S. bank bailout extended to life insurance companies
The depth of this situation is now coming into focus. What has basically happened, is the life insurance companies who normally are very risk adverse in their investing got caught up in investing in dodgy “other assets” that carried a “AAA” credit rating. Now because we have realized that these were not “AAA” but in fact junk debt, the insurance companies are in a hole to provide adequate coverage to their policyholders (according to the insurers).
Commercial real estate has to be the next bailout target, I know personally that many of these insurance companies and pensions invested heavily during the boom times in commercial real estate and sercurities based on commercial real estate. To be continued…..
News (Reuters):
Shares of U.S. life insurance companies rose broadly on Wednesday on a report that the government may widen a funding program for troubled financial companies to include insurers.
The U.S. Treasury is expected to announce within the next several days the inclusion of life insurers that are bank holding companies or own a thrift in its capital injection program, The Wall Street Journal reported, citing people familiar with the matter.
Shares of Hartford Financial Services Group Inc climbed more than 30 percent to as much as $11.35 in early morning trading, from $8.45 on Tuesday.
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