Archive for the ‘treasury’ Category

Geithner’s Toxic-Asset Plan on Slow Track as Values Deteriorate

March 27, 2009

The Obama administration’s plan to remove distressed assets from bank balance sheets may take three months to begin operating, risking further deterioration in the value of the securities and driving up rescue costs.

By James Sterngold
Bloomberg

No matter how well the plan is designed, delays could mean that prices for mortgage-related assets will drop, requiring banks to take bigger writedowns and seek additional capital from the government, said Christopher Whalen, senior vice president and managing director of Torrance, California-based Institutional Risk Analytics.

“The government has said it thinks the assets are worth more than the 30 cents they could get in the market now — that it’s 80 cents or 50 cents on the dollar,” Whalen said. “But that 30 cents is going to look good in three months. Loss rates aren’t going to peak until late this year, when those assets will be going for five cents or 10 cents on the dollar. Absolutely they should move faster.”

The three-part government plan, announced March 23 by Treasury Secretary Timothy Geithner, requires a two-week comment period for one program, an application process for asset managers, analysis of the troubled mortgage assets to be sold and assessments of how much debt investors can take on.

As a result, the programs might not be operating before June or July, said Curtis Arledge, a managing director at New York-based BlackRock Inc., which plans to apply to become one of the asset managers for the public-private partnerships.

Falling Asset Prices

Two government officials, who spoke on condition of anonymity because no announcements on timing have been made, confirmed that the program won’t be operating until the summer. Once launched, it will create public-private partnerships to purchase as much as $500 billion of bad debts and securities from banks. The aim, Geithner said, is to allow the banks to clean up their balance sheets, attract private capital and resume active lending.

“The longer it takes, the more likely it won’t do the job,” said Robert Barbera, chief economist at New York brokerage ITG Inc., who supports the program because he believes that cheap government financing for the asset purchases will lift prices. “This allows the squeeze on the real economy to continue. The longer credit is not available from the banks, the greater the drag on the economy, and asset prices drop further.”

Read the rest:
http://www.bloomberg.com/apps/news?pi
d=20601087&sid=agEBuyNoFyvI&refer=home

For Obama and Geithner: Action Would Speak Louder Than What We Have Now

March 27, 2009

“People have confidence in Obama and generally want him to succeed,” says Frank Luntz, an experienced pollster. “But they don’t necessarily translate that confidence into his policies or the government.”

Bingo.

Treasury is a confidence black hole.  Why?  Because despite many efforts to point the blame at Wall Street and greedy executives, nobody has said, “The regulaters screwed up.”  Instead we have been told “we inherited this Bush mess and Bush decreased regulations so we need more regulations — we need more government.”

We don’t need more government.  We need better government and more accountability: from the President through Barney Frank and the rest in congress and to Geither and all the other bureaucrats.

Who among us thinks Barney Frank and Christopher Dodd screwed up?  Who has trust and confidence that Barney and Chris and Tiny Tim Turbo Tax and even Obama can get us out of this?

Yesterday it looks like Mr. Geithner actually fired — or at least sent into the penalty box — one of his top deputies.  Now we are getting to the issue.

Scott Polakoff at Treasury’s  Office of Thrift Supervision  is on ice: and Treasury needs to explain why and take responsibility for him and his actions and fast.

Maybe we don’t need to make more rules: maybe we need to enforce the ones we have and enforce accountability.

Recovery will be about trust and confidence.  Without that, investors hold back, businesses don’t hire and workers don’t spend.

A government mea culpa would be a good first step: and continuing this line of “we inherited” is now more than paper thin it is a sign of impotence.

“What we need today is more optimism and more confidence,” Larry Summers said.

“Consumer confidence is slightly up. The market is slightly up,” Biden said.

“We need confidence to make this recovery work,” President Obama said.

Confidence can’t be produced with fairy dust or a magic wand.  We get it the old fashioned way: we earn it.

President Obama has to take dramatic action: not giggle through an appearance on Leno and “60 Minutes” or jabber on an Internet town hall.  That may work with tweens but it is not so good with real adults with real money.

