U.S. Treasury posts
FeedPosted Apr 23rd 2010 4:40PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Financial Crisis
That Wall Street and the financial sector have experienced periodic scandals over the generations would not be a revelation to the experienced investor. Further, fraud and scandal can be traced to antiquity: it is not new, and it certainly is not unique to Wall Street.
What is unique now, however, is that fraud is amplified by leverage and interconnected as a result of globalization to financial centers around the world. It now has the capacity to inflict unacceptable and catastrophic damage on the financial system, and by extension, on the economy.
Continue reading The Wild, Wild West Days of Finance Are Over
Posted Feb 15th 2010 12:40PM by Connie Madon (RSS feed)
Filed under: Management, Law, Consumer Experience, Scandals
Federal law bars creditors from taking Social Security to recover a debt. Other deposits that are exempt include pensions, payments to disabled veterans and survivors' benefits for children.
Banks have been ignoring the law when it comes to garnishment orders. They freeze the accounts, then rip off people by charging them outrageous fees. First the account goes into deficit and there is a fee Then the account goes on hold and the customer cannot get access to his or her money. If the customer tries to use a debit card, it is rejected and another fee is added. Once the account is in deficit, the banks keep adding fees on and on ...
Continue reading Treasury to Stop Banks from Freezing Social Security Accounts
Posted Mar 2nd 2009 2:35PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Politics, Financial Crisis
Most investors know about the United States' anti-state political culture: in America it's private sector solution first, public sector solution second.
And, most also know that what state that does exist is anti-central government: it dates back to our federalist origination. We're even reluctant to call something 'central' for this reason: we have a central bank, but it's called the
Federal Reserve, not the Central Reserve. And it's the
Internal Revenue Service, not the Central Revenue Service.
Continue reading Socialism by any other name is probably a U.S. government program
Posted Feb 11th 2009 12:00PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Recession, Financial Crisis
Investors should not read too much into the Dow's
nearly 400-point drop Tuesday. What they should concentrate on, in the view of a pair of economists, is the mechanism the
U.S. Treasury uses to price toxic assets.
The above is the most important 'unknown' in the U.S. Treasury's financial stability plan, so says economist David H. Wang -- how toxic assets that are clogging banks' balancing sheets and restricting credit -- will be priced.
"Will the United States government set-up a clearinghouse? Or will they design some type of open outcry, or managed open outcry? These are the key unknowns," Wang said. "Treasury Secretary Geithner and his staff cannot rush this decision, but on the other hand they cannot take two quarters to developed it. They have to announce the structure of the pricing program within a couple of weeks. I cannot underscore enough the importance of this pricing methodology. It will be the biggest factor in whether the credit system recovers, or something much worse occurs."
Continue reading Pricing system for toxic assets deemed key to U.S. Treasury bank rescue plan
Posted Feb 10th 2009 6:00PM by Joseph Lazzaro (RSS feed)
Filed under: Politics, Recession, Financial Crisis
On a day when the United States committed
up to $2 trillion more in government financing and programs to unlock credit markets -- probably the federal government's largest, one-day implied commitment in history -- the dollar
rose against the euro and British pound.
The
dollar strengthened 1.2 cents to $1.3821 and a gargantuan 4 cents to $1.4488 versus the
British pound. The dollar also rose about one-half cent to $1.1584 versus the
Swiss franc. Now, in theory, increasing dollar commitments by the U.S. government means more dollars in circulation, which means every dollar is worth less -- a sequence that should cause the dollar to fall against the world's other major currencies. Not Tuesday, and really, when you review it, not since the financial crisis took hold in October 2008, so says economist David H. Wang. And the reason is basic: the dollar's status as a reserve currency, and as a safe haven.
Continue reading U.S. adds up to $2 trillion in debt... and the dollar rallies
Posted Feb 3rd 2009 6:30PM by Joseph Lazzaro (RSS feed)
Filed under: Politics, Financial Crisis
It's a Washington, D.C. adage -- one that can help investors understand the public policy process -- and House Financial Services Chairman
U.S. Rep. Barney Frank, D-Massachusetts, among others, have said it a dozen times, if not more:
"Congress doesn't get credit for not doing something or for avoiding something," Frank has said.
Case in point:
TARP I, the initial $350 billion allocation in Troubled Asset Relief Program funds. The initial allocation has been widely criticized as ill-conceived. Some of the money has apparently enabled certain banks to approve large bonuses, allowed others to complete acquisitions or position themselves for the same, or pay-down debt, while not resulting in what Congress intended the allocation to accomplish -- increase lending to businesses and consumers.
