Continue reading Greenspan: 'The Recession Is Over'

Greenspan: 'The Recession Is Over' originally appeared on BloggingStocks on Mon, 08 Feb 2010 10:00:00 EST. Please see our terms for use of feeds.

The follically challenged Herb Allison is likely to take over from Neel Kashkari, the former Goldman Sachs Group (NYSE: GS) banker who brought his shiny pate to Congress to get kicked in another part of his anatomy as the Troubled Asset Relief Program (TARP) continued to frustrate almost everybody. If approved, Allison's formal title will be assistant secretary for the Office of Financial Stability which administers TARP. Under former Treasury Secretary Hank Paulson, TARP went from being a way to buy toxic assets to a source of capital for big banks -- whether they wanted it or not.

Now, Treasury Secretary Geithner wants to revive Paulson's original idea to the tune of a deeply flawed $1 trillion program to further enrich a handful of billionaire hedge fund and private equity honchos. And Geithner appears to have selected a very cold fish for that job -- former Merrill Lynch executive Allison -- a Yale philosophy major and Stanford MBA who lost out on the CEO's chair at Merrill Lynch a decade ago to the far more stock-broker-friendly David Komansky.

Continue reading Will Fannie Mae's Allison head TARP?

Will Fannie Mae's Allison head TARP? originally appeared on BloggingStocks on Tue, 14 Apr 2009 10:50:00 EST. Please see our terms for use of feeds.

Treasury Secretary Hank Paulson made his bones pleasing his former colleagues on Wall Street by using a chunk of $350 billion taxpayers' TARP to pay $16 billion in bonuses to the bankers who got us into this mess. But let's face it, bankers only make tens of millions in bonuses. The really big bucks -- that is the annual earnings in excess of $1 billion -- go the the hedge fund and private equity runners. And that's where Paulson's replacement is upping the ante.

Rather than pandering to bankers who will now have their salaries capped at $500,000 if they take TARP money, Tim Geithner is going to make $1 trillion of taxpayer money available to those hedge fund honchos at the very pinnacle of the Wall Street food chain. To be fair, not all that $1 trillion will come from Treasury. In the initial phase, the Treasury will provide just $20 billion and the Fed will provide $180 billion -- but the Treasury could increase its commitment to $100 billion to allow the Fed to lend up to $1 trillion.

Continue reading Is Geithner trying to out-pander Paulson?

Is Geithner trying to out-pander Paulson? originally appeared on BloggingStocks on Fri, 20 Feb 2009 11:45:00 EST. Please see our terms for use of feeds.

Continue reading TARP overpaid for assets, says watchdog

TARP overpaid for assets, says watchdog originally appeared on BloggingStocks on Fri, 06 Feb 2009 12:45:00 EST. Please see our terms for use of feeds.

The Congressional Oversight Panel (COP) reports today that Hank Paulson's Troubled Asset Recovery Plan (TARP) stole $78 billion of our money. This sounds like a huge under count to me -- I would put the figure at much closer to $350 billion. The questions now are what to do about TARP and whether similar waste can be prevented for the next $350 billion.

How did COP arrive at the $78 billion? It claims that TARP received bank assets worth $176 billion in exchange for capital purchases of $254 billion. Two hundred banks have gotten TARP money so far. In addition to assets, TARP has gotten preferred stock and warrants in exchange for its cash. And I would guess that the amount taxpayers have lost is well in excess of the $78 billion.

Continue reading TARP robs $78 billion in taxpayer cash

TARP robs $78 billion in taxpayer cash originally appeared on BloggingStocks on Fri, 06 Feb 2009 09:42:00 EST. Please see our terms for use of feeds.

It is old news that fixing the problems at America's large banks cannot be completely accomplished unless the toxic assets and toxic loans on their balance sheets recover their value or are sold to other entities. A recovery in value is almost out of the question, at least for several years. Too much of the value of the paper is based on the housing market and the general economy.

The federal government has been adroit in dodging the issue. Paulson elected not to buy bad assets with TARP money. He put the money directly onto banks balance sheets instead. When the failure of value in large pool of assets at Citigroup (NYSE:C) began to falter, the Fed agreed to share losses that the bank might incur on the bad assets.

It has started to dawn on the Obama economic and financial team that none of the past actions has addressed the real problem. The creation of a national "bad bank" to take in most of these assets and allow banks to go on operating without them may be the only way to create a safety net under the entire credit system.

Continue reading Obama looks harder at 'bad bank' solution

Obama looks harder at 'bad bank' solution originally appeared on BloggingStocks on Sat, 17 Jan 2009 06:46:00 EST. Please see our terms for use of feeds.

