Did the Federal Reserve gag American International Group (AIG)? Emails first reported by Bloomberg News show that the insurer wanted to disclose information about the payments it made to such banks as Goldman Sachs (GS) and Deutsche Bank (DB) to cancel some financial deals. But, lawyers for the New York Fed, which was led by Timothy Geithner at the time, told AIG to pull that information out of a report it was going to issue.

The AIG bailout is being questioned by watchdogs, which accuse the Fed of doling out billions of dollars to banks that weren't necessary -- especially now that big bonuses are piling on.

Continue reading NY Fed Told AIG to Limit Disclosure of Bank Payments

NY Fed Told AIG to Limit Disclosure of Bank Payments originally appeared on BloggingStocks on Fri, 08 Jan 2010 09:20:00 EST. Please see our terms for use of feeds.

Last year, a U.S. District Court in Manhattan secretly froze $2 billion held in a Citigroup (C) account. The money was believed to have been held on behalf of Iran, through Luxembourg's Clearstream Banking S.A. In what the Wall Street Journal reports could be the largest seizure of Iranian assets abroad since the Islamic revolution of 1979, several parties are lining up to claim the cash. And, it looks like the battle is headed for trial.

The order to freeze the funds was executed 18 months ago by the U.S. District Court for the Southern District of New York and hasn't been made public. In issuing the legal order, the court used information from the U.S. Treasury Department. Though the money is frozen, the struggle is heating up.

Continue reading Global fight brewing over frozen funds from Iran

Global fight brewing over frozen funds from Iran originally appeared on BloggingStocks on Sun, 13 Dec 2009 16:10:00 EST. Please see our terms for use of feeds.

Last year, the Treasury Department received warrants when it injected billions in JPMorgan Chase & Co. (JPM). JPMorgan received $25 billion in bailout money in October 2008 and paid the money back last June.

The government received 88.4 million warrants. They were sold at auction at a price of $10.75. The conversion price for the warrants is $42.42 a share. That means when the stock reaches that price, the warrants can be converted into stock worth $3.75 billion. The Treasury received $936 million from Thursday's auction.

Continue reading U.S. sells JPMorgan warrants for $936 million

U.S. sells JPMorgan warrants for $936 million originally appeared on BloggingStocks on Sat, 12 Dec 2009 14:20:00 EST. Please see our terms for use of feeds.

Continue reading Capital One warrants help chip away TARP obligation

Capital One warrants help chip away TARP obligation originally appeared on BloggingStocks on Sun, 06 Dec 2009 15:40:00 EST. Please see our terms for use of feeds.

The federal government is a step closer to having vast powers over financial services firms. The U.S. House of Representatives Financial Services Committee voted on Wednesday to give regulators the authority to carve up financial firms when economic stability is at stake. The bill would also open up the Federal Reserve to much more congressional oversight. This comes more than a year after firms such as AIG (AIG) and Citigroup (C) needed profound financial intervention to prevent a broad collapse of the global economic system.

Of course, the measure is getting mixed reviews. The Independent Community Bankers of America, a lobbying group for smaller entities, says it will "create a more equitable financial system and hold too-big-to-fail firms accountable for the risks they pose." Meanwhile, the Financial Services Roundtable, which represents larger banks, such as Bank of America (BAC), says it will "stifle creativity and the free-flow of ideas and capital."

Continue reading House votes on risk bill, bank breakup power included

House votes on risk bill, bank breakup power included originally appeared on BloggingStocks on Thu, 03 Dec 2009 11:20:00 EST. Please see our terms for use of feeds.

If mortgage companies start to feel like they're losing elbow room, it's probably because they're starting to get nudged by the Obama administration. The folks in the White House are planning to kick off a campaign to squeeze mortgage companies to lower payments for even more borrowers who are in trouble. The $75 billion program, financed by taxpayers, to keep homeowners from falling into default appears to be in trouble.