Continue reading TARP I, if nothing else, bought time for TARP II
Posted Jan 25th 2009 1:40PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Financial Crisis
Washington Post business columnist and Pulitzer Prize-winner Steven Pearlstein reminds investors that a complex financial crisis will not be solved by a simple solution.
Hence, Pearlstein's offered a four-part solution that he believes will get the United States back on the road to financial health.
The first involves a limited guarantee against default by the federal government for packaged loans that circulate in the "shadow" banking system, such as the way Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) do with conventional mortgage-backed securities. The FDIC is working on plan to do the above, he said, funded by either bank fees or via a modest contribution from the $700 billion TARP.
Second, the FDIC, via a new program that covers $1,000 in refinance closing costs, should be able to encourage more banks to renegotiate at-risk mortgages, greatly reducing the number of home foreclosures that are at the root of the bad bond/toxic asset pipeline.
Comment: The view from here argues that had the FDIC under chairwoman Sheila Bair been allowed to implement a version of the above program a year ago, the U.S. would have been that much closer to reducing foreclosure rates. The previous presidential administration did not act swiftly on Bair's proposal -- an unmitigated policy error that the current administration inherited. Hopefully, the Obama administration will correct it.
Continue reading Washington Post's Pearlstein: 4-part financial crisis requires 4-part solution
Posted Jan 19th 2009 12:00PM by Joseph Lazzaro (RSS feed)
Filed under: Housing, Federal Reserve, Recession, Financial Crisis
Outgoing U.S. Treasury Secretary Henry Paulson stated goal was to have banks "deploy not hoard" TARP money as a part of process to loosen constrained credit markets.
In advocating such, the outgoing Bush administration hoped that banks would work with homeowners at risk of losing their homes to foreclosure.
Some banks have worked with struggling homeowners, offering alternate payment plans, loan forbearances, or even lowering the interest rate to help get these mortgages back in the non-delinquent category. Still, the practice has by no means been universal.
Many banks have not participated in mortgage modifications -- even those banks that received TARP funds. For example, a Palm Beach conference sponsored by Sandler, O'Neill & Partners revealed how many banks are using their TARP money,
The New York Times reported.
Continue reading You'll never guess what some banks are using the TARP money for
Posted Jan 16th 2009 2:27PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Bank of America (BAC), Politics, Federal Reserve, Recession, Financial Crisis
The U.S. Treasury, U.S. Federal Reserve, FDIC's
joint decision Friday to inject $20 billion into the
Bank of America (NYSE:
BAC) and guarantee $118 billion in assets provides another case study. Bank of America's shares fell 80 cents to $7.52 in Friday afternoon trading.
[ Earlier, my BloggingStocks colleague
Peter Cohan provided an analysis of the bail-out's cost to taxpayers. ]
Economists and other public policy wonks love the theoretical and they love 'taking the other side' in arguments.
Hey, they can't help it: it's the stuff they were trained to do - - the stuff they love. And, after all, it's frequently a major source of their income.
And my economist and policy wonk colleagues and friends are no different.
Now, on the surface, it looks like yet-another taxpayer bailout of bad decisions by bankers, mortgage lenders, and borrowers. In other words, another "profits - - the bankers win, losses - - the U.S. taxpayer foots the bill." Further, because it occurs on the heels of the Bank of America's buy-out of Merrill Lynch, it looks like, in some sense, U.S. taxpayers are subsidizing a financial institution merger.
Continue reading Fed, Treasury's Bank of America bailout suggests they know more than we know
Posted Jan 14th 2009 9:26AM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Economic Data, Politics, Recession, Financial Crisis
It's not as bad or as large as it looks is how one economist put it, but try convincing U.S. taxpayers of that.
The U.S. budget deficit soared to a record $485.2 billion in the federal government's fiscal first quarter, (October-December 2008), the
U.S. Treasury Department announced, as the government implemented its financial system stabilization plan.
The December 2008 budget also increased to $83.6 billion from $48.3 billion a year ago.
Further, the deficit is on-track to total more than $1 trillion this year, fiscal 2009. The
Congressional Budget Office (pdf) is projecting a $1.2 trillion deficit for the current fiscal year.
In addition, the $485.2 budget record for fiscal Q1 already exceeds last year's budget deficit
for the full year of $454.8 billion.
Continue reading U.S. budget deficit soars to record in $485.2 billion in first quarter
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