Archive for the ‘Bank of America’ Category

Obama Spending $1 Billion an Hour of Borrowed Money in First 50 Days

March 11, 2009

“In just 50 days, Congress has voted to spend about $1.2 trillion between the Stimulus and the Omnibus,” Senate Minority Leader Mitch McConnell (R-Ky.) said. “To put that in perspective, that’s about $24 billion a day, or about $1 billion an hour—most of it borrowed. There’s simply no question: government spending has spun out of control.”

And, sadly, the economy has not shown new signs of life…..

On Obama:

“No one wants him to fail,” McConnell, 67, said in an interview. “But saying ‘no’ to bad policy is not saying ‘no’ to everything.”

*****************

Senate Minority Leader Mitch McConnell (R-Ky.) has come up with a vivid new way to express his contention that the nation is spending way too much money it doesn’t have.

McConnell includes the tweaks in his opening remarks on the Senate floor on the 51st day that President Obama has been in office.

“In just 50 days, Congress has voted to spend about $1.2 trillion between the Stimulus and the Omnibus,” McConnell says. “To put that in perspective, that’s about $24 billion a day, or about $1 billion an hour—most of it borrowed. There’s simply no question: government spending has spun out of control.”

From Politico:
http://www.politico.com/new
s/stories/0309/19884.html

and
http://news.yahoo.com/s/bloom
berg/20090311/pl_bloomberg
/a9ygbyjyi4dq

And where has the Bank Bailout (TARP) money gone?
.
Ask Cleveland Democratic Rep. Dennis Kucinich.

Kucinich staffers questioned the propriety of an $8 billion Citigroup Inc. loan to Dubai, a $7 billion Bank of America investment in China Construction Bank Corp., and a $1 billion investment in India by J.P. Morgan. The three financial institutions got a total of $120 billion in tax dollars through the bailout program.

Although the transactions are not illegal,  Kucinich questioned the wisdom of directing money to foreign governments rather than the domestic economy.

“How does a multibillion financing deal to Dubai ease the liquidity crisis in the United States of America?” Kucinich asked at the subcommittee hearing. “What about other kinds of uses of funds: corporate spending on lavish parties, the continuation of contractual agreements to pay for naming rights on professional sports stadiums, corporate sporting event sponsorships?”

The memo also cited “significant shortcomings” in Treasury Department oversight over money dispersed through TARP, and claimed the department hasn’t questioned any TARP recipient about its use of the money.

Nancy Pelosi is already saying the nation will need another stimulus bill before we get out of this recession….

The $787 billion economic-stimulus plan was followed by today’s omnibus for $410 billion….

The interest payment on the debt from the stimulus and the omnibus will be about $500 billion…..

Elect me after I promised to end earmarks and “business as usual.”  Priceless?  Hardly.  Hypocracy.  Much of the price will be paid by your children and grandchildren.  John McCain calls that “generational theft.”  Not “priceless.”

Related:
President may Ask For “Global Bailout”
Obama, Geithner: recession requires global action 

Even Democrats Showing Signs Of Economic Despair, Worry at White House Inertia

http://michellemalkin.com/2009/03/1
1/earmark-zilla-futuregen-boondoggle-
grows-even-bigger/

http://giovanniworld.wordpress.com
/2009/03/11/howard-fineman-grows-up/

Hypocracy President Signs Omnibus, 9,000 Earmarks, Claims “Honest Budget”

U.S. Losses May Reach $3.6 Trillion; Banking System “Effectively Insolvent”

January 21, 2009

U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis.

By Henry Meyer and Ayesha Daya
Bloomberg

“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.”

Losses and writedowns at financial companies worldwide have risen to more than $1 trillion since the U.S. subprime mortgage market collapsed in 2007, according to data compiled by Bloomberg.

President Barack Obama will have to use as much as $1 trillion of public funds to shore up the capitalization of the banking sector, following the $350 billion injection by the Bush administration, Roubini told Bloomberg News. Congress last year approved a $700 billion rescue fund, of which half remains to be disbursed.

