Looks like Former U.S. Treasury Secretary Henry Paulson may be headed back up to Capitol Hill soon.

On Wednesday, the Chairman of Congress' Financial Crisis Inquiry Commission (Phil Angelides) stated that Paulson may be one of the witnesses called to testify in front of the panel. Right after emerging from the panel's first meeting, the chairman of the bipartisan group noted that it "must examine" the financial institutions that did or could have crumbled if not for the help of the government.

Continue reading Paulson may be heading to Capitol Hill -- will it do any good?

Paulson may be heading to Capitol Hill -- will it do any good? originally appeared on BloggingStocks on Fri, 18 Sep 2009 12:00:00 EST. Please see our terms for use of feeds.

Continue reading Wells Fargo climbs out from under the TARP

Wells Fargo climbs out from under the TARP originally appeared on BloggingStocks on Tue, 01 Sep 2009 18:00:00 EST. Please see our terms for use of feeds.

Continue reading Bank of America says it was pressured into Merrill Lynch deal

Bank of America says it was pressured into Merrill Lynch deal originally appeared on BloggingStocks on Thu, 11 Jun 2009 09:45:00 EST. Please see our terms for use of feeds.

Stephen Friedman, chairman of the Federal Reserve Bank of New York, stepped down from his post late Thursday. The 71-year-old came under fire when a regulatory filing revealed that he upped his stake in Goldman Sachs Group (NYSE: GS) during late 2008, when the bank holding company was under the New York Fed's supervision.

"Today, although I have been in compliance with the rules, my public service motivated continuation on the Reserve Bank Board is being mischaracterized as improper," wrote Friedman in his letter of resignation. "The Federal Reserve System has important work to do and does not need this distraction."

Continue reading NY Fed chair steps down amid Goldman Sachs stock uproar

NY Fed chair steps down amid Goldman Sachs stock uproar originally appeared on BloggingStocks on Fri, 08 May 2009 11:30:00 EST. Please see our terms for use of feeds.

An outspoken group of Bank of America (NYSE: BAC) shareholders has been calling for CEO Kenneth Lewis's head lately, with investors none too pleased by the bank's near-disastrous acquisition of Merrill Lynch. However, testimony is hitting Wall Street today that indicates Lewis was simply following government orders by keeping hefty losses at Merrill under wraps.

Lewis testified under oath before New York Attorney General Andrew Cuomo in February, asserting "it wasn't up to me" to disclose Merrill's fourth-quarter losses toward the end of 2008.

According to Lewis, Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Henry Paulson pressured him to stay mum about Merrill Lynch's troublesome balance sheet. The regulators reportedly urged Lewis to proceed with the merger, warning that the deal's failure would "impose a big risk" to the nation's financial system.

Continue reading Was Bank of America's CEO intimidated by the feds?

Was Bank of America's CEO intimidated by the feds? originally appeared on BloggingStocks on Thu, 23 Apr 2009 11:00:00 EST. Please see our terms for use of feeds.

When Hank Paulson scared Congress into passing the Troubled Asset Relief Plan (TARP) last fall, he said that it would be used to buy toxic waste from banks. That never happened. All we know is that $350 billion of our taxpayer money is gone and that most of it went to banks and a bit to the auto industry. What are they doing with our money? How is the government measuring the success of TARP? Is it helping? Until we get those answers, we should not allow more good money to be thrown after bad.

What we have now is a bunch of talk. Sen. Kent Conrad (D-ND) said "Without the first TARP, we may have a Dow at 4,000 right now and the economy in an absolutely free fall." Thanks Kent -- I'd like to see your proof for that claim. Why not Dow 400? Progress on finding out what happened to the money is coming from Sen. Carl Levin (D-MI) who got Treasury to cough up contracts between the government and 10 financial institutions -- by threatening a subpoena.

Continue reading Before releasing the next $350 billion, what happened to the first?