Mortgage lenders have increased their efforts to modify borrowers' mortgages, but most of them are still in a trial stage, which will last up to five months. Only a handful have been made permanent, which isn't good enough for Washington. The Treasury Department's assistant secretary for financial institutions, Michael S. Barr, told the New York Times, "The banks are not doing a good enough job," continuing, "Some of the firms ought to be embarrassed, and they will be."

Continue reading White House, lenders, lawyers and borrowers: Nobody can agree on mortgage relief

White House, lenders, lawyers and borrowers: Nobody can agree on mortgage relief originally appeared on BloggingStocks on Sun, 29 Nov 2009 15:10:00 EST. Please see our terms for use of feeds.

Continue reading 34 banks fail to pay TARP dividends

34 banks fail to pay TARP dividends originally appeared on BloggingStocks on Thu, 08 Oct 2009 16:40:00 EST. Please see our terms for use of feeds.

The Congressional Oversight Panel reported on Wednesday that most of the $23 billion in taxpayer funds provided to General Motors and Chrysler is unlikely to be repaid. The Congressional Budget Office estimated in June that taxpayers would lose $40 billion of the first $55 billion provided to the auto industry.

The Treasury Department acknowledges that most of the $23 billion provided by the Bush Administration is likely gone forever, but added that there is a "reasonably high probability of the return of most or all of the government funding" provided by the Obama administration.

Continue reading GM insists it will repay taxpayer funds -- oh, really?

GM insists it will repay taxpayer funds -- oh, really? originally appeared on BloggingStocks on Thu, 10 Sep 2009 12:50:00 EST. Please see our terms for use of feeds.

Three quarters of the fiscal year is comfortably behind us, and the U.S. budget deficit has already passed the $1 trillion mark. In June alone, the federal government spent faster than it earned to the tune of $94.3 billion. The result is below the median predicted by 30 estimates according to a Bloomberg News survey of economists -- projections ranged from $70 billion to $109.3 billion for the month. This is the first time we've had a June deficit since 1991.

In June 2008, the deficit for the month was a much more modest (but still sizeable) $33.5 billion. But last month spending spiked 37% to $309.7 billion, while revenue plunged 17% to $215.4 billion.

So how does the rest of the year look? Pretty grim.

Continue reading U.S. budget passes $1 trillion with one more quarter to go

U.S. budget passes $1 trillion with one more quarter to go originally appeared on BloggingStocks on Tue, 14 Jul 2009 08:00:00 EST. Please see our terms for use of feeds.

JPMorgan Chase & Co. (NYSE: JPM) and the U.S. government can't seem to agree what the bank's stock warrants are worth. As a result, JPM has asked the Treasury Department to auction off the warrants publicly in order to determine a fair market price.

The JPM warrants were issued to the government under the terms of its TARP loan. Bailed-out banks have the option to repurchase their own warrants, but only if they can strike a deal with the feds regarding a reasonable price. However, many firms have complained that the Treasury is seeking too high a price for the assets -- putting executives in the awkward position of claiming that their stock just isn't worth that much.

In choosing the auction alternative, JPMorgan is waiving its right to repurchase its own warrants (it could potentially bid through the public auction process, but company executives have decided not to do so). If the stock warrants are successfully auctioned off to a third party, their exercise would be dilutive to existing shareholders.

Continue reading JPMorgan Chase slides after waiving right to buy its stock warrants

JPMorgan Chase slides after waiving right to buy its stock warrants originally appeared on BloggingStocks on Fri, 10 Jul 2009 11:20:00 EST. Please see our terms for use of feeds.

My, how a day of reaction can change things. Late last night, Treasury Secretary Tim Geithner announced that American International Group (NYSE: AIG) will repay the taxpayers up to $165 million that it doled out as bonuses.

According to Geithner's letter to congressional leaders, the government can't block the payments -- which were contractually agreed to before the government's bailout.

However, the public's "considerable outrage" over the payments was an epiphany for AIG, causing the bank to agree to pay the Treasury an amount equal to the payments. The Treasury will then deduct that amount from the $30 billion in government assistance that the company is slated to receive.

Continue reading AIG to make the big payback?

