Geithner: balancing budget will require Americans to sacrifice (banks not so much)

Geithner: balancing the budget will

involve some difficult choices on the

part of lawmakers and

“will require sacrifice from all Americans.”

AIG BAILOUT
Automobile Tax Credits (Hybrid Gas-Electric)
BAB (Build America Bonds)
Big Oil Tax Subsidies Act (roughly $8 billion per year)
Cash For Caulkers
Cash For Clunkers
Chrysler BAILOUT
Consumer Energy Efficiency Creidts
Fannie BAILOUT
First Time Homebuyer Tax Gift Credit
Freddie BAILOUT
General Motors BAILOUT
HAFA (Home Affordable Foreclosure Alternatives a.k.a. "Exit Gracefully")
HAMP (Home Affordable Modifcation Program)
HARP (Home Afrfordable Refinance Program)
Home Energy Efficiency Improvement Tax Credit
HHF (Hardest Hit Housing Markets)
Operation Enduring Freedom (gov't speak for Afghanistan War)
Operation Iraqi Freedom (gov't speak for Iraq War)
PRA (Principal Reduction Alternative)
TARP (Troubled Asset Relief Program a.k.a. Too BIG to FAIL)
UP (Home Affordable Unemployment Program)

...and so on..and so on...

No, it's Not Colic

 
ABC News
By Arlette Saenz
2/15/2011

ABC News’ Arlette Saenz reports: In a hearing before the House Ways and Means Committee, Treasury Secretary Timothy Geithner defended the president’s budget proposal as a means of restoring fiscal responsibility to an economy riddled by a mounting national deficit.

“Our deficits are too high. They are unsustainable, and left unaddressed, these deficits will hurt economic growth and make us weaker as a nation,” Geithner said. “We have to restore fiscal responsibility and go back to living within our means.”

Geithner targeted entitlement programs as the key to reducing the national debt while insisting that Social Security benefits remain protected.

“Our long term deficits that we face over the next century are primarily driven by rapid rates of growth in healthcare costs and to a lesser extent by Social Security obligations. The most important thing we can do to reduce those long term costs is to reduce the rate of growth in healthcare costs.”

But committee members pounced on the president’s budget proposal for not providing enough guidance in curbing entitlement programs.

“Americans shouldn’t have to wait any longer for some real solutions, and frankly, this budget is a missed opportunity,” Chairman Dave Camp, R-MI, said. “There‘s nothing on entitlement reform, and there’s little more than lip service about getting the deficit under control.”

“For so many of us, we are just dumbfounded, astounded by the fact that the administration hasn’t taken this opportunity to address the issue of entitlements,” Rep. Tom Price, R-GA, said. “There’s no evidence of this administration taking the lead and initiative on entitlement reform. You’ve taken the lead and initiative in expanding entitlements and expanding automatic spending.”

Geithner acknowledged that balancing the budget will involve some difficult choices on the part of lawmakers and “will require sacrifice from all Americans.”

Geithner took a brief moment to tout the success of TARP, which was initially projected to cost taxpayers $350 billion but is anticipated to show a positive return for taxpayers.

“I think it will prove to be the most successful financial rescue in modern history,” Geithner said. “Even recognizing, we face a lot of challenges ahead in digging out of this crisis, repairing the damage caused by it.”

JPMorgan Chase: Operate with the highest standards of integrity, unless dealing w/military families

Dylan Ratigan on JPMorgan Chase foreclosing on U.S. active duty service personnel. Nobody at JPMorgan cared to listen. JPMorgan Chase admitted overcharging thousands of military families for the mortgages, including families of troops in combat overseas.

JPMorgan Chase's business principles include:

• Operate with the highest standards of integrity
• Be open and honest with ourselves, our colleagues, our shareholders and our communities
• Foster an environment of respect and inclusiveness

Yes, JPMorgan Chase received $25 billion of TARP bailout dollars and is clearly a friend a "friend" of President Obama:

"You know, keep in mind, though there are a lot of banks that are actually pretty well managed, JPMorgan being a good example, Jamie Dimon, the CEO there, I don't think should be punished for doing a pretty good job managing an enormous portfolio."

Jamie Dimon, chairman and CEO of JPMorgan Chase is a member of the Federal Reserve Bank of New York's Board of Directors and was one of the thirteen members of The Business Council to meet with President Obama.