Bank of America Corp., the largest U.S. bank by assets, posted a quarterly loss of $1.79 billion last week, its first since 1991, and received $138 billion in emergency government funds. Citigroup Inc. posted an $8.29 billion fourth-quarter loss, completing its worst year, and plans to split in two under Chief Executive Officer Vikram Pandit’s plan to rebuild a capital base eroded by the credit crisis.

‘Bankrupt’ System

“The problems of Citi, Bank of America and others suggest the system is bankrupt,” Roubini said. “In Europe, it’s the same thing.”

Stocks in Europe, Canada and Brazil dropped yesterday on speculation government efforts to shore up the financial industry will fail to stem the deepening global recession. The U.K.’s Royal Bank of Scotland Group Plc said it expects to post a loss of as much as 28 billion pounds ($41 billion) for 2008 and the government got ready to raise its stake in the lender.

Oil prices will trade between $30 and $40 a barrel all year, Roubini predicted.

“I see commodities falling overall another 15-20 percent,” Roubini said. “This outlook for commodity prices is beneficial for oil importers, it’s going to imply that economic recovery might occur faster, but from the point of view of oil exporters, this will be very negative.”

Oil has tumbled 77 percent from its July high of $147.27 as the global economy sinks into recession, straining the budgets of crude exporters. Saudi Arabia, Oman and Dubai, the second- largest sheikdom in the United Arab Emirates, have said they will post budget deficits this year.

Crude oil for February delivery fell to $32.70, down 10.4 percent from last week’s close and the lowest since Dec. 19, on the New York Mercantile Exchange today. The contract traded at $33.37 a barrel at 10:45 a.m. London time.

Financial Crisis “Far From Over”

January 21, 2009

Our global financial crisis is a long way from over.

If you feel the need to hang a bunch of investment bankers, Wall Street types, lawyers and CEOs, you are likely having a “normal” reaction to reality.

But we still need to get behind the wheel and solve our economic ills.  And, in this commentators mind, a bunch of government spending isn’t the cure (it never has sufficed before).

But there still should be justice for the guilty.  Didn’t Enron’s Key Lay get the electric chair?
.
Get the rope.  Get Clint Eastwood.  Then let’s get Madoff!

But the problems have to be solved.  Bailouts of banks buys the mortgages and other debt that has lost value, little value and nobody will buy.  So the U.S. has to buy this debt.

There are also some 5 million “home owners” that will default on their morgages unless they get relief.

Accused swindler Bernard Madoff exits the Manhattan federal ... 
Accused swindler Bernard Madoff exits the Manhattan federal court house in New York January 14, 2009.(Brendan McDermid/Reuters)

The truth is, there may be some jail time passed out but the real problem is systemic which needs a lot of long-term fixing….

Headlines from London January 21, 2009:

“Banking Crisis May Last a Decade”

“Only Two London-Listed Banks By End of 2009”
…the government is now the largest, or only, shareholder in Lloyds/HBOS, RBS and Northern Rock and it seems highly likely that HSBC and Standard Chartered will be the only UK-quoted bank shares by the end of 2009.
http://www.telegraph.co.uk/finance/personalfinance/inv
esting/shares/4298704/Fundamentalist-View-There-wil
l-be-only-two-London-listed-banks-left-by-the-end-of-2009.html

*********************

By Philip Johnston
Telegraph (London)

Before the internet age, it was a rite of passage, a feeling that you had finally grown up and were considered responsible and trustworthy. As children, many of us might have had savings accounts or a few pounds in a building society deposited by an ageing aunt.

But to get one’s first cheque book was something special. Mine had the words National Westminster Bank written on the front, an imprimatur that could hardly have sounded more rock solid and British to the core, a guarantee of probity and quiet competence.

In those days, banks were forbidding places; there were no open plan offices. A visit to the bank manager, especially for an impecunious student trying to explain a £20 overdraft, was a terrifying experience conducted in a sternly avuncular manner from behind a large desk.