Campaigning is for wannabees.  Those with real responsibility and accountability have to act to be credible and earn trust and confidence.

Now’s the time.

Related:
http://michellemalkin.com/2009/03/27/
the-strange-sacking-of-a-top-treasury-official/

Stumulus: Obama and Congress Sold Us A Lot Of Useless Swampland; Ready To Buy More?

Obama Buys Into Anger, Fear as Political Tool
Obama, Geithner, Summers Plan for “Toxic Assets” May be Toxic Itself

Obama’s public overexposure

Obama Still Thinks After Economy Recovers; Bank, Finance Good Times Can Return?

 Obama’s Economic “Rescue;” “The plan is very, very clever. Maybe too clever.”

 Stimulus: Way Fewer Jobs Than You Thought

 The Great Give Away of Taxpayer Money By Bigger and Bigger Government

 President Tries To Harness Public Anger To Move His Budget

Obama Dead Wrong On Stimulus, Caterpillar Company Jobs, Recovery

Obama Wants To Take Over Companies; Complains Congress Might Take Too Long

March 24, 2009

President Barack Obama says he hopes “it doesn’t take too long” for Congress to approve new authority to oversee financial firms — and even take them over by the Federal Government if they are in economic trouble.

The president made the remark in the Oval office Tuesday afternoon, March 24, 2009.

The administration is pushing the idea of an overarching regulator, such as the Federal Reserve, to have the ability to take over nonbank financial entities whose failure could topple the entire financial system.

Congress has gotten us into trouble recently by rushing through important legislation or hearings.

The congress held no hearing on the president’s stimulus spending measure — with many member saying they didn’t have time to read it.

The stimulus assured AIG that it had the authority to pay bonuses.

Then the House last week rushed to vote a 90% tax on those same bonuses….an idea that could be unconstitutional…. and is certainly questionable….

Most fast legislation is very bad legislation, in our experience….

 Geithner Wants To Seize Troubled Businesses: “By What Authority in the Constitution?”

Obama “Strongly Approve” Number from 42% to 36% in Last 60 Days; Geithner 24% Or Less

See Michelle:
http://michellemalkin.com/2009/03/24/the-sen
ate-shows-a-little-sense-confiscatory-republica
ns-show-no-shame/

Related:
http://www.frugal-cafe.com/public_html/frugal-
blog/frugal-cafe-blogzone/2009/03/21/wait-ha
ste-made-the-mess-sen-kyl-blocks-aig-punish
ment-bill-to-allow-level-headed-review/

US President Barack Obama (R) speaks with Australian Prime Minister ... 
US President Barack Obama (R) speaks with Australian Prime Minister Kevin Rudd in the Oval Office of the White House in Washington, DC. Obama said Tuesday he hoped to partner with Rudd for “years to come” after forging a “meeting of the minds” in their first White House talks.  During this meeting, Obama told reporters, he hopes “it doesn’t take too long” for Congress to approve new authority to oversee financial firms .(AFP/Jim Watson)

U.S. Seeks Expanded Power to Seize Firms

March 24, 2009

The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.

The government at present has the authority to seize only banks.

By Binyamin Appelbaum and David Cho
Washington Post Staff Writers

Giving the Treasury secretary authority over a broader range of companies would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president’s Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to the document.

The administration plans to send legislation to Capitol Hill this week. Sources cautioned that the details, including the Treasury’s role, are still in flux.

Read the rest:
http://www.washingtonpost.com/wp-dy
n/content/article/2009/03/23/AR200
9032302830_pf.html

On economic matters, Obama lacks a secretary of Selling It

March 24, 2009
Geithner & Co. may know policy, but they’ve proven less than adept at inspiring the public to accept tough medicine. Their most effective point man is in danger of being overused, one analyst says.
By Peter Nicholas and Peter Wallsten
The Los Angeles Times
March 24, 2009
Reporting from Washington — The first time Treasury Secretary Timothy F. Geithner was sent out as point man to sell the Obama administration’s financial rescue plan, the Dow Jones industrial average plunged 382 points. And Geithner’s subsequent efforts as a center-stage spokesman were less than resounding successes.