AIG to make the big payback? originally appeared on BloggingStocks on Wed, 18 Mar 2009 07:00:00 EST. Please see our terms for use of feeds.

Continue reading AIG set to pay $450 million in retention bonuses to CDS salespeople

AIG set to pay $450 million in retention bonuses to CDS salespeople originally appeared on BloggingStocks on Wed, 28 Jan 2009 17:30:00 EST. Please see our terms for use of feeds.

Citigroup bailout contract set to be subpoenaed originally appeared on BloggingStocks on Mon, 12 Jan 2009 10:45:00 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.

Our introduction to the Treasury Department official in charge of the $700 billion bailout fund -- Who will spend our $700 billion? Meet 35-year-old Neel Kashkari -- generated a lot of interest and commentary. Many of the comments have been negative and cover a wide range of fear and loathing, from cracks about Goldman Sachs (NYSE: GS) running the country and stealing all the money, to insults directed at Kashkari's lack of hair and ethnic background. (For the record, his family is from India, not Iran, and Neel is apparently a Hindu name, not a Muslim one, although I haven't found any definitive proof of his religious background.)

Looking around the web, I found lots of talk about Kashkari, including one curious comment at Huffington Post that Kashkari has a special arrangement with respect to his salary. Somehow, according to this commentator, Goldman Sachs is paying him billions of dollars to do his job. He will supposedly collect these riches when he steps down, presumably after having rendered super-secret services to the financial oligarchs who apparently own our country.

The writer of the comment offered no proof, and I have to admit that I'm a little skeptical (about the salary, not the oligarchy). But it did get me thinking about how much government officials are being paid to handle all this bailout money.

According to this Bloomberg report, Kashkari earned $738,000 in salary and bonus at Goldman before joining his former boss Hank Paulson at Treasury in July 2006. His title is now Assistant Secretary (Assistant Secretary of the Treasury for Financial Stability and Assistant Secretary of the Treasury for International Economics and Development, to be precise) and he is, obviously, a federal employee now. So he must earn the standard salary for an Assistant Secretary.

Continue reading So how much is bailout czar Neel Kashkari getting paid?

So how much is bailout czar Neel Kashkari getting paid? originally appeared on BloggingStocks on Fri, 31 Oct 2008 11:50:00 EST. Please see our terms for use of feeds.

The weekend is fast approaching. And with global markets in a tailspin --- the Nikkei fell 11%, the Hang Seng tumbled 7.1%, and the FTSE 100 declined 3% -- that can only mean one thing: Hank Paulson and Ben Bernanke will spend the weekend putting together another massive cash dump to announce by Sunday night. But I have a different idea -- for one weekend, how about a massive information campaign instead.

What if, instead of trying to fight fear and restore confidence with money, they decided to educate the world instead? If Bernanke is such a good teacher, perhaps he can put together an explanation for what is going on, why it happened, and how he plans to fix it. I think that a patient and honest explanation of what is really going on -- similar to FDR's fireside chats -- would go a long way to pushing away the fear.

By uttering meaningless platitudes about how "we have the tools" and "the economy will come back better than ever", the Administration is sending an unhelpful message. It is telling us a combination of things: it does not understand what is going on, it does not trust the American people to handle reality, and/or it believes that discussing the truth would make matters worse. Throwing more money at the problem without providing leadership does not seem to be working. Here are a few questions I think Paulson and Bernanke should answer for starters:

Continue reading What are Paulson and Bernanke cooking up for this weekend?

What are Paulson and Bernanke cooking up for this weekend? originally appeared on BloggingStocks on Thu, 16 Oct 2008 09:22:00 EST. Please see our terms for use of feeds.

With reports that the UK will invest $60.5 billion to take control of its four top banks, leading Western finance ministers left Washington with an important unanswered question: "What can we do that will restore confidence to the global financial markets?" I am heartened to learn the U.S. leaders are discarding their reverse auction strategy in favor of a plan to inject capital into our banks. But if that plan is not done the right way, it could be a missed opportunity of colossal proportions.