We are right to ben angry with the bankers

Fred Goodwin, former chief executive, Royal Bank of Scotland Photo: REUTERS

We all knew that such a world had disappeared. But it was none the less astonishing to wake on Monday morning to discover that the Royal Bank of Scotland – my bank, or at least the NatWest bit of it – had posted the biggest loss in British corporate history.

Nor did it take long for the shock to give way to fury. Charles Dickens captured the feeling well after the collapse of Merdle’s bank in Little Dorrit: “The air was laden with a heavy muttering of the name of Merdle, coupled with every form of execration.”

Well, there were a few execrations in my own household and doubtless in many others across the country. Both curses and questions. How could this have happened?

How is it possible to rack up a loss of £28 billion and yet be worth just £8 billion?

What happened to the RBS share of the £37 billion shelled out by taxpayers last October to recapitalise the banking system? What possessed the executives of RBS to buy a Dutch financial institution for way over the odds even as the Northern Rock fiasco was unfolding?

Beyond the sheer incredulity, there is anger that the people responsible have cushioned themselves financially against the privations that their recklessness will induce in millions of others.

The people at the top may lose their jobs, but they have already paid themselves so much in bonuses and struck such lucrative pension deals that they can retire in luxury while the rest of us face penury.

Extraordinarily, the vast bonuses were paid for what at the time was hailed as success but now turns out to be abject failure. Do they get returned, along with the knighthoods and gongs?

For those of us who did not know what a derivative was until a few months ago and had only a vague idea that Sir Fred Goodwin was “something in the City”, these are revelatory times.

It was evident from the steady flow of letters offering to lend money and urging us to take out new credit cards (all of which went into the bin in our house) that the banks were on a credit binge and that many people were being tempted to join in.

But surely, we all thought, they must know what they are doing. Even the near-collapse of Northern Rock after the first run on a bank since the mid-19th century, seemed like an isolated example of a badly run institution that had been led to the edge by incompetent and foolhardy executives and had to be rescued by the Government.

At the time, some cynical observers suggested that if it had been Southern Rock based in Guildford, it would have been allowed to go to the wall. But it was a big employer and an iconic institution in Labour’s north-east heartland, so it had to be saved. But at least it was one-off, wasn’t it? The other banks could not possibly be in the same leaky boat.

The discovery that they were sinking too has been more than a shock; it has been a betrayal. Their recklessness has bordered on the criminal. One figure from the Bank of England’s financial stability report last October exemplifies the enormity of their folly. In 2000, the amount of money held on deposit in British banks and the amount they were lending was roughly comparable.

Last year, they were lending £700 billion more than they were receiving. This was the mother of all bubbles, yet the bank bosses kept inflating it, egged on by the Government, the Bank of England, the so-called regulators and, let’s be frank, by those of us who borrowed way beyond our means.

In its report, the Bank said: “The seeds of this boom can be traced back to the development of financial and trade imbalances among the major economies over the past decade. Increased borrowing in a number of developed countries was in part financed with inflows of foreign capital, leading to greater integration in international capital markets. Benign economic conditions helped anchor expectations of continued stability. This, along with rising asset prices and low global real interest rates, boosted the demand for and supply of credit in a number of developed economies.

It added: “Over time, banks took on progressively more credit risk by lending to, for example, households with high loan to income ratios, leveraged buy-out firms and, in the United States, to the sub-prime sector.”

Read the rest:
http://www.telegraph.co.uk/finance/financetop
ics/financialcrisis/4301285/We-have-every-ri
ght-to-be-angry-with-the-bankers.html

Worst U.S. Stocks Slide in Inauguration Day History

January 21, 2009

U.S. stocks sank, sending the Dow Jones Industrial Average to its worst Inauguration Day decline, as speculation banks must raise more capital sent financial shares to an almost 14-year low.

State Street Corp., the largest money manager for institutions, tumbled 59 percent after unrealized bond losses almost doubled. Wells Fargo & Co. and Bank of America Corp. slumped more than 23 percent on an analyst’s prediction that they’ll need to take steps to shore up their balance sheets. The Dow’s 4 percent slide was the most on an Inauguration Day in the measure’s 112-year history, according to data compiled by Bloomberg and the Stock Trader’s Almanac.

