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Archive for the ‘bailout’ Category

Pennies from heaven: how the bailout worked

Posted by Charles II on December 3, 2010

Via Barry Ritholtz, you can find out how the October 2008 (Emergency Economic Stabilization Act which funded TARP) bailout money was used by the US Treasury here.

But the big news is what the Fed did, namely bail out the entire world. We only know about this thanks to the persistence of Senator Bernie Sanders in forcing a partial audit of the Fed through the Dodd-Frank legislation. Annie Lowrey, Slate:

The cache also shows that a much broader range of companies used the Fed facilities than previously imagined. For instance, the Fed, via its commercial paper facility, aided hog-builder Harley Davidson, Japanese carmaker Toyota, and construction equipment giant Caterpillar. It also helped a plethora of foreign banks, from the Swiss bank UBS to the government-owned Korean Development Bank.

Supersecret hedge funds also availed themselves of the Fed’s help. Indeed, firms like Magnetar—of the infamously skeezy Magnetar trade—borrowed billions from the government via the Term Asset-Backed Securities Loan Facility. The main purpose of TALF was to help ease the market for assets backed by things like student loans and credit cards, with the goal of restoring the flow of credit to consumers. Now we know that TALF also provided low-cost loans to firms like Magnetar and Pacific Investment Management Co., or PIMCO.

Luca Di Leo and Maya Jackson Randall of the WSJ add some detail on how we bailed out foreign institutions (if “foreign” has any meaning in globalized finance):

When Lehman Brothers failed Sept. 15, 2008, borrowers started to line up for the PDCF. That day, the single-biggest loan went to Barclays Capital, the investment bank of U.K. lender Barclays PLC that eventually bought a big piece of Lehman out of bankruptcy. Several foreign banks benefited from the program, including Deutsche Bank, BNP Paribas and UBS. …

Companies outside the traditional banking world also sold commercial paper. Apart from banks, the Fed also bought short-term debt from McDonalds Corp., Verizon Communications Inc., Harley-Davidson Inc., and state-owned Korea Development Bank….

Some of the largest players in the bond market, such as Allianz SE’s Pacific Investment Management Co., also used the Fed’s programs. California-based Pimco borrowed $7.1 billion from the Fed’s Term Asset-Backed Securities Loan Facility, or TALF. …

The ECB used this facility 271 times from December 2007, with loans picking up again this year following Europe’s debt crisis, in a reminder that the effects of the financial crisis are still being felt.

Lowrey links to Caroline Salas and Matthew Leising at Bloomberg on the key question of what the Fed got as collateral. The Fed refused to supply information on the specific securities that were supplied, which means that we do not get a meaningful audit of the Fed:

It is “specifically impossible” to know how much risk taxpayers were taking by looking at pools of collateral grouped by asset class and rating, said Sylvain Raynes, a principal at R&R Consulting in New York and co-author of “Elements of Structured Finance,” published in May by Oxford University Press.

“I need to know the individual composition because a $2 billion pool can be one asset of $2 billion, which would be very risky, or 2,000 assets of $1 million each, and that’s not risky at all,” Raynes said. “The spirit of Dodd-Frank was not respected, and they used the vagueness in the wording of the law to weasel out of fulfilling their duty to the American people.”

With the change in power in Washington, it’s unlikely that the Congress will force the rest of the disclosure necessary to understand just how much corporate socialism is involved.

Posted in bailout, Congress, financial crisis, mortgage crisis | Comments Off on Pennies from heaven: how the bailout worked

The Gilded Age Redux: Woman Cleans Home Of Banker Who Evicted Her

Posted by Phoenix Woman on March 4, 2010

I kid thee not:

At first, Minneapolis janitor Rosalina Gomez said she didn’t realize she was cleaning up after the CEO of the bank that bought her foreclosed home in a September sheriff’s sale.

“At the beginning I didn’t know he was the guy,” said Gomez through an interpreter in an interview with HuffPost. “I didn’t know the relationship between my house and him. I saw him one time but never talked to him.”