Finally. let's not forget, Jamie Dimon in an era of To Big To Fail (while getting bigger), with the assistance of the U.S. Federal Government, acquired Bear Stearns and Washington Mutual.

t's really nice having friends in high places. Yes, this is the same organization that admitted overcharging thousands of military families for the mortgages, including families of troops in combat overseas. Oh, before I forget, while many active duty service personnel are dodging bullets and IED's, JPMorgan Chase just reported a $4.8 billion in 4th Quarter profits.

Visit msnbc.com for breaking news, world news, and news about the economy

123 TARP Banks Miss November's Dividend Payment

Cumulatively, these tardy banks owe Treasury

roughly $161 million in dividends,

according to SNL

By Taylor Allred and Kevin Curry
SNL
12/14/10

The number of financial institutions deferring dividends on their TARP preferred stock rose once again in November, as 123 banks and thrifts failed to make their Nov. 15 dividend payment, according to a Dec. 10 Treasury report. This compares to 115 deferrals in August, 91 deferrals in May and 74 deferrals in February.

The 123 institutions that deferred the latest TARP dividend payment received a total of $3.3 billion in Capital Purchase Program funds, which comprises 1.6% of the $204.9 billion received by the 707 institutions under the CPP.

In total, 135 institutions are delinquent on at least one TARP dividend payment. The U.S. Treasury Department invested $3.4 billion in the delinquent companies, which have now racked up a noncurrent dividend balance of $161.3 million.

Of the 123 dividend deferrers in November, 18 institutions missed their first payment since entering the program. This represents a decline in first-time deferrals from the 28 that deferred payment for the first time in August. Fifteen of the 18 first-timers are bank holding companies, which means they must pay cumulative dividends and missed payments accrue.

Banks without holding company status pay noncumulative dividends, and missed payments do not accrue. In some cases, state regulators can restrict banks from paying dividends if their accumulated earnings do not meet a certain threshold. Some banks also must attain shareholder approval before paying dividends.

Some Down and Dirty Facts

• Eleven institutions paid their November dividends but still have not paid some previously deferred dividends
• Three banks that had previously missed dividend payments failed during the most recent payment period. Treasury had invested $19.5 million in Tacoma, Wash.-based Pierce County Bancorp; Sonoma, Calif.-based Sonoma Valley Bancorp; and, Tifton, Ga.-based Tifton Banking Co. The companies had missed four, three and one dividend payments prior to failure, respectively.
• As of Nov. 30, a total of 14 institutions have paid in full all their previously missed dividend payments to the Treasury
• Complete SNL Report

TARP Oversight Panel Calls for New Round of Bank Stress Tests (Ted Kaufman delivers the message)

Banks Could Face Billions of Dollars

in Unexpected Losses

(yes America, it was really important to bailout the banking system

in 2008...they were simply not done pillaging)

11/16/10

The Congressional Oversight Panel's November oversight report, "Examining the Consequences of Mortgage Irregularities for Financial Stability and Foreclosure Mitigation," reviews allegations that companies servicing $6.4 trillion in American mortgages may in some cases have bypassed legally required steps to foreclose on a home.

The implications of these irregularities remain unclear, but it is possible that "robo-signing" may have concealed deeper problems in the mortgage market that could potentially threaten financial stability and undermine foreclosure prevention efforts.

In the best-case scenario, concerns about mortgage documentation irregularities may prove overblown. In this view, which has been embraced by the financial industry, a handful of employees failed to follow procedures in signing foreclosure-related affidavits, but the facts underlying the affidavits are demonstrably accurate. Foreclosures could proceed as soon as the invalid affidavits are replaced with properly executed paperwork.

The worst-case scenario is considerably grimmer. In this view, which has been articulated by academics and homeowner advocates, the "robo-signing" of affidavits served to cover up the fact that loan servicers cannot demonstrate the facts required to conduct a lawful foreclosure.

The risk stems from the possibility that the rapid growth of mortgage securitization in recent years may have outpaced the ability of the legal and financial system to track mortgage loan ownership. In essence, banks may be unable to prove that they own the mortgage loans they claim to own.

A Complete Cluster

If documentation problems prove to be pervasive and, more importantly, throw into doubt the ownership of not only foreclosed properties but also pooled mortgages, the consequences could be severe. Clear and uncontested property rights are the foundation of the housing market. If these rights fall into question, that foundation could collapse.

Borrowers may be unable to determine whether they are sending their monthly payments to the right people. Judges may block any effort to foreclose, even in cases where borrowers have failed to make regular payments. Multiple banks may attempt to foreclose upon the same property.

