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Treasury Department Releases Details on Public Private Partnership Investment Program

Mon, 23 Mar 2009 16:52:54 +0000

From the Department of Treausury:
The Financial Stability Plan – Progress So Far: Over the past six weeks, the Treasury Department has implemented a series of initiatives as part of its Financial Stability Plan that – alongside the American Recovery and Reinvestment Act – lay the foundations for economic recovery:

Efforts to Improve Affordability for Responsible Homeowners: Treasury has implemented programs to allow families to save on their mortgage payments by refinancing, assist responsible homeowners in avoiding foreclosure through a loan modification plan, and, alongside the Federal Reserve, help bring mortgage interest rates down to near historic lows. This past month, the 30% increase in mortgage refinancing demonstrated that working families are benefiting from the savings due to these lower rates.
Consumer and Business Lending Initiative to Unlock Frozen Credit Markets: Treasury and the Federal Reserve are expanding the TALF in conjunction with the Federal Reserve to jumpstart the secondary markets that support consumer and business lending. Last week, Treasury announced its plans to purchase up to $15 billion in securities backed by Small Business Administration loans.
Capital Assistance Program: Treasury has also launched a new capital program, including a forward-looking capital assessment undertaken by bank supervisors to ensure that banks have the capital they need in the event of a worse-than-expected recession. If banks are confident that they will have sufficient capital to weather a severe economic storm, they are more likely to lend now – making it less likely that a more serious downturn will occur.

Read From the Department of Treasury

AIG

Wed, 18 Mar 2009 13:42:57 +0000

AIG Financial Products President Joseph Cassano Barred Auditor From Valuing Credit Default Swaps

Obama Administration: We Didn’t Find Out About AIG Bonuses Until This Month – Sources in the Obama administration Tuesday said that despite previous media reports administration officials did not know until a couple weeks ago that the officials of the controversial AIG Financial Product Division were set to receive $165 million in bonuses on March 13.

Wyden: My Bill Could Have Prevented AIG Mess – Senator Ron Wyden said on Tuesday that the furor surrounding AIG’s bonus payments could have been avoided had the Obama White House and members of Congress simply backed legislation that he and Sen. Olympia Snowe introduced more than a month ago.

AIG staff: We deserve this money – AIG’s new management team last year proposed that its employees give up their “retention” bonuses, or at least reduce them. The response from the 370 or so employees set to rake in $450 million in bonuses through 2010? Take a hike.

How the Economic Crisis Will Change America

Wed, 18 Feb 2009 22:24:25 +0000

The crash of 2008 continues to reverberate loudly nationwide—destroying jobs, bankrupting businesses, and displacing homeowners. But already, it has damaged some places much more severely than others. On the other side of the crisis, America’s economic landscape will look very different than it does today. What fate will the coming years hold for New York, Charlotte, Detroit, Las Vegas? Will the suburbs be ineffably changed? Which cities and regions can come back strong? And which will never come back at all?

Full Article Here

Merrill’s Other Big Payout

Mon, 26 Jan 2009 15:03:32 +0000

Despite $15 billion in losses, former Merrill Lynch CEO John Thain approved $4 billion in bonuses for top executives and $565 million in dividends to shareholders. All this happened at a time when the company should have been “building up cash.”

From Business Week:
“On Nov. 13, just three weeks before Merrill shareholders voted to approve the merger with BofA, Merrill’s former board approved the payment of 35 cent-a-share dividend to all common stockholders. The payout drained another $565 million from Merrill’s coffers at a time when the firm should have been building up cash, instead of spreading it around.

Now sure, one could argue that if Merrill had slashed the dividend to the bone, the brokerage’s stockholders may not have voted for the merger with BofA. But Merrill’s dividend payout came just weeks after Bofa announced on Oct. 6 it was slashing its dividend in half to 32 cents-a-share–a move the bank said would save it some $1.4 billion in cash each quarter. (The bank has since cut the dividend to a penny-a-share).”

To Bail-Out or Not To Bail-Out….

Thu, 04 Dec 2008 17:02:58 +0000

The Congress voted quickly to provide a bail-out for Wall Street firms and has no real oversight of where/how the money is spent, but the same congress is extremely slow to provide money for auto manufacturers. I’m convinced this is due to a few reasons:

1. We and Congress understand the problems of the auto industry better than the financial crisis created by Wall Street and mortgage banks. We’ve seen just how negligent the Detroit executives have been in making a profit compared to their competition (Toyota and Honda).