The guy is Richard Davis, CEO of Minneapolis-based US Bank, the nation’s sixth-largest bank and recipient of $6.6 billion in TARP bailout funds. On Feb. 28, Davis was set to receive an “Executive of the Year” award from the Minneapolis/St. Paul Business Journal at a banquet — 11 days before Gomez and her family had to comply with an eviction order.

The Service Employees International Union, of which Gomez is a member, could not resist the opportunity to draw attention to the soon-to-be-evicted woman cleaning up after one of the bankers taking her home away (US Bank is the trustee; Chase is the mortgage servicer). The SEIU began agitating for Gomez, an effort which dovetailed with a union campaign on behalf of area janitors fighting for a better contract.

This story has a somewhat happier ending: The publicity drawn to Gomez’ plight got the bank to postpone the eviction for 60 days while she and Chase work out a deal.

Posted in bailout, banking | Comments Off on The Gilded Age Redux: Woman Cleans Home Of Banker Who Evicted Her

US Health Insurance Industry’s Balance Sheets: “Goodwill” Doesn’t Feed The Bulldog

Posted by Phoenix Woman on October 6, 2009

FDL’s Masaccio points out something rather interesting:

Take a look at this chart.

Company Goodwill and Intangibles
as % ofShareholders Equity
UnitedHealth Group 106%
Wellpoint 99%
Cigna 78%
Aetna 64%

This table tells us that if the companies were liquidated at prices equal to the book value of the assets, UnitedHealth and Wellpoint would have little or nothing for shareholders, and Cigna and Aetna would have little.

How did “goodwill” come to take up so much space on these balance sheets? In the case of UnitedHealth, it was by buying a company for more than its stated book value. That extra amount got turned into “goodwill” for UnitedHealth.

In other words, there are a lot of big health insurance companies out there that are teetering and are looking for a bailout — and a MaxTax plan that provides mandates but no public option is just what they want, whereas a plan with a genuine and robust public option really would be a direct threat to their continued existence.

Posted in bailout, big money, capitalism as cancer, health care | 4 Comments »

Warren Buffett: Obama Is On The Right Track

Posted by Phoenix Woman on May 3, 2009

As noted here.

Something you wouldn’t know from most of the news coverage lately.

Posted in bailout, big money | 4 Comments »

Somehow This Doesn’t Surprise Me

Posted by Phoenix Woman on April 5, 2009

Oh noes! Somebody (William Black) went on Bill Moyers and said that Obama is breaking the law by not nationalizing stricken banks!

Um, except that he isn’t:

Read the rest of this entry »

Posted in bailout, banking, big money, mythmaking, President Obama | 10 Comments »

Roubini, Richardson: Give Credit To Geithner’s Plan

Posted by Phoenix Woman on March 26, 2009

Surprise! Doctor Doom actually likes most of the Geithner Plan:

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.

Posted in bailout, banking, economy | 16 Comments »

This ‘n’ That

Posted by Phoenix Woman on March 25, 2009

Back when the whole teetering credit tower toppled last fall, there were people on all sides of the political spectrum saying that there was no need to bail out the banks because credit wasn’t tightening up at all. For instance, there was David Cay Johnston:

If you look around, you’ll notice that banks are still making ordinary loans to ordinary businesses. Your mailbox is still full of proposals to sell you credit cards and extend you debt. The Internet still has ads for these very toxic mortgages that are at the heart of this. They’re being advertised all over the Internet.

Except that the banks weren’t lending, and in many cases still aren’t lending, not unless they’re credit unions. I know a couple that wants to refinance but can’t because the bank won’t let them — and their credit is perfect. And I don’t know about you, but I hadn’t seen those internet ads in months, up until this week. As for the snail mail ads, I used to get three a day. Now it’s more like three a week. Maybe.

Posted in bailout, banking | 1 Comment »

Friday Morning News Roundup

Posted by Phoenix Woman on March 20, 2009

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Lawrence Wilkerson, who served under Colin Powell at the State Department before Powell was purged for not being pro-PNAC enough:

Many detainees locked up at Guantanamo were innocent men swept up by U.S. forces unable to distinguish enemies from noncombatants, a former Bush administration official said Thursday. “There are still innocent people there,” Lawrence B. Wilkerson, a Republican who was chief of staff to then-Secretary of State Colin Powell, told The Associated Press. “Some have been there six or seven years.”

