Troubled Asset Relief Program (TARP)
Where does all the bailout money go?
We are being robbed big-time, but you can’t say we haven’t been warned. Not after the release Tuesday of a scathing report by the Treasury Department’s special inspector general, who charged that the aptly named Troubled Asset Relief Fund bailout program is rife with mismanagement and potential for fraud. The IG’s office already has opened 20 criminal fraud investigations into the $700 billion program, which is now well on its way to a $3 trillion obligation, and the IG predicts many more are coming.” Huffington Poast 4/22/09
The Real Crime in the Bailouts — Naked CDS deals “The only person who used to be in government who has raised this issue recently is Eliot Spitzer. He said what I have been wondering for a long time now – do we even have to pay these things? Since they are simply gambling wins, if the counterparties who won the bets don’t get paid, nothing really happens. They didn’t really actually have anything on the line, so it’s not like they are going to suffer heavy losses. They are only going to suffer theoretical losses on money that never existed. Why is Tim Geithner still paying off these debts? If he doesn’t understand this phenomenon, he should be fired immediately. If he does understand it, and he thinks it is the obligation of the US taxpayer to pay off the gambling binges of the large financial institutions in the country, then I would seriously question his judgment, to say the least. Huffington Post 3/27/09
Hedge funds may benefit from government cash to AIG: report “AIG has put in escrow some money for at least one major bank, Deutsche Bank AG, whose hedge fund clients bet against the housing market, the paper said, citing a person familiar with the matter. The money will be released to the bank if mortgage defaults rise above a certain level, it said.” Reuters 3/18/09
AIG Suddenly Takes the Full Disclosure Route “U.S. Taxpayers will be thrilled to discover that of the $93.2 billion of their money spent to prevent financial collapse, over 70% went to bail out non-domestic banks. Another $12.1 billion was spent to bailout out municipalities under Guaranteed Investment Agreements, the main beneficiaries being California and Virginia, both receiving just north of $1 billion. In total, over $105 billion has been spent so far to bail out assorted entities that have been so far entangled in the AIG web.” Seeking Alpha 3/16/09
Who got AIG’s bailout billions? ” The Wall Street Journal reported on Friday that about $50 billion of more than $173 billion that the U.S. government has poured into American International Group Inc since last fall has been paid to at least two dozen U.S. and foreign financial institutions. The newspaper reported that some of the banks paid by AIG since the insurer started getting taxpayer funds were: Goldman Sachs Group Inc, Deutsche Bank AG, Merrill Lynch, Societe Generale, Calyon, Barclays Plc, Rabobank, Danske, HSBC, Royal Bank of Scotland, Banco Santander, Morgan Stanley, Wachovia, Bank of America, and Lloyds Banking Group.” Reuters 3/8/09
The TARP is a fiscal straightjacket “Without a sound medium-term fiscal framework, the stimulus package can easily do more harm than good, since the prospect of trillion-dollar-plus deficits as far as the eye can see will weigh heavily on the confidence of consumers and businesses, and thereby undermine even the short-term benefits of the stimulus package.” Financial Times 1/27/09
Where’d bailout dough go? Few strings attached to taxpayers’ billions The Associated Press contacted 21 banks that got at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what’s the plan for the rest? None of the banks provided specific answers. “We’re not providing dollar-in, dollar-out tracking,” said Barry Koling, a spokesman for Atlanta-based SunTrust Banks, which got $3.5 billion in taxpayer dollars. Some banks said they didn’t know where the money was going.” Seattle Times 11/23/08
Insurers eye small banks, TARP eligibility. In a bid to gain access to the government’s $700B rescue program, some U.S. life insurers are buying up tiny banks with the goal of becoming savings-and-loan holding companies eligible for TARP funds. In the last week alone, insurance firms including Lincoln National (LNC), Genworth Financial (GNW), Transamerica (AEG) and Hartford Financial Services (HIG) have all agreed to purchase savings-and-loans banks, though it is unclear whether insurers have received approval of government financing. Hartford’s purchase of Federal Trust Corp. is valued at $10M, and Hartford estimates it’s eligible for a federal infusion of $1.1B-$3.4B. Lincoln National is buying a savings-and-loan with just $7M in assets; a Lincoln spokeswoman said the company is likely eligible for up to $3B. Wall Street Journal 11/17/08
Dear Fed: What Do You Have To Hide? Bloomberg sues the Fed for refusing to disclose what sort of collateral they are lending against. I come at this from having worked in insurance for two decades. Insurers have to disclose every asset that they own in their Statutory filings. When I looked at a bank’s call report recently, I was surprised to see only summary data available. The insurance industry has high disclosure, and it hasn’t hurt them. Why should the Fed cower, and refuse to reveal what they are lending against? Five possibilities, and none of them good: Seeking Alpha 11/08/08
Banking On A Deal In a move that signals yet another turn in the government’s dramatic attempt to rescue the U.S. financial system and restart credit flows, the Treasury agreed to invest $7.7 billion in PNC Financial Services Group Inc. (PNC), which will use the lion’s share of those funds to buy regional rival National City Corp. (NCC). The deal to acquire Cleveland-based National City, valued at roughly $5.5 billion in stock and cash, confirms recent market speculation that banks receiving Treasury investments might use those funds to finance acquisitions rather than for direct lending.
Fannie, Freddie Jump on Grenade For anyone wondering where the billions of dollars in worthless mortgage-backed securities will wind up, look no further: The mirror….Fannie Mae (FNM) and Freddie Mac (FRE), the formerly quasi-public, now taxpayer-owned mortgage behemoths, are stealthily sopping up the worst of the structured mortgage debt Wall Street churned out during the boom. Minyanville 10/23/08
Roubini Ups Losses Estimate to 3T – Still Smaller Than the Rescue Package But the main point is this: His estimate of total credit-related losses have gone from 1 trillion to 2 trillion to his current estimate of 3 trillion. He’s double the worst estimates out there. As bad as that sounds, it is STILL smaller than the amount that global governments have pledged to their respective rescue plans. Seeking Alpha 10/15/08
Bailout won’t cure economic stress History tells 
us not to expect miracles overnight. After the last big U.S. bailout — the formation of the Resolution Trust Corp. in 1989 to stop the U.S. savings and loan crisis — it took a year for the stock market to hit bottom, two years for the economy and three years for the housing market, according to Merrill Lynch.” Associated Press 10/3/08
Have We Reached a Near Term Bottom? – Housing prices must continue to fall. If they do not, home inventories will remain high, the market for credit will not be allowed to clear, as banks delay writing down loans, and we could find ourselves in a Japan-style sclerotic environment. The problem is so large, the edifice is most likely to continue falling on itself. – Seeking Alpha 9/19/08
VIDEO: Bill Rhodes on what caused the financial crisis and how to fix it – About a Resolution Trust Corporation solution, as well as financial regulation, risk management, marking-to-market, and the future of independent broker-dealers. Financial Times 9/17/2008
FinancialEndTimes.com 