“All the banks are going to have to recapitalize,” said Greg Woodard, portfolio strategist at Manning & Napier Advisors Inc., which manages $16 billion in Fairport, New York. “That’s not done. That’s in front of them, and we don’t want to try to get in front of that trade.”

The S&P 500 plunged 5.3 percent to 805.22. The S&P 500 Financials Index fell 17 percent to below its lowest closing level since March 1995 as concern European banks need more capital also weighed on the group. The Dow average slid 332.13 points to 7,949.09. Both the Dow and S&P 500 retreated to two- month lows.

The S&P 500 is off to its worst start to a year, shattering the biggest rally since World War II, as analysts cut earnings estimates by a record 83 percentage points and companies signal worse to come.

Bloomberg

A paedestrian passes before a share prices board which has news ... 
A paedestrian passes before a share prices board which has news pictures of new US President Barack Obama in Tokyo on January 21. Asian stocks fell Wednesday after a plunge on Wall Street, where financial fears eclipsed hope that US President Barack Obama will move quickly to resuscitate the stricken economy.(AFP/Yoshikazu Tsuno)

The S&P 500 is down 11 percent in the first 12 trading days of 2009, exceeding last year’s 9.2 percent drop, according to data compiled by Bloomberg going back to 1928. The decline helped erase more than two-thirds of a 24 percent rally since Nov. 20 as optimism that government spending would revive the economy evaporated.

‘Effectively Insolvent’

U.S. financial losses from the credit crisis may reach $3.6 trillion, according to New York University Professor Nouriel Roubini, who predicted last year’s economic and stock-market meltdowns.

“If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion,” Roubini said at a conference in Dubai today. “This is a systemic banking crisis.”

Europe’s Dow Jones Stoxx 600 Index retreated 2.1 percent today, led by banks and technology companies. It fell almost 2 percent yesterday after Royal Bank of Scotland Group Plc forecast the biggest-ever loss by a U.K. company. The MSCI Asia Pacific Index retreated 2.1 percent today.

Obama Sworn In

Barack Obama became the 44th U.S. president today, inheriting the most severe economic crisis since Franklin D. Roosevelt was sworn in 76 years ago. The turmoil has dragged the world’s largest economies into recession, caused more than $1 trillion of losses at financial institutions and prompted a sell-off in global stock markets.

Treasuries fell for a second day on speculation Obama will sell record amounts of debt to battle the recession. The dollar strengthened for a second day against the euro.

State Street lost $21.46 to $14.89 for the biggest drop in the S&P 500 and the stock’s steepest tumble since at least 1984. Unrealized losses on fixed-income investments rose to $6.3 billion at Dec. 31 from $3.3 billion at Sept. 30, the company said. Unrealized losses on assets held in conduits increased to $3.6 billion from $2.2 billion.

Bank of New York Mellon Corp., the world’s largest custodian of financial assets, fell 17 percent to $19, its lowest closing price since 1997.

Financials Tumble

Financial companies posted the biggest drop among the S&P 500’s 10 main industry groups as all 81 shares fell.

Wells Fargo, the largest bank on the U.S. West Coast, slid 24 percent to $14.23. Friedman Billings Ramsey Group Inc. analyst Paul Miller lowered his earnings estimates and price target, in addition to predicting a dividend cut.

Bank of America, the biggest U.S. lender by assets, fell the most in the Dow average, sliding 29 percent to $5.10. FBR’s Miller estimated Bank of America needs at least $80 billion of additional capital.

Read the rest from Bloomberg:
http://www.bloomberg.com/apps/news?
pid=20601087&sid=aOYw.awwsNSg&r
efer=worldwide

The Bank of America building in Washington, The bank will receive ... 
The Bank of America building in Washington, The bank will receive 20 billion dollars in fresh capital to help shore it up after acquiring Merrill Lynch, the US Treasury Department announced(AFP/File/Karen Bleier)

Obama Urged to Move Swiftly to Rescue Banks

January 18, 2009

President-elect Obama’s advisors have provided few details about how they will attack the banking crisis.