He stepped forward because he was sickened by Dick Cheney’s trashing Obama earlier this week. But of course, this was ignored in favor of AIG.

— Speaking of which, Nate Silver has a good piece that cuts through the noise and screeching on the subject.

— President Obama sez ‘hi!’ to hybrids. Specifically, the next generation of plug-in hybrids, especially the SUVs.

The First Lady is growing an organic garden near where her daughters play:

Twenty-three fifth graders from Bancroft Elementary School in Washington will help her dig up the soil for the 1,100-square-foot plot in a spot visible to passers-by on E Street. (It’s just below the Obama girls’ swing set.) Students from the school, which has had a garden since 2001, will also help plant, harvest and cook the vegetables, berries and herbs.

[…]

The Clintons grew some vegetables in pots on the roof of the White House. But the Obamas’ garden will have 55 varieties of vegetables — from a wish list of the kitchen staff — grown from organic seedlings started at the executive mansion’s greenhouses.

The Obamas will feed their love of Mexican food with cilantro, tomatilloes and hot peppers. Lettuces will include red romaine, green oak leaf, butterhead, red leaf and galactic. There will be spinach, chard, collards and black kale. For desserts, there will be a patch of berries. And herbs will include some more unusual varieties, like anise hyssop and Thai basil. A White House carpenter who is a beekeeper will tend two hives for honey.

Total cost for the seeds, mulch, etc., is $200.

The plots will be in raised beds fertilized with White House compost, crab meal from the Chesapeake Bay, lime and green sand. Ladybugs and praying mantises will help control harmful bugs.

Cristeta Comerford, the White House’s executive chef, is eager to plan menus around the garden, and Bill Yosses, the pastry chef, is looking forward to berry season.

Sam Kass, an assistant White House chef who prepared healthful meals for the Obama family in Chicago and is an advocate of local food, will oversee the garden. The White House grounds crew and kitchen staff will do most of the work, but other White House staff members have volunteered.

Now that’s gardening we can believe in!

Posted in automobiles, bailout, banking, big money, Dick Cheney, economy, energy, environment, food, gardening, Iraq war, terrorism, torture | 3 Comments »

Fascinating

Posted by Phoenix Woman on March 19, 2009

One funny thing about the AIG hoo-ha — It’s seriously thrown the Republicans off their message discipline:

The Associated Press reports that House GOP leadership has decided to oppose [a Democratic bill to heavily tax the AIG bonuses]….

[…]

But not all Republicans are aligned with Boehner and Pence, Politico reports.

[A] senior GOP aide said the conference would likely split on the vote, with conservative members of the Republican Study Group opposing the tax and members in more competitive districts casting their lot with Democrats.
Boehner, the aide said, told members to “vote their conscience” at a meeting this morning and declared that the leadership would “not whip the bill.”

Media Matters notes that conservative commentators are out of step with the Republican party on the whole affair. Rush Limbaugh, Glenn Beck, and Sean Hannity are defending the AIG executives while GOP leaders in Congress denounce them.

The bill passed the House easily, by the way, with 85 Republicans — almost exactly half the GOP House membership — voting for it.

Wow. Movement conservatives’ heads must be spinning right now.

Posted in 111th Congress, bailout, banking, big money, Congress, Democrats, Republicans, taxes | 2 Comments »

A Possible Turnaround?

Posted by Phoenix Woman on March 18, 2009

While everyone’s looking at the bright shiny object called AIG, I’ve pulled my gaze back a touch to see some other things in my peripherial vision:

Citigroup, Bank of America and Chase all reported last week that they’d been operating in the black since the start of the year. Granted, that’s only two months, but it’s two months more than they’d managed at the end of the year.

Housing starts have risen slightly, further boosting a stock market that has gained several hundred points in the last week.

I’m touching wood as I type this, but we may finally be seeing some beneficial results from the various bailouts and the planned stimulus spending.

Posted in bailout, banking, big money, economy | 9 Comments »

 
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