Before releasing the next $350 billion, what happened to the first? originally appeared on BloggingStocks on Tue, 13 Jan 2009 09:48:00 EST. Please see our terms for use of feeds.

Auditors from the General Accounting Office say that no one is keeping particularly good tabs on how Paulson is using the $700 billion bailout fund. According to The New York Times, "Government auditors urged the Treasury Department on Tuesday to act more quickly to develop the internal controls and hire the professional staff necessary to ensure that its $700 billion financial rescue package is operating effectively and ethically."

That won't happen. Treasury is too busy putting out fires, which range from getting money into the large banks to considering whether to fund a rescue plan for mortgage owners. Paulson has less than two months to leave his mark on the economy and then he is "retired." Treasury barely has enough qualified people to figure out where money should go, let alone keep careful track of it.

The complaint by auditors is fair, but it gets to the heart of most large federal government spending packages, whether they are for the Defense Department or new national health initiatives. These programs are just too large to monitor completely, so the taxpayers have to rely on the competence of the officials who spend the money in the first place.

Paulson is faced with using his personnel on saving the financial system or counting beans. He has, appropriately, put his effort into the more pressing problem.

Douglas A. McIntyre is an editor at 247wallst.com.

No one is watching how Paulson money is spending the bailout money originally appeared on BloggingStocks on Wed, 03 Dec 2008 11:45:00 EST. Please see our terms for use of feeds.

Can someone please stop Hank Paulson from wasting more taxpayer money? Steve Forbes -- a failed 2000 presidential candidate I met a few weeks after 9/11 -- has called Paulson the worst Treasury Secretary in modern times. Now, Paulson wants to launch the fourth reincarnation of the Troubled Asset Recovery Plan (TARP) by buying securities consisting of bundles of consumer loans. In his effort to appear to be helping consumers, he is simply launching another failed Wall Street bailout.

Here's how I view the four reincarnations of TARP:

• TARP 1.0 was to take $700 billion to buy toxic waste from Wall Street in reverse auctions. As Paulson said, America needed to pass this plan to avoid heavenly retribution. But the plan was DOA for reasons I posted about here.
• TARP 2.0 involved buying equity stakes in banks -- the U.S. spent $159 billion for preferred shares in 24 banks. But the banks are holding onto the money and not lending it out. Perhaps they'll use it to pay $26.6 billion worth of bonuses. That's rich -- using taxpayer money to help out the people who got us into this mess.
• TARP 3.0 was the plan to cover losses on $277 billion worth of Citigroup 's (NYSE: C) toxic waste while using $20 billion in cash to buy $27 billion worth of preferred stock yielding 8% along with warrants on 254 million shares at $10.61. Expect more of these deals as Citi competitors complain of a tilted playing field and Paulson scrambles to accommodate them. But with Citi, the U.S. protected Prince Alwaleed's common shares, other banks might not be so lucky.

Continue reading Paulson to launch TARP 4.0 to buy consumer-loan backed securities

Paulson to launch TARP 4.0 to buy consumer-loan backed securities originally appeared on BloggingStocks on Tue, 25 Nov 2008 08:30:00 EST. Please see our terms for use of feeds.

Back in September, Hank Paulson urged swift passage of the now $810 billion bank bailout bill by citing heavenly retribution if it did not pass. Paulson succeeded in getting his money. But after spending nearly $300 billion there's scant evidence that it's helping. Congress was clearly wrong to put its faith in Paulson and it should cancel the plan and replace it with one that clearly defines the problem and demonstrates how the plan will solve that problem.

One piece of good news is that the London Interbank Offered Rate (Libor) has declined from 4.82% to 2.15% -- but lending still remains extremely tight. And it's possible that other programs, such as the Fed's plan to purchase $50 billion in commercial paper (CP), contributed to that Libor decline rather than Paulson's. Even more outrageous than the failure of Paulson's plan to fix the problems is that there is nothing to stop our money from paying $26.6 billion worth of banker bonuses.