The financial meltdown is the most serious to confront a new president since Franklin D. Roosevelt entered the White House in 1933.

***************

By Stephen Labaton
The New York Times

A growing chorus of officials and Wall Street executives have urged President-elect Barack Obama to move immediately to shore up the banking industry as its crisis deepens.

With Citigroup, Bank of America and many other large financial institutions continuing to hemorrhage billions of dollars, the central issue Mr. Obama faces is how to relieve banks of rapidly deteriorating assets.

In a speech last week at the London School of Economics, Ben S. Bernanke, the chairman of the Federal Reserve, raised three proposals that Obama transition officials are said to have been considering to cleanse the largest banks of their biggest problems. One would involve the purchase by the government of troubled assets. A second would provide guarantees and agreements to absorb some of the losses in exchange for warrants or other compensation. A third would involve the creation of “bad banks” that would buy the declining assets for cash or stock in the new entity.

Mr. Obama has vowed in generalities to move swiftly. In an interview last week on “This Week” on ABC, he said he had asked his team “to come together, come up with a set of principles around how we are going to maintain transparency, what are we going to do in terms of housing, how are we going to target small businesses that are under an enormous business crunch.”

Likewise, advisers to Mr. Obama have provided few details about how they will attack the banking crisis.

The financial meltdown is the most serious to confront a new president since Franklin D. Roosevelt entered the White House in 1933.

On March 5 of that year, a day after he became president, Roosevelt responded to the devastating string of bank failures by declaring a bank holiday that closed all banks and halted all financial transactions, allowing the start of the arduous process of restoring public confidence in the system.

None of Mr. Obama’s advisers are suggesting a bank holiday. But like Roosevelt’s move, the details of the Obama administration’s rescue efforts are expected to begin to emerge quickly after the new president takes office.

On Wednesday, the day after the inauguration, Timothy F. Geithner, the nominee for Treasury secretary, is certain to be asked about the administration’s plans at his confirmation hearing before the Senate Finance Committee.

Read the rest:
http://www.nytimes.com/2009/01/18/
us/politics/18assets.html

In Britain’s Bank Bailout, Taxpayers Face Years of Debt: How About in the US?

January 18, 2009

Oxymoron defined: We’re borrowing and spending our way out of debt…

Last week, Goldman Sachs estimated that losses worldwide could mount to $2 trillion, about double what has been realized so far.

British Prime Minister Gordon Brown told the Financial Times on Saturday that banks need to reveal the true size of their losses as a step toward moving past the crisis.

Meanwhile, across the pond, the U.S. government early Friday morning agreed to invest $20 billion in Bank of America, and to protect the bank against up to $118 billion in potential losses from bank assets related to risky mortgage loans.

Early Friday morning, Bank of America reported a $2.39 billion fourth-quarter loss and slashed its quarterly dividend to a penny. Meanwhile, Merrill Lynch posted a $15.31 billion loss for the period. The company reported a profit of $4 billion for the year.

Pardon me if I worry….

John E. Carey
Peace and Freedom

**********************

Taxpayers are poised to take on the “toxic” debts of High Street lenders in a new bank rescue deal that could cost the Treasury billions of pounds.

By Katherine Griffiths, Mark Kleinman and Patrick Hennessy
The Telegraph (UK)

Under the “pay as you go” plan, details of which were still being hammered out on Saturday, the Government will create a new insurance scheme that would see liabilities of up to £200 billion potentially kept on the public books for years.

Taxpayers would not face an immediate upfront cost but could be hit with payments in future if banks’ assets fell below a certain level.

The insurance scheme has won favour at the expense of alternative plans to create a “bad” bank under which the Government would have simply bought banks’ existing toxic debts.

The latest rescue plan comes amid growing concern that lenders are about to unveil losses for 2008 that will shock the market.

Royal Bank of Scotland (RBS) could reveal about £20 billion of losses which would be the biggest corporate loss ever in Britain. HBOS’s bad debts, meanwhile, are thought to be so serious that the Government will press for the Lloyds Banking Group to come under state control.