Here's what worries me about the current vague discussions. If the U.S. invests $700 billion in banks that apply for the investment, then the applications are likely to come from banks that are losing money and have the least amount of capital. If the Treasury invests in these money losing applicants, odds are good that they will keep losing money and the investment will be wasted.

In order to get a return on our investment, Treasury must follow a plan I called cull and capitalize. In this plan, Treasury would analyze our 8,400 banks and pick the winners. To do this, the FDIC could rank banks based on their profitability, their capital levels, and the quality of their assets. The banks that did not make it into the winner's circle would either be encouraged to merge with those winners or close down.

Continue reading A way forward for financial leaders

A way forward for financial leaders originally appeared on BloggingStocks on Sun, 12 Oct 2008 09:04:00 EST. Please see our terms for use of feeds.

Paulson trashes taxpayer-funded bailouts for lenders and home owners originally appeared on BloggingStocks on Thu, 28 Feb 2008 10:10:00 EST. Please see our terms for use of feeds.

It's a bit more than 20 years since the Dow fell 508 points, or 22.6%, in a single day. With Asian and European markets down a mere 1% to 4% today, it does not look like we'll have a repeat of that 23% decline today. What's happening in world markets? According to the New York Times, Hong Kong fell 3.3%, Japan tumbled 2.2%. South Korea was down 3.25%. In Europe the early news was not as bad -- London's FTSE 100 was down 1.4%, the German DAX dropped 1.3%, and Paris slid 1.8%.

Twenty years ago, the CEO of the company I worked for sent one of my colleagues to figure out good stocks to buy -- considering the market plunge an opportunity to buy good stocks at a discount. It turned out that he was right. The cause of the crash was found to be related to simultaneous computer driven-selling that somehow took the rationality out of stock valuations.

But will today's potential plunge also turn out to be a buying opportunity? The answer depends on your time frame and which stocks you buy. It's never clear to me why markets go up and down although "explanations" get printed every day. But it could be that the big reason for the selling in global markets is fear. In particular, investors fear that the U.S. has unleashed a subprime mortgage-backed securities (MBS) financial virus that is sucking an unknown -- but enormous -- quantity of credit out of the global financial system.

Hank Paulson's floundering effort to rescue the world from this MBS viral epidemic is not inspiring confidence. So I would not be eager to rush out and buy stocks in this market. Unlike the computer-driven selling of 1987, the economic costs of MBS's financial "innovation" are still too difficult to count.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Black Monday 2007 originally appeared on BloggingStocks on Mon, 22 Oct 2007 08:45:00 EST. Please see our terms for use of feeds.

The New York Times [registration required] reports that Citigroup (NYSE: C) and JPMorgan Chase (NYSE: JPM) are working with the Treasury Department to create a $75 billion fund to bail out Structured Investment Vehicles (SIV) -- of which there are thought to be $400 billion worldwide. What are SIVs? Why do they need to be bailed out? Why is the Treasury Department getting involved? Will the bailout plan work? Why should you care?

Before addressing these questions, it's worth pointing out that Hank Paulson, the current Treasury Secretary and former Goldman Sachs Group (NYSE: GS) CEO, has not had much success as a government servant. His efforts to talk China into loosening its currency have fallen flat. And a high-level government source told me that Paulson's brusque personal style has not endeared him to other economic policy makers.

When Paulson took the job in May 2006, I speculated that the reason he took it was so he would have the chance to outshine Robert Rubin, another former Goldman executive, whose tenure at Treasury was widely perceived to have been brilliant. I thought then that Paulson thought a financial crisis would occur under his tenure that would enable him to demonstrate his financial crisis management skills. The SIV crisis is a big problem but I doubt he'll rise to the occasion like Rubin did.

Continue reading Hank Paulson's got an Enron-like crisis that could swamp Citigroup (C) and JPMorgan (JPM)

Hank Paulson's got an Enron-like crisis that could swamp Citigroup (C) and JPMorgan (JPM) originally appeared on BloggingStocks on Sun, 14 Oct 2007 10:25:00 EST. Please see our terms for use of feeds.