The subject just won't go away. Some lawmakers want TARP money to go toward stopping foreclosures. That is not exactly what the fund was supposed to be used for, but, by the same token, it was not meant to buy equity in banks. Paulson decided to do so anyway, which opened the door for using the TARP capital for whatever the Congress or Treasury want it to be used for.

According to The Wall Street Journal, "The federal government should devote at least $50 billion of the remaining financial-rescue funds toward a plan to prevent foreclosures, said House Financial Services Committee Chairman Barney Frank Friday."

That may be a noble idea, but it is not practical. The trouble with using government money to directly aid homeowners is that it would be remarkably complex and inefficient. Which homeowners qualify? How do they get their money, or a cut in their obligations? Is the program supervised by some federal agency or by banks? Who is considered needy and who is not?

Bailing out homeowners one at a time a a proposal that makes good headlines. It may help some members of Congress look like champions of the common man. But, the only realistic way to get relief for people having trouble paying their mortgages is to cut taxes or increase national employment. A person without a job, or a person worried about his job is not likely to view paying his mortgage any differently just because the government cuts his monthly payment from $800 to $600. It is still money he does not have.

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

Barney Frank wants TARP money for foreclosures originally appeared on BloggingStocks on Sat, 10 Jan 2009 13:40:00 EST. Please see our terms for use of feeds.

A Congressional oversight committee has gone after the Treasury on how it used TARP funds. Doing so is like asking why the fire department picked a 4-inch hose to put out a fire rather than a 6-inch one. In a catastrophe, the need to save to save time trumps method.

According to The Wall Street Journal, "The U.S. Treasury has failed to reveal its strategy for stabilizing the financial system, not answered questions asked by a government watchdog, and has done nothing to help struggling homeowners, a report being released Friday charges."

What strategy would that be? Paulson & Co. were faced with a collapsing credit market and the chance that several major financial firms would fail. Under those circumstance, the whole US economic system could have melted down.

The original purpose of the TARP was to buy toxic assets from banks. The Treasury quickly decided that the process would take too long and would require complex calculations as to the value of troubled bonds which did not trade. Instead, Paulson elected to mainline capital into banks by taking equity positions in large financial firms. It would be hard to argue that this did not stabilize they system, at least temporarily.

The second major beef from the oversight committee is that Treasury did not do enough for mortgage owners. How would that have worked? Bailing out individual mortgages would have taken months, even if the process was done though the banking system. Which mortgages would quality? What would be the process for deciding whether help would be based on homeowner income or some other scale of need? How would hundreds of thousands of troubled home loans be identified.

The TARP was a fund for a series of emergencies. Looking back can always be done with 20/20 vision.

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

The error of attacking the TARP originally appeared on BloggingStocks on Fri, 09 Jan 2009 04:03:00 EST. Please see our terms for use of feeds.

A spokesman for JPMorgan Chase (NYSE: JPM) Thomas Kelly said his firm has not disclosed what it did with the $25 billion in emergency bailout money it has received. In fact, JPMorgan Chase is declining to provide any such disclosure.

AP has reported that none of the 21 banks that received $1 billion or more from taxpayers is tracking, or at least willing to disclose how they are using the money. Let me be clear -- THIS STINKS TO THE HIGH HEAVENS!

What kind of deals did Treasury Secretary Paulson make with these favored financial institutions? The money would be very easy to track. Why wouldn't that be a part of the bargain?

Paulson obviously did not read Conservative bankers? Surely you jest!, but he should have. Of course, having former Goldman Sachs (NYSE: GS) CEO Paulson negotiate with his Wall Street buddies on behalf of the taxpayer is highly suspect. At a minimum we have the good 'ol boy network operating in full form.

The banks simply are avoiding what should be required scrutiny by pleading ignorance. I don't believe the money can't be tracked, or even traced now after the fact. What happened to the idea of more transparency? More cover up I fear!

The banks should be subject to full disclosure. The use of the funds should be subject to review. Government money should be subject to the Freedom of Information Act. Why all the secrecy?

PS: Personal emails I have been receiving and the initial comments indicate strong sentiment about this issue. I encourage those that care to forward this story to their elected officials and friends encouraging full disclosure -- as promised! Obama used the internet to help win the White House, lets use it to get someone to listen with an internet blast from all over the country!

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money.

Banks not disclosing billions -- why all the secrecy, Paulson? originally appeared on BloggingStocks on Mon, 22 Dec 2008 11:44:00 EST. Please see our terms for use of feeds.