Given this colossally wrong-headed plan, how did Paulson get his way? Not surprisingly, Congress has a weak understanding of economics and global finance. According to a Washington reporter I spoke with last month, Congress approved the Paulson plan because it believed that the former CEO of Goldman Sachs Group (NYSE: GS) must have known what he is talking about. They believed that if he was advocating a reverse auction plan to buy toxic waste that it must be the right thing to do. Unfortunately, faith is not a strategy.

Continue reading Congress should cancel Paulson's $810 billion bailout plan

Congress should cancel Paulson's $810 billion bailout plan originally appeared on BloggingStocks on Fri, 14 Nov 2008 10:15:00 EST. Please see our terms for use of feeds.

It is a bad idea because it will slow the process of getting money from the Treasury to needy firms. That negates one of the key aspects of the bailout program. It is supposed to move fast to stay ahead of the national liquidity crisis.

Paulson may be asking to change that. According to The Wall Street Journal, "The Treasury Department, signaling a new phase in its $700 billion financial-rescue plan, is considering requiring that firms seeking future government money raise private capital in order to qualify for public assistance."

While it may seem sensible to get smaller banks and insurance companies, the next group of firms likely to get Treasury help, to ask private investors to come in side-by-side with the government, the program would be flawed for two reasons.

The first is that, in a failing economy, nothing may bring private equity out of its shell even if buying into a financial firm getting a huge slug of government money might seem attractive in normal times. But, these are not normal times and panic keeps capital from making investments which should appear attractive.

The second reason that the plan is flawed is the private equity deals can take many weeks or even months to close, and private investors may want different terms than the federal government is getting. That turns what could be a quickly fashioned lifeline from Treasury into a prolonged process which could damage the companies it seeks to save.

It is probably a good thing that Paulson's tenure is over in two months. His new plan could could wreck what it is trying to fix.

Douglas A. McIntyre is an editor at 24/7 Wall St.

The Treasury bailout, getting private equity involved originally appeared on BloggingStocks on Wed, 12 Nov 2008 04:48:00 EST. Please see our terms for use of feeds.

Remember Hank Paulson's $810 billion program to save the world? It started off as a plan to buy toxic waste from banks. But as soon as it was passed, it changed into a scheme to buy stock in big banks -- some of which, like Citigroup (NYSE: C) -- are hugely unprofitable. This makes no sense to me -- I prefer cull and capitalize. With the election behind us, there's a chance to put some teeth into the plan by making sure that banks lend the money -- or refund our investment.

So far, the program has spent $159 billion for shares in 24 banks. But how are the banks using the money? Is it to make loans? No -- too risky. Is there anything stopping the banks from using it to pay bonuses? No. In fact, even if they don't use the cash from the Treasury's investment check to pay the bonuses -- our money will free up cash that would have been used for other purposes to pay those bonuses.

So how much of our money will bankers get this year? Well they received $33.2 billion in 2007 and forecasts are that they'll get 20% to 35% less -- or $26.6 billion -- for 2008. That's $147,556 for each of the 180,000 individuals who worked on Wall Street in 2007 (the number is lower now after layoffs).The banks created fake profits but they're getting huge bonuses. How so? Over the last couple of years, they reported $305 billion worth of profits but those have been wiped out by $323 billion in bad loans they charged off.

Continue reading Will our tax dollars pay $26.6 billion in Wall Street bonuses this year?

Will our tax dollars pay $26.6 billion in Wall Street bonuses this year? originally appeared on BloggingStocks on Thu, 06 Nov 2008 10:35:00 EST. Please see our terms for use of feeds.

This post is part of a feature on companies and products that our bloggers think are in need of a makeover. See all 26.