2. The financial bail-out was sold as something that was not only good for “Wall Street”, but necessary for “Main Street”. In addition, we were made to feel that we actually had a part in causing the financial crisis by buying homes we couldn’t afford – even though the problem was mostly caused by lack of regulation of the financial industry. However, with the failing auto industry, we and congress act as if it’s not a “crisis”.

Sure, there are more reasons for why the auto bail-out feels different than the financial bail-out, but I think the biggest reason is that no one (even now) really has a grasp of how expansive the mortgage/financial crisis actually is (or will be). Therefore, we are willing to give Henry Paulson and Wall Street’s whatever they ask for to “solve” the crisis for us – even though this is the same group that got us in this mess.

Sorry, Detroit. It seems like congress and most of the public are just tired of hearing about problems in your industry and we’ve had all the “crisis” we can stand.

Wall Street vs Detroit Bail-Out: [Video]

Auto Executives Request Bail-Out Again: [Video]

GM CFO Against Bankruptcy: [Video]

“The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too”

Fri, 14 Nov 2008 15:00:09 +0000

From the Author James K. Galbraith:

Today, the signature of modern American capitalism is neither benign competition, nor class struggle, nor an inclusive middle-class utopia. Instead, predation has become the dominant feature—a system wherein the rich have come to feast on decaying systems built for the middle class. The predatory class is not the whole of the wealthy; it may be opposed by many others of similar wealth. But it is the defining feature, the leading force. And its agents are in full control of the government under which we live.

Our rulers deliver favors to their clients. These range from Native American casino operators, to Appalachian coal companies, to Saipan sweatshop operators, to the would-be oil field operators of Iraq. They include the misanthropes who led the campaign to abolish the estate tax; Charles Schwab, who suggested the dividend tax cut of 2003; the “Benedict Arnold” companies who move their taxable income offshore; and the financial institutions behind last year’s bankruptcy bill. Everywhere you look, public decisions yield gains to specific private entities.

For in a predatory regime, nothing is done for public reasons. Indeed, the men in charge do not recognize that “public purposes” exist. They have friends, and enemies, and as for the rest—we’re the prey. Hurricane Katrina illustrated this perfectly, as Halliburton scooped up contracts and Bush hamstrung Kathleen Blanco, the Democratic governor of Louisiana. The population of New Orleans was, at best, an afterthought; once dispersed, it was quickly forgotten.

[Video]

James K. Galbraith teaches economics at the Lyndon B. Johnson School of Public Affairs at the University of Texas-Austin. He previously served in several positions on the staff of the U.S. Congress, including executive director of the Joint Economic Committee.

PIMCO’s Bill Gross

Thu, 23 Oct 2008 20:04:50 +0000

Bill Gross is the Managing Director of the world’s largest bond fund. Gross explains that what the government has done to tackle the financial crisis has been too ad hoc and too late. He also says capitalism, as we’ve known it for the past 30 years, has changed forever.

Gross has offered to help the Federal Treasury Department value the mortgages and sub-prime assets it has been appoved to purchase through the recent bailout package – FOR FREE. As far as I know, he has not been contacted by the Treasury.

For PIMCO, a company he founded, he manages over $720 billion in assets. Bill Gross may be able to do a better job than all the ex-Goldman Sachs executives the Treasury department has been bringing in to determine which assets get purchased with the bailout money.

Nothing to Fear but McFear Itself

Greenspan Tells Congress He Is Shocked By Credit Crisis

Thu, 23 Oct 2008 15:39:27 +0000

Greenspan Calls Financial Crisis A ‘Credit Tsunami’

[Greenspan] said he and others who believed lending institutions would do a good job of protecting their shareholders are in a “state of shocked disbelief.” Greenspan also blamed the problems on heavy demand for securities backed by subprime mortgages by investors who did not worry that the boom in home prices might come to a crashing halt.

“Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment,” Greenspan said. “Fearful American households are attempting to adjust, as best they can, to a rapid contraction in credit availability, threats to retirement funds and increased job insecurity.”

He said a necessary condition for the crisis to end will be a stabilization in home prices, but he said that is not likely to occur for “many months in the future.”