On Monday, the administration took a different approach. Geithner largely confined himself to conducting a pen-and-pad-only news conference that excluded TV and effectively reduced the secretary from point man to staff briefer. The Dow soared nearly 500 points.

Read the rest:
http://www.latimes.com/news/nationwo
rld/nation/la-na-obama-econ24-2009m
ar24,0,2138669.story

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

In a Congressional hearing today, Bernanke and Geithner are likely to once again call on Congress to enact legislation that would allow the government to safely dismantle a big financial institution, like American International Group Inc., to minimize any damage to the U.S financial system and the broader economy.

http://news.yahoo.com/s/ap/2009032
4/ap_on_bi_ge/bailout_bernanke_geithner

Geithner’s Toxic Asset, Bank Plan Offers Nothing New To A Bad Idea

March 22, 2009

PAUL KRUGMAN BLOGS ON THE TOXIC-ASSET PROGRAM to be announced early this week: “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. … 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. To this end the plan proposes to create funds in which private investors put in a small amount of their own money, and in return get large, non-recourse loans from the taxpayer, with which to buy bad … assets. This is supposed to lead to fair prices because the funds will engage in competitive bidding.

“But it’s immediately obvious, if you think about it, that these funds will have skewed incentives. In effect, Treasury will be creating — deliberately! — the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem. Or to put it another way, Treasury has decided that what we have is nothing but a confidence problem, which it proposes to cure by creating massive moral hazard. This plan will produce big gains for banks that didn’t actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And I fear that when the plan fails, as it almost surely will, the administration will have shot its bolt: it won’t be able to come back to Congress for a plan that might actually work. What an awful mess.”

From:
http://www.politico.com/playbook/

Krugman blog: NY Times:
http://krugman.blogs.nytimes.com/?s
cp=2&sq=krugman&st=cse

Related:
Obama Talks Too Much: Time For Action
(Fire Geithner, for one….)

Obama Overexposed

 Threat of inflation sky high

Obama’s Katrina Moment Is Here Now

Obama Administration May Not Understand Economy

 Public Outrage Could Devour Obama Presidency

Financial Advice, Recovery, Trumped by Obama, Congress, Media, Polls
(Maybe Axelrod is giving better advice than Summers, Geithner…)

Protesters At Homes Of AIG Execs
.
Obama, Biden Chat Up Economy; Congress Talking “Stimulus II”

Rosy Talk From Obama and Gang is BS

Sen. Sherrod Brown, D- Ohio, pauses in the elevator after arriving on Capitol
Geithner

Geithner can still pay off for Obama

March 22, 2009
The Treasury chief has stumbled, but firing him now would be a mistake.
Doyle McManus
The Los Angeles Times
March 22, 2009
Is Treasury Secretary Timothy F. Geithner becoming a toxic asset for the Obama administration?

It’s a question people in Washington are starting to ask.

Geithner, though considered a brilliant policy wonk and financial strategist behind closed doors, has not been a hit with the public or Congress as the administration struggles to tame the economic crisis.

Instead, he has become the administration’s chief magnet for negative attention. He spent his confirmation hearings explaining why he failed to pay some of his taxes. He muffed the rollout of his most important policy initiative, the bank rescue plan. He failed to stop AIG from paying out $165 million in bonuses — which reminded Congress and the public that he was one of the people who presided over the AIG deal in the first place.

Cabinet secretaries are supposed to deflect fire away from the president, not draw it toward him. But President Obama is now spending a good chunk of his time coming to the defense of his beleaguered Treasury chief. “He is a smart guy, and he’s a calm and steady guy,” Obama said in his appearance on Jay Leno’s “Tonight Show” on Thursday, a deliberately chosen opportunity to reach out to middle America. “I don’t think people fully appreciate the plate that was handed him. This guy has not just a banking crisis; he’s got the worst recession since the Great Depression. … I think Geithner is doing an outstanding job.”