You may have noticed, as I did, that Treasury Secretary Henry Paulson seemed colossally uncomfortable during his testimony before Congress in September. Obviously, no one would enjoy jumping into Paulson's shoes and defending the merits of the government's $700-billion bailout bill to skeptical senators. However, the good Secretary's level of discomfort went up to 11 when the legislators began grilling him about the obscenely fat pay packages received by Wall Street CEOs -- even those who, you know, bankrupted their companies and stuff?

I can't blame Hank for breaking a sweat. Before he assumed the role of Treasury Secretary, Paulson was better known as the handsomely compensated CEO of Goldman Sachs (NYSE: GS). To his credit, Goldman is one of the few titans of Wall Street still standing in the wake of the mortgage-backed securities mess. Although he managed not to drive his company into the ground, I'd argue that Paulson is not quite impartial enough to lead the charge for CEO pay reform.

On the other hand, I have never received a salary that could be described as "scandalous." Plus, I have a healthy amount of indignant rage regarding the pay packages scored by such Wall Street ne'er-do-wells as Richard Fuld of Lehman Brothers and Martin Sullivan of AIG (NYSE: AIG). With this arbitrary sense of entitlement, I feel more than qualified to suggest some new guidelines for executive pay.

Continue reading Makeover needed: CEO pay

Makeover needed: CEO pay originally appeared on BloggingStocks on Mon, 27 Oct 2008 18:00:00 EST. Please see our terms for use of feeds.

Global markets are crashing down today. Asia (Hang Seng down 12.7%, Nikkei 225 fell 6.4%) and Europe (Dow Jones Euro Stoxx 50 crumbled by 5.9% and the FTSE 100 index tumbled 5.4%) are collapsing in unison. And in the last year, they have lost 51% of their value -- destroying $29.6 trillion in stock market value. You may have noticed that stockholders are the silent majority of the financial crisis. This is the group of citizens that Richard Nixon tried to mobilize to win elections. And it's the same group that John McCain's advisor, Phil Gramm, talks about when he says Americans are Whiners.

There are plenty of corporations and financial institutions that can afford lobbyists. The clients of lobbyists don't whine -- they get bailouts. As vice chairman of UBS AG (NYSE: UBS), Gramm is one of the lobbyists that the average taxpayer can't afford, so we end up paying to bail out those who can. How much? Commercial Paper (CP) gets $540 billion; Fannie Mae (NYSE: FNM), Freddie Mac (NYSE: FRE), and American International Group (NYSE: AIG) get $322.8 billion; and the top nine banks get $125 billion to pay bonuses (since Hank Paulson did not require them to lend it out).

Even if stockholders could hire lobbyists, it is unlikely that governments would be able to come up with enough cash to reimburse us for the $29.6 trillion we've lost so far -- or for the additional $20 trillion we could lose if things keep going the way they have been. With confidence lost that governments will solve the problem, people are now trying to cut their losses before they get even worse.

That lack of confidence is what will drive global stock markets for the foreseeable future.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns AIG shares and has no financial interest in the other securities mentioned.

With global markets down 51%, $29.6 trillion in wealth evaporates originally appeared on BloggingStocks on Mon, 27 Oct 2008 08:58:00 EST. Please see our terms for use of feeds.

What is wrong with us? We gladly fork over $125 billion to capitalize a handful of banks that got us into this mess that's cost $37 trillion since 2007. But we can't muster up any help for people whose houses go into foreclosure. Why are we using our taxpayer money to give bankers the extra capital they need to pay bonuses while not requiring them to lend it out to keep the economy moving?

And why don't we do something to get to the root of this problem? That is the enormous borrowing of money to finance the purchase of houses many of which are worth less than the unaffordable mortgages taken on to buy them. When people have a mortgage that's bigger than the value of their house, they walk away. When others see their mortgage payments skyrocket while their incomes stay flat, they stop writing checks. And their houses go into foreclosure -- in the third quarter the number of foreclosures rose 71% to 765,558 -- the highest on record.