Incoming president Barack Obama is going to have to have a look at the TARP early on. There is still $350 billion left in the facility. There is a great deal of debate about whether Paulson has used the money correctly. Some analysts say he spent too much money dumping capital onto bank balance sheets and never bought toxic assets from financial firms like he said he would.

According to The Wall Street Journal, "While Treasury Secretary Henry Paulson has seized on equity investments in banks as Treasury's primary mechanism to help resolve the financial crisis, the Obama team is developing a broader approach that would likely incorporate multiple remedies." That would probably involve bring more direct help to mortgage holders. In principle that is a fine idea and it may silence some critics, but it won't work.

Pushing money to individual homeowners is a nearly impossible task to manage. It involves looking at hundreds of thousands of home loans, the incomes of their holders, and the falling value of their properties. Some yardstick has to be applied to determine who gets bailed out and who doesn't. In depressed markets like Florida or Michigan, should people get extra-special consideration?

Continue reading Obama looks at TARP

Obama looks at TARP originally appeared on BloggingStocks on Wed, 17 Dec 2008 10:55:00 EST. Please see our terms for use of feeds.

This post is part of our feature on Money Winners of 2008. See all 20.

Lots of people thought real estate was overpriced. Many worried that banks were giving out mortgages too cheap. But what did you do about it? (Either to help the situation or to make money.) Jeff Greene, a real estate mogul in California, actually found a way to bet against the subprime mortgage folly. He made $450 million -- at least that was the count earlier this year.

Well, he didn't just think of it on his own. He basically took the idea that his friend, hedge fund manager John Paulson, had. Paulson thought that, as an individual, Greene wouldn't be able to do this complex a transaction. According to the Wall Street Journal he even used special software so investors in a hedge fund Paulson created just to exploit the subprime crisis couldn't pass on his strategy.

How Greene and Paulson made money involves two financial terms you've probably had to learn this year and never want to hear again. Collateralized debt obligations (CDOs) are the way mortgages are packaged and sold to investors in various slices of risk. Credit default swaps are the holders of those investments insured themselves -- by buying what was like unregulated insurance from one another. The credit default swaps are what got so many big companies in trouble -- they had to pay up on investments that went bad. So Paulson shorted CDOs and bought some credit default swaps.

Continue reading Money winners of 2008: Jeff Greene shorted subprime

Money winners of 2008: Jeff Greene shorted subprime originally appeared on BloggingStocks on Mon, 15 Dec 2008 12:42:00 EST. Please see our terms for use of feeds.

One of the rules for the $700 billion bailout plan that Congress approved was that there would be a panel to monitor the use of the money. It appears that the group will issue a report that is relatively critical of how the cash was spent.

According to The Wall Street Journal, "The report isn't expected to contain any new findings but is expected to raise fresh questions about the program, which would further complicate the administration's deliberations over whether to ask Congress for the second half of the funds."

What is the value of the report? Probably not much. It is Monday morning quarterback stuff.

In what has been one of the great financial catastrophes of the last century the Treasury has had to do crisis management almost every day. The report will apparently ask why more money was not used to prevent foreclosures. The most logical answer is that helping individual homeowners is immensely complex and would take months given the millions of mortgages that are in default.

Paulson made a decision that the most important role for the first half of the $700 billion given to the Treasury to use should be put to work saving the banking system. Did that make sense? Imagine trying to save homes if large banks had failed? Imagine what would have happened to the stock market and confidence in the national credit system?

Was every penny of the bailout fund spent as best it could be? Maybe not, but it was close enough.

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

What did Paulson do wrong? originally appeared on BloggingStocks on Wed, 10 Dec 2008 10:33:00 EST. Please see our terms for use of feeds.

Continue reading Treasury says TARP is working, banks obligated to lend; so why aren't they?

Treasury says TARP is working, banks obligated to lend; so why aren't they? originally appeared on BloggingStocks on Fri, 05 Dec 2008 12:46:00 EST. Please see our terms for use of feeds.

From TheStreet.com Network

• For Banks, More Trouble Just Around the Bend
• Problem Bank List Balloons, FDIC Says

Continue reading Cramer on BloggingStocks: We need Sheila Bair

Cramer on BloggingStocks: We need Sheila Bair originally appeared on BloggingStocks on Thu, 04 Dec 2008 09:18:00 EST. Please see our terms for use of feeds.

We are unfortunately not privy to the backroom deals and promises that are passing between Treasury Secretary Henry Paulson and the honchos who are benefiting from the government's massive bailout. However, two things are becoming increasingly clear: first, the financial industry has not gotten the memo about changing their business practices, and, second, the $700 billion in tax money that is keeping these companies afloat is not finding its way down to the average citizen. The big bailout was originally sold as a desperate maneuver to keep Wall Street afloat. Paulson has indicated that these funds would enable lending companies to service their toxic debt and, in turn, continue lending. In this way, America would be able to count on the credit that kept it running; businesses would be able to meet their payrolls, people would be able to buy houses, and the world would continue to turn.