Read the rest:
http://www.latimes.com/news/opinion/com
mentary/la-oe-mcmanus22-2009mar22,0,
4847534.column

Obama Supports Geithner (Again)
http://news.yahoo.com/s/ap/200
90322/ap_on_go_pr_wh/obam
a_interview

Wall Street Journal: “Geithner Incapacitated;” President Voices Support

March 21, 2009

We haven’t even heard the Sunday morning talk shows and already the noice calling for the firing of Treasury Secretary Tim Geithner is rising to a crescendo.

“Geithner is incapacitaed,” said Steve Moore of the Wall Street Journal.  “Too many politicians care calling for him to be fired and he’s in too deep over AIG.”

James Freeman of the WSJ agreed, calling Geithner the “architect of the AIG fiasco.”

The two appeared on Fox News today.

Meanwhile, President Obama continues to voice support for Geithner.

Obama Talks Too Much: Time For Action
(Fire Geithner)

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

From The Washington Post:

President Barack Obama stepped up his weeklong defense of much-criticized Treasury Secretary Timothy Geithner, saying he would not accept his resignation even if it was tendered.

It came ahead of a critical week for Geithner, who is expected to unveil his much-anticipated bank bailout plan and outline broad financial regulatory reforms to better police Wall Street within days.

Obama said in an interview with CBS television network’s “60 Minutes” program that if Geithner tried to quit, he would tell him, “Sorry buddy, you’ve still got the job.”

Read the rest:
http://www.washingtonpost.com/wp-dy
n/content/article/2009/03/21/AR20
09032101532.html

Michelle Malkin:
http://michellemalkin.com/200
9/03/21/saturday-open-thread-7/

http://gvk2.wordpress.com/2
009/03/22/obama-at-jay-leno-show/

Government To Have Bigger Role in All American Lives; Obama Seeks to Increase Oversight of Executive Pay

March 21, 2009

The Obama administration will call for increased oversight of executive pay at all banks, Wall Street firms and possibly other companies as part of a sweeping plan to overhaul financial regulation, government officials said.

By STEPHEN LABATON
The New York Times
.
The outlines of the plan are expected to be unveiled this week in preparation for President Obama’s first foreign summit meeting in early April.

Increasing oversight of executive pay has been under consideration for some time, but the decision was made in recent days as public fury over bonuses has spilled into the regulatory effort.

Related:
Financial Advice, Recovery, Trumped by Obama, Congress, Media, Polls 

Wall Street Journal: “Geithner Incapacitated;” President Voices Support

The officials said that the administration was still debating the details of its plan, including how broadly it should be applied and how far it could range beyond simple reporting requirements. Depending on the outcome of the discussions, the administration could seek to put the changes into effect through regulations rather than through legislation.

One proposal could impose greater requirements on the boards of companies to tie executive compensation more closely to corporate performance and to take other steps to assure that outsize bonuses are not paid before meeting financial goals.

The new rules will cover all financial institutions, including those not now covered by any pay rules because they are not receiving federal bailout money. Officials say the rules could also be applied more broadly to publicly traded companies, which already report about some executive pay practices to the Securities and Exchange Commission. Last month, as part of the stimulus package, Congress barred top executives at large banks getting rescue money from receiving bonuses exceeding one-third of their annual pay.

Beyond the pay rules, officials said the regulatory plan is expected to call for a broad new role for the Federal Reserve to oversee large companies, including major hedge funds, whose problems could pose risks to the entire financial system.

It will propose that many kinds of derivatives and other exotic financial instruments that contributed to the crisis be traded on exchanges or through clearinghouses so they are more transparent and can be more tightly regulated. And to protect consumers, it will call for federal standards for mortgage lenders beyond what the Federal Reserve adopted last year, as well as more aggressive enforcement of the mortgage rules.

The plan is being put together in advance of the meeting of the Group of 20 industrialized and developing nations in London, an annual event that is expected to be dominated by the global financial crisis and discussions about better oversight of large financial companies whose problems could threaten to undermine international markets.

An important part of the plan still under debate is how to regulate the shadow banking system that Wall Street firms use to package and trade mortgage-backed securities, the so-called toxic assets held by many banks and blamed for the credit crisis.