Borrowers who have already suffered foreclosure may seek to regain title to their homes and force any new owners to move out. Would-be buyers and sellers could find themselves in limbo, unable to know with any certainty whether they can safely buy or sell a home. If such problems were to arise on a large scale, the housing market could experience even greater disruptions than have already occurred, resulting in significant harm to major financial institutions.

For example, if a Wall Street bank were to discover that, due to shoddily executed paperwork, it still owns millions of defaulted mortgages that it thought it sold off years ago, it could face billions of dollars in unexpected losses. Full Report

Fannie Mae $3.5 Billion loss attributable to shareholders and sticks its hand out for another $2.5 billion

The Fannie Mae Black Hole Gets Deeper

Pays the U.S. Government a $2.1 Billion Dividend

and Requests an Additional $2.5 Billion

This is simply crazy!!

Fannie Mae Earnings Press Release
11/5/10

WASHINGTON DC – Fannie Mae (FNMA/OTC) today reported a net loss of $1.3 billion in the third quarter of 2010, compared to a net loss of $1.2 billion in the second quarter of the year. The company continues to focus on building a strong new book of business and returning to profitability (excluding Treasury dividend payments), and its operating results reflect stabilizing credit-related expenses and increasing revenues.

The company’s net loss attributable to common stockholders was $3.5 billion, including $2.1 billion in dividend payments to the U.S. Treasury. To eliminate the company’s net worth deficit of $2.4 billion as of September 30, 2010, more than 85 percent of which is the dividend payment to Treasury, the Federal Housing Finance Agency has requested $2.5 billion on the company’s behalf from Treasury. Upon receiving those funds, the company’s total obligation to Treasury for its senior preferred stock will be $88.6 billion. The company has paid a total of $8.1 billion in dividends to Treasury. Fannie Mae's Report

AIG to get another $22 billion in TARP funds for restructuring and Geithner still expects a profit

And it's only Monday

Reporting by David Lawder
11/1/10

(Reuters) - Bailed out insurer American International Group will get up to $22 billion more in U.S. taxpayer funds to facilitate its restructuring and prepare for an eventual government exit, the U.S. Treasury said on Monday.

But the Treasury reiterated that it expects the government to earn an overall profit on bailout investments in the insurance giant -- once as high as $180 billion -- assuming the AIG restructuring announced on September 30 is executed.

AIG will draw the $22 billion from remaining Troubled Asset Relief Program funds to repurchase Federal Reserve preferred stock interests in the special purpose vehicles holding two key subsidiaries being sold off, AIA Group Ltd and American Life Insurance Co (ALICO), the Treasury said in a statement.

Following the sale of ALICO and AIA's initial public offering in Hong Kong, the Treasury said it will receive the remaining special purpose vehicle assets, including AIG's remaining shares in AIA and shares in ALICO buyer MetLife Inc. These assets "significantly exceed the amount of the preferred investments, and as such, no losses are expected on those preferred interests," the Treasury said.

Currently, the New York Fed values the AIA and ALICO preferred interests at $26.1 billion -- with part of this to be paid down from sale and IPO proceeds.

The bulk of the $20.5 billion in proceeds from the AIA IPO and $7.2 billion in cash from the AIA sale will go to pay off a Federal Reserve credit facility, at a cost of about $20 billion including accrued interest and fees.

AIG on Monday closed the sale of ALICO to Metlife Inc for $16.2 billion, with $7.2 billion in cash and the remainder in stock.

Following the restructuring, expected to be completed by the end of the first quarter of 2011, the Treasury will own 92.1 percent of AIG's common stock, or about 1.66 billion shares.

Based on Friday's market closing price of $42.01, the government's stake was worth $69.5 billion, compared with the Treasury-only investment of $47.5 billion. The $69.5 billion value excludes the special purpose vehicles, which includes stakes in AIA, MetLife and in AIG subsidiaries Nan Shan in Taiwan, Star Life and Edison Life Insurance in Japan and aircraft leasing firm International Lease Finance Corp.

"It is expected that proceeds from the monetization of these assets will be used to repay the SPV preferred interests in full," the Treasury said.

Two other Federal Reserve bailout special purpose vehicles, Maiden Lane II and Maiden Lane III, hold AIG mortgage assets whose value now exceeds their original Fed loan amounts. These loans, totaling $27.8 billion, are expected to be repaid in full from the assets held in the vehicles, the Treasury said.

Obama and Co. have bungled the bailout (Jack Kelly)

Nice Job Jack Kelly!!