In a closely linked plan, the Government is preparing to “swap” certain types of shares in RBS, increasing its stake in the troubled lender from almost 60 per cent to 70 per cent. Ministers believe it is increasingly likely that they will now have to fully nationalise the Edinburgh-based bank.

Under the same share-swap scheme the Government could increase its holding in the enlarged Lloyds bank from 43 per cent to over 50 per cent, giving it a controlling stake. Lloyds is expected to fiercely resist the move.

Details of Labour’s latest bail-out plans, which could be announced as soon as Monday, came as Gordon Brown, the Prime Minister, stepped up his rhetoric over irresponsible lending.

Read the rest:
http://www.telegraph.co.uk/finance/financeto
pics/recession/4280229/Taxpayers-face-yea
rs-of-debt-in-bank-salvage-deal.html

Blagojevich: Terrifying; Didn’t Just Fiddle While Rome Burned

December 13, 2008

Taking a page out of the playbook of the Roman emperor Nero, Illinois Gov. Rod Blagojevich has done so many bad things in such a short period of time that some of his worst actions are likely to be swept under the rug. Nero, as even the dimmest schoolchild will recall, is famous for fiddling while Rome burned to the ground — a flamboyantly insensitive gesture that has obscured the fact that he also kicked his pregnant wife to death, murdered his predecessor, masqueraded as a wild beast at gladiatorial events so that he could mutilate helpless captives bound to stakes and diverted himself on evening promenades by disguising himself as a street urchin, stabbing tipsy pedestrians to death and then chucking their bodies into the sewer. 

By Joe Queenan
Washington Post
Sunday, December 14, 2008; Page B01

It just so happens that Nero set fire to Rome not once, but several times, and did so as part of an impromptu urban-renewal project that served no purpose other than to line his own pockets. But because of the sheer impudence of setting the capital of the civilized world ablaze and then amusing himself on a musical instrument, Nero’s other crimes are less well remembered, if they are remembered at all.

Plaster bust of Nero, Pushkin Museum, Moscow.
The only “bust” of Blagojevich was made by police….

It would be a great tragedy if Blagojevich’s crass attempts — as described in juicy detail last week by prosecutors — to auction off President-elect Barack Obama’s Senate seat and shake down the Tribune Co. diverted the public’s attention from his other misdeeds. Politicians are always demanding some kind of payback for favors, and Blagojevich wouldn’t be the first pol to try to get journalists fired because he didn’t like the things they wrote about him. In Illinois, in New Jersey, in Louisiana, this kind of brazen scuzziness is par for the course. Society can deal with it.

What’s far more worrisome is Blagojevich’s bizarre confrontation with the Bank of America. The day before he was arrested on charges of massive corruption, Blagojevich visited a group of striking workers at a North Chicago firm called Republic Windows & Doors. After being laid off the week before, the employees had begun a sit-in, demanding benefits they were still owed by their employer, which said it could not meet their demands because the Bank of America had cut off its financing. At this point, Blagojevich informed bank officials that unless they restored the shuttered window-and-door company’s line of credit, the state of Illinois would suspend all further business with Bank of America. A few days later, the bank caved in and ponied up a $1.35 million loan.

The idea that the governor of a state as prosperous and important and sophisticated and upscale as Illinois would make this kind of threat is terrifying. Even more terrifying is that Bank of America saw no alternative but to give in. Yet even more terrifying is that nobody outside Chicago seems to have gotten terribly worked up about the situation, riveted as they are on the governor’s more theatrical transgressions. But peddling a Senate seat or using scare tactics to shake down a newspaper are nowhere near so serious a menace to society as letting the government arbitrarily intervene in financial transactions between banks and creditors. A crooked governor we can all handle. But a governor who capriciously decides which commercial enterprises a bank must finance and which it can ignore is a scary proposition indeed.

Read the rest:
http://www.washingtonpost.com/wp-dyn/content/artic
le/2008/12/12/AR2008121203299.html