"The U.S. Congress may have to approve a 'TARP 2,'" Wang told BloggingStocks Friday. "Whether Congress does it as part of a fiscal stimulus package, or separately, it is clear we will need more money to purchase toxic assets, improve bank capitalization and allocate funds for home mortgage refinance programs, and other financial stabilization measures. At this stage of the crisis, the $700 billion TARP is not going to be enough, in my interpretation."
Bank sector stress remains
Wang said that if Citigroup, whose CEO Vikram Pandit said has adequate capital, for some reason cannot, when needed, find additional capital in the private sector, then "the Fed and or U.S. Treasury will step in, and take necessary measures to stabilize the bank," Wang said. If the U.S. Treasury is the primary funder, "that action, and other forthcoming, planned actions by the Treasury may use up a considerable amount of TARP funds, requiring a TARP 2."
Citigroup's shares plummeted another 85 cents to $3.86 early Friday afternoon.
Further, Wang added that even though U.S. Treasury Secretary Henry Paulson has shifted strategy and is using current TARP funds to increase capital in banks and not buy toxic mortgages and other bad assets as originally planned, Wang said the Treasury Department "will likely have to return to the toxic asset buying strategy, along with recapitalizing banks."
In addition, of recent concern regarding Citigroup, and regarding other financial institutions, is the commercial mortgage backed securities (CMBS) market, Wang said. "There are concerns that CMBS defaults may rise as the recession prevents more companies from making payments on loans they obtained for office buildings, shopping centers, hotels and other commercial property," Wang said. "If CMBS defaults rise, it will represent another wave of the financial crisis, and a TARP 2 will most certainly be needed."
Still, Wang took pains to note that the Fed and/or Treasury will not let Citigroup collapse. "Citigroup is too big to fail, let me underscore that," Wang said. "In a federal rescue, current Citigroup shareholders may be wiped out, but Citigroup's operations are not going to cease. They are integral to the global financial system and they would quickly go into conservatorship or a comparable form, and become 'United States Federal Citigroup.' "
Economic Analysis: The system is coming close to where residential (and now commercial?) mortgage defaults are caused not by poorly-conceived loans, but by the recession -- which is part of the negative cycle / vicious circle that New York Times columnist Paul Krugman and others have spoken about. If that's the case, the U.S. Congress will be back in session very soon for TARP 2, as Wang noted, and for other financial system stabilization and economic stimulus actions.
Cramer on BloggingStocks: Don't paint everything with the jobs brush
Seven banks go up in smoke ahead of the holiday weekend
Sears offering hedge for consumers who lose their job -- good idea?
Reader Comments (Page 1 of 1)
11-22-2008 @ 9:46AM
Virgil Bierschwale said...
Here is an economic stimulus plan that will work.
Virgil
http://www.KeepAmericaAtWork.com
I've listened to our experts talk about stimulating the economy.
I've watched them piss away 700 BILLION dollars and accomplish nothing except pay bonuses for those that don't need nor deserve bonuses.
I've listened to all of their crap that didnt amount to squat and still I see all of us hurting.
So I have decided to propose an economic stimulus plan that will work and it is very simple and I want you to tell me and your state and federal representatives what you think about it, because if we're silent, we're out of sight and out of mind when it comes to our representatives.
Here it is and its very simple.... !
Are you ready ???
I want to put 10 % of America back to work which is 20 MILLION people and I'm going to pay them 50,000.00 per year.
Let's see, our government asked for 700 BILLION
I'm asking for 300 BILLION more.
Their stimulus plan did NOTHING for the economy.
Mine will put 300 BILLION back into the treasury AND
It will put 700 BILLION into the economy
Damn, Imagine that
They ask for 700 BILLION and deliver NOTHING
I ask for 1 TRILLION and put 300 BILLION into the treasury and 700 BILLION into the economy.
Wow, Maybe I should be running for office because I've sure lost my confidence in our Political and Corporate Leaders.
2-14-2009 @ 12:50AM
The Answer said...
Simple isn't it.
Who will these people work for? Welfare, Inc.;
handouts.com; freeload.gov???
Which 10% do you want to put back to work?
the 10% who dont want to work anyway???
Where will these workers come from? insurgents,
immigrant??? good luck collecting the 300B in Fed income tax to replentish the treasury
How about direct TARP 2 and the EESA to take 10% of the $800B and infuse into managed venture capital industry whose mandates direclty create job for those millions. The Emerging industries that must replace jobs from our aging/dying industries.
To your point, salaries would be capped untill independent corporate performance supports increase (far cry from TARP 1, whose funds went to (gulp) Merril Lynch bonus pool). These folks better qualify for the $50k jobs in the new industry companies if they make it through a managed hiring process.
This approach reignites the middle class. The back bone of America.
The top 10% are wealth - and status quo
The bottom 10% are unwilling/incapable of working.
The 'right' Answer!