Posts Tagged ‘economy’

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Eric Cantor: Dems “Overreacting” To The Economic Crisis

Thursday, April 2nd, 2009

From Politico:
“GOP Whip Eric Cantor thinks his party can retake the House in next year’s midterm elections — and accused Democrats like Rahm Emanuel of “overreacting” to the economic crisis by embarking on a federal spending spree.”

DNC response from spokesman Hari Sevugan: “On the day we learned that jobless claims rose to their highest levels in 26 years, Eric Cantor’s charge that anyone is ‘overreacting’ to this economic crisis typifies the Republican just say ‘NO’ approach. Whether it’s because they are simply out of touch with the pain American families are feeling, or they understand but are choosing to play politics instead, the lack of urgency shown by the Republican party at this time of crisis is appalling.”

Full Article Here

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President Obama Open for Questions

Thursday, March 26th, 2009

From the White House:
We invite you to participate in our community-moderated online town hall. Submit your own question about the economy and vote on submissions from others. We also encourage you to include a link to a video of yourself asking your question (ideally 30 seconds or less), but text submissions are all you need. Come back on Thursday to watch the President answer some of the most popular submissions live at WhiteHouse.gov.

UPDATE: The online town hall will be at 11:30 AM Eastern, the voting will close at 9:30 AM.

http://www.whitehouse.gov/openforquestions/

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Economist Nouriel Roubini Applauds Sec. Geithner’s Toxic Asset Plan

Wednesday, March 25th, 2009

By Matthew Richardson and Nouriel Roubini:
For the economy to be viable, the financial system must be healthy. For this to occur, the system needs to be cleansed of its poorly performing loans and so-called toxic securities backed by loans. This way, once creditworthy institutions and individuals come to the market looking for capital to borrow, financial firms will be in a position to lend them money.

Secretary Timothy Geithner’s new toxic asset plan is a serious step in the right direction in that it creates a public-private partnership to buy the troubled assets of financial firms – in other words, to do the necessary cleansing. Up until now, with all the government bailouts, the financial system has been barely treading water. With this plan, it will still be a hard swim, but, at least, there is a path to shore.

More at NY Daily News

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An EVP Resigns from AIG

Wednesday, March 25th, 2009

The resignation letter comes from Jake DeSantis, an executive vice president of the American International Group’s financial products unit, to Edward M. Liddy, the chief executive of A.I.G. Below is the opening portion of the letter…

“DEAR Mr. Liddy,

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.
…”

Read the Full Letter Posted at NY Times

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Obama Administration Updating Regulations for the 21st Century

Tuesday, March 24th, 2009

From the NY Times:
The crisis surrounding the American International Group was a near-tragedy that underlines the need for broad new government authority to regulate or even take control of financial institutions other than banks, the government’s top fiscal officials told lawmakers on Tuesday.


Treasury Secretary Timothy F. Geithner said financial crises like those caused by the recklessness of A.I.G. “contain a basic and tragic unfairness — that those who were prudent and responsible in their personal and professional judgments are harmed by the actions of those who were less careful and less prudent.”

Read Full Article

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Media Matters Unveiling New Site: “Financial Media Matters”

Monday, March 23rd, 2009

From The Plum Line:
“The site, which will be announced this afternoon, reflects the sudden preoccupation that many on the left now have with the accuracy, balance, and fairness of financial coverage, now that the crisis has thrust all of our attention on the financial world. Witness the widespread liberal and public interest in the Rick Santelli rant on MSNBC and in Jon Stewart’s showdown with Jim Cramer.”

Media Matters Financial Site

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Thoughts on Treasury’s Private Partnership Investment Plan

Monday, March 23rd, 2009

I’ve pretty much agreed with those who have been critical of the way Tim Geithner has handled the AIG and bank bailouts in Henry Paulson-like fasion. We will have to give the time plan to determine whether it was good or not (it works if it works); but at first glance, Geithner’s plan seems to get “bad assets” off the books of banks at a price private investors are willing to pay for it.

Sample Investment Under the Legacy Loans Program

Step 1: If a bank has a pool of residential mortgages with $100 face value that it is seeking to divest, the bank would approach the FDIC.
Step 2: The FDIC would determine, according to the above process, that they would be willing to leverage the pool at a 6-to-1 debt-to-equity ratio.
Step 3: The pool would then be auctioned by the FDIC, with several private sector bidders submitting bids. The highest bid from the private sector – in this example, $84 – would be the winner and would form a Public-Private Investment Fund to purchase the pool of mortgages.
Step 4: Of this $84 purchase price, the FDIC would provide guarantees for $72 of financing, leaving $12 of equity.
Step 5: The Treasury would then provide 50% of the equity funding required on a side-by-side basis with the investor. In this example, Treasury would invest approximately $6, with the private investor contributing $6.
Step 6: The private investor would then manage the servicing of the asset pool and the timing of its disposition on an ongoing basis – using asset managers approved and subject to oversight by the FDIC.

There are many moving parts to the plan, but one of the important issues is whether the FDIC can properly determine the leveraging ratio for bad assets. One thing to note is that the FDIC has been getting a lot of practice in doing just that with the increasing rate of recent bank closings.

Downside – This may be the best available option, but taxpayers will be financing a significant portion of these “bad” bank assets for the next few years.

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Krugman: Treasury Plan Suggests Financial Crisis is Only a Confidence Problem

Saturday, March 21st, 2009

“The Geithner plan has now been leaked in detail. It’s exactly the plan that was widely analyzed — and found wanting — a couple of weeks ago. The zombie ideas have won.

The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system — that what we’re facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved.”

Read More Here

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