Instead, some banks seem to be going on a buying spree, snatching up smaller, less successful institutions while prices are low and the getting is good. Citigroup (NYSE: C), for example, used the Wall Street fire sale to make a bid for Wachovia and pick up Forum Financial, shortly before asking for a second huge bailout. Similarly, Bank of America (NYSE: BAC) has decided to take over Merrill Lynch. A clever MBA could, undoubtedly, filter these purchases through a secret capitalism decoder ring and come up with a logical reason for them, but one wonders how gobbling up companies (and their toxic debt) is likely to help Bank of America and Citigroup to stay afloat, much less enable them to extend money to consumers. It is becoming clearer and clearer that the huge influx of taxpayer money is less about saving consumers than it is about enabling big companies to get even bigger.

Continue reading Citigroup bailout sheds light on just what the taxpayers are buying

Citigroup bailout sheds light on just what the taxpayers are buying originally appeared on BloggingStocks on Sat, 29 Nov 2008 13:40:00 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.

Continue reading Should the U.S. consider a national, home mortgage foreclosure time-out?

Should the U.S. consider a national, home mortgage foreclosure time-out? originally appeared on BloggingStocks on Mon, 24 Nov 2008 09:27:00 EST. Please see our terms for use of feeds.

As Citigroup 's (NYSE: C) shares dropped, it was talking to Treasury and the Fed. That should not surprise anyone. The government knows a failure of Citi would damage the world financial system even further and kill consumer confidence in the U.S. banking system.

According to Reuters, "The bank has met with officials from the Federal Reserve and the U.S. Treasury Department in recent days."

The federal government has a number of options. The best is probably to put more money from the Paulson $700 billion bailout package into the bank. What would Citi need? Only its management and regulators know what its balance sheet looks like. Based on guarantees that FDIC might have made on the Wachovia buyout, the need at Citi could be $50 billion.

Cheap for keeping what was once the world's largest bank alive.

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

Citigroup talking to Treasury, Fed originally appeared on BloggingStocks on Sat, 22 Nov 2008 12:10:00 EST. Please see our terms for use of feeds.

Continue reading Should Obama name FDIC's Bair as a Special Advisor for Mortgage Policy?

Should Obama name FDIC's Bair as a Special Advisor for Mortgage Policy? originally appeared on BloggingStocks on Tue, 18 Nov 2008 17:14:00 EST. Please see our terms for use of feeds.

Nero was a Roman emperor who was rumored to have played a lyre in his palace in July 64 while Rome burned for six days. And to paraphrase Mark Twain, history may not be repeating itself now; but it sure is rhyming. The 30 developed economies are receding -- expected to shrink 0.3% in 2009. Meanwhile, in the U.S., foreclosures are up 25% since last year and Wal-Mart Stores, Inc. (NYSE: WMT), which was thought to be the place everyone would shop in a recession, now forecasts fourth quarter earnings per share to be as much as 7% lower than analysts expected. And the S&P 500 has lost 41.4% of its value in the last year.

So why does this feel like Nero's Rome? Two things: Hank Paulson -- who has consistently made confident predictions that later proved to be wrong -- has done so again. And, Washington, which was required by the terms of the $810 billion rescue plan to report on its progress after 30 days, has missed its deadline. As I posted yesterday, Paulson admitted that his plan to save the world by using reverse auctions to buy toxic waste was DOA. But the subtext of speech was that he does not have a clue about what to do -- and he has his eye on the exit door.

Meanwhile, a special inspector -- to be appointed by Bush -- and a Congressional Oversight Panel, which was supposed to check the dictatorial powers that Paulson originally asked for, has no staff members. This means that the taxpayers do not know exactly where the $290 billion that Treasury has committed so far has been spent. Simply put, the economy is getting worse, the program to restore it is rudderless, there is no public information on how the money has been spent, and nobody is in a position to provide that information.

It's not exactly a repeat of ancient Rome. While I doubt anyone in the White House knows how to play the lyre, the global economy is going up in flames.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book, You Can't Order Change: Lessons From Jim McNerney's Turnaround at Boeing, will be published by Portfolio on December 26, 2008. He has no financial interest in the securities mentioned.

Nero in charge as global economy burns originally appeared on BloggingStocks on Thu, 13 Nov 2008 08:45:00 EST. Please see our terms for use of feeds.