I Look Forward to Reading More of Your 

"Call It Like It Is Articles"

Sunday, October 31, 2010
By Jack Kelly, Pittsburgh Post-Gazette

Treasury Secretary Timothy Geithner is all that remains of President Barack Obama's original economic team. Budget Director Peter Orszag and Christina Romer, chairman of the Council of Economic Advisers, are long gone, and Lawrence Summers, chairman of the National Economic Council, plans to be back at Harvard in January.

Neil Barofsky wouldn't be sad if Mr. Geithner were to depart, too. Who, you may ask, is Neil Barofsky? And why should you care what he thinks?

Mr. Barofsky, 40, is something of a prodigy. After earning a degree in economics from the Wharton School of Business at the University of Pennsylvania and a law degree from New York University, Mr. Barofsky joined the office of the U.S. attorney for the Southern District of New York, where he prosecuted international drug gangs and later headed the mortgage fraud group.

President George W. Bush tapped Mr. Barofsky to be the special inspector general for the Troubled Asset Relief Program, even though Mr. Barofsky reportedly is a Democrat. TARP, you'll recall, is the bailout of financial institutions that followed the bursting of the subprime mortgage bubble.

TARP consists of 13 programs, for which $474.8 billion has been obligated. TARP recipients have paid back much of it, and $178.4 billion in TARP funds remain outstanding.

On Oct. 26, the second anniversary of TARP, Mr. Barofsky issued a report on the program to Congress. It concludes that, while TARP prevented financial and economic collapse, it has made possible the payment of record bonuses to Wall Street bankers, failed to increase lending to small businesses and fallen short in reducing unemployment or preserving home ownership.

TARP also is encouraging big banks to return to the risky behaviors which caused the last financial crisis, and has increased the risk the next crisis will be worse.

"The biggest banks are bigger than ever, fueled by government support and taxpayer-assisted mergers and acquisitions," the report said. "The repeated statements that the government would stand by these banks during the financial crisis has given a significant advantage to the larger 'too big to fail' banks, as reflected in their enhanced credit ratings borne from a market perception that the government still will not let these institutions fail."

Treasury officials have exaggerated TARP's successes, bungled administration of its programs and concealed information Americans have a right to know, the report said.

J.P. Freire of the Washington Examiner noted Monday that the Treasury Department has contracted with a private firm for a Freedom of Information Act specialist with experience in the "use of FOIA/PA exemptions to withhold information from release to the public."

"When Treasury refuses for more than a year to require TARP recipients to account for the use of TARP funds, or claims that Capital Purchase Program participants were 'healthy, viable' institutions knowing full well that some are not, or when it provides hundreds of billions of dollars in TARP assistance to institutions, and then relies on those same institutions to self-report any violations of their obligations to TARP, it damages the public trust to a degree that is difficult to repair," Mr. Barofsky's report said.

"When the government promotes programs without meaningful goals or metrics for success, such as its mortgage modification programs, or when it makes critical and far-reaching decisions, such as pushing for dramatically accelerated car dealership closings without considering the potential for devastating job losses, or when it fails to negotiate robustly on behalf of the taxpayer, as it did when agreeing to compensate [AIG's] counterparties 100 cents on the dollars for securities worth less than half that amount, the government invites public anger, hostility and mistrust," his report continued.

Financial news is boring, and the TARP revelations are embarrassing to Democrats, which is probably why most journalists have paid little attention to the Barofsky report.






But as the report said, what's going on now "dangerously undermines (the government's) ability to respond effectively to the next crisis." We need to understand what's happening, and why.






Telling us what's happening and why is the job journalists are supposed to do. If journalists were doing their jobs, we should know at least as much about TARP as we do about Delaware GOP Senate candidate Christine O'Donnell's teenage dabbling in witchcraft. That we don't is contemporary journalism's enduring shame.

Where's the HAMP Loan Data?

By Julie Vorman
The Center for Public Integrity
10/27/10

The Treasury Department should stop dragging its feet and release some of the specific loan-level data it has collected from mortgage servicers in the Home Affordable Modification Program (HAMP), a consumer advocacy group says.

“For over a year, it has promised to release the loan-level data to policymakers, researchers, and the public, but whenever asked, the promised date of release is pushed back,” Julia Gordon, a lawyer with the Center for Responsible Lending, told the Congressional Oversight Panel on TARP at a hearing today.

The data – once scrubbed of names and Social Security numbers – can shed light on which borrowers are getting HAMP modifications, the types of modifications being provided, and patterns of re-defaults that are occurring, she said. “Given the significant racial and ethnic inequities that have plagued the mortgage market, detailed demographic data for each servicer is