Hank Paulson said, "The government may buy home loans and related securities to help property owners struggling with monthly payments." It's nice of him to dangle that carrot in front of the three million people who have lost their homes to foreclosure. Obviously, it was much more urgent for him to secure the bonuses of his banker buddies with our tax dollars.

Continue reading $125 billion for banker bonuses, nothing for 765,558 foreclosure victims

$125 billion for banker bonuses, nothing for 765,558 foreclosure victims originally appeared on BloggingStocks on Thu, 23 Oct 2008 11:00:00 EST. Please see our terms for use of feeds.

It might be that the Treasury is lurching slowly in the direction of doing the right thing to fix our financial system. My cull and capitalize plan would pick the surviving few banks and close or merge the others with the winners -- it would then pump a combination of private and public capital into the winners. I think this is a good idea because the surviving banks would be healthy enough to borrow and lend to each other without undue fear of losing their money. This would go a long way to unfreezing the financial pipelines of our economy.

So far, the Treasury has invested $125 billion in nine banks which I am guessing it thinks are among the winners. Now, the Treasury is suggesting that it will dole out more capital to so-called super-regional banks -- such as KeyCorp (NYSE: KEY), Fifth Third (NYSE: FITB), BB&T (NYSE: BBT), and SunTrust Banks (NYSE: STI) -- if they use the money to acquire weaker players. These super-regional banks might be a good investment opportunity now.

Unfortunately, the Treasury is approaching the problem in a haphazard manner. For example, it already gave capital to banks that are losing enormous sums -- Citigroup (NYSE: C) which got $25 billion comes to mind. And of these four super-regionals -- two (KeyCorp and Fifth Third) are losing big bucks and two -- BB&T which posted third quarter profit of $358 million and SunTrust which earned $540 million in the second quarter -- are earning money. Why would Treasury invest in money-losing banks?

Continue reading Can you profit from Paulson's bank consolidation plan?

Can you profit from Paulson's bank consolidation plan? originally appeared on BloggingStocks on Tue, 21 Oct 2008 10:00:00 EST. Please see our terms for use of feeds.

Earlier this week, Hank Paulson forced the nine top banks to take $125 billion in taxpayer money in exchange for perpetual preferred stock that pays a 5% yield, which rises to 9% after five years plus warrants to buy 15% of the banks' stock. Does this mean that the banks will now start lending out that money to get the economy off its back? Absolutely not. It could go to paying banker's bonuses instead.

And why not? After all, the write-offs of sour investments have more than wiped out all the "profits" these banks reported over the last three years -- during those boom years they reported $305 billion in profits and have recently taken $323 billion in write-offs. And with more losses looming, the top nine banks need to raise $275 billion more.

How much of these reported bank profits were faked to boost banker's bonuses? Why are the bankers who booked these lousy deals keeping the multimillion bonuses they got during those years? And why did Paulson decide to inject taxpayer money into these banks if they're not going to use it to boost the economy?

Continue reading Will our $125 billion bank capital injection pay bankers' 2008 bonuses?

Will our $125 billion bank capital injection pay bankers' 2008 bonuses? originally appeared on BloggingStocks on Fri, 17 Oct 2008 10:15:00 EST. Please see our terms for use of feeds.

Continue reading Rule change that blew up the banks

Rule change that blew up the banks originally appeared on BloggingStocks on Fri, 03 Oct 2008 09:15:00 EST. Please see our terms for use of feeds.

Continue reading Fortune interviews Buffett on CNN

Fortune interviews Buffett on CNN originally appeared on BloggingStocks on Thu, 02 Oct 2008 15:39:00 EST. Please see our terms for use of feeds.

Democrats back Bush's Wall Street bailout bill that Republicans oppose originally appeared on BloggingStocks on Thu, 25 Sep 2008 23:35:00 EST. Please see our terms for use of feeds.

President Bush, Congress reach deal on $700 billion buyout originally appeared on BloggingStocks on Wed, 24 Sep 2008 22:15:00 EST. Please see our terms for use of feeds.