Officials said the plan would also call for increasing the levels of capital that financial institutions need to hold to absorb possible losses. But in a sign of the fragility of the economic system officials said the administration would emphasize that those heightened standards should not be imposed now because they could discourage more lending. Rather, they would be put in place after the economy began to rebound.

“The argument some are making is that they don’t want to be stepping on the gas pedal and the brake at the same time,” said Morris Goldstein, a senior fellow at the Peterson Institute for International Economics and a former top official at the International Monetary Fund.

Administration officials are also debating how tightly to supervise hedge funds. A broad consensus has emerged among regulators and administration officials that hedge funds must be registered and more closely monitored, probably by the Securities and Exchange Commission. But officials have not decided how much the funds will have to disclose about their investments and trading practices.

A central aspect of the plan, which has already been announced by the administration, would give the government greater authority to take over and resolve problems at large, troubled companies that are not now regulated by Washington, like insurance companies and hedge funds.

Read the rest:
http://www.nytimes.com/2009/0
3/22/us/politics/22regulate.htm
l?_r=1&hp

NYT:
http://www.nytimes.com/

Bankers Press Case Against Punitive Tax 

Obama, Geithner, Congress Squandering Confidence Needed For Recovery

Bonus backlash hits Wall Street

American Democracy With Checks and Balances is Broken; Media, Congress Failing

Obama’s Radicalism Is Killing the Stock Market

 Obama Spending, Tax Plans Likely Out The Window As CBO Predicts Much More Debt

Obama: Why Are We Saving Geithner and His Incestuous Relationship With Wall Street?

Finance, one of America’s great industries, being destroyed by Congress during crisis?

For Cuomo, AIG, Financial Crisis Is His Political Moment

 Did Obama White House Fuel AIG Bonus Mess To Enact Tougher Rules With Public Support, “Outrage”?

Michelle Malkin:
http://michellemalkin.com/2009/0
3/21/liveblogging-the-lexington
-ky-tea-party/

Bankers Press Case Against Punitive Tax

March 21, 2009

An alarmed banking industry looked for friends in Washington yesterday as it tried to head off severe congressional restrictions on compensation, fearful that a wave of popular anger about vast paydays will result in permanent damage to the industry.

After a week of unexpected setbacks for an industry accustomed to deference, bank executives said they were now racing to convince Congress and the Obama administration that imposing punitive taxes on bonuses would unfairly punish thousands of people for the sins of a few. Executives also argued that hitting banks would hurt the broader economy.

By Binyamin Appelbaum
The Washington Post

“We are working in every appropriate way with policymakers in Washington, and with other financial institutions and industry associations, to come to agreement on a constructive industry compensation system that is good for the company, the financial system and the country,” Citigroup chief executive Vikram Pandit said in a memo sent to employees.

The stakes are especially high because the Treasury Department is moving ahead with a critical initiative that involves persuading private investors to buy troubled assets from banks. The administration, which could unveil more details of this plan as early as Monday, is deeply worried that investors will be afraid to participate, Treasury officials say.

The Treasury plan would include three primary components, drawing on resources from the Federal Deposit Insurance Corp., the Federal Reserve and private investors, officials say.

Congress remained at a fever pitch, with several members issuing new demands that various companies rescind various bonuses. Long-simmering anger about lavish paydays on Wall Street has erupted since the disclosure last weekend that American International Group, bailed out by the government, still had paid $165 million in new bonuses to the company’s most troubled division.

But there were signs that others in official Washington were more sympathetic to industry concerns. Two of the nation’s senior banking regulators indicated in speeches that compensation should be tied to performance, the point of bonuses.

Fed Chairman Ben S. Bernanke said banks should structure compensation to reflect contributions to a company’s health and profitability. He said problems arose when employees were rewarded for short-term results that created long-term risks.

Read the rest:
http://www.washingtonpost.com/wp-d
yn/content/article/2009/03/20/AR20
09032003737.html?hpid=topnews

Read the rest:
President, Treasury, Congress “undermining efforts to shore up the economy”

Obama, Geithner, Congress Squandering Confidence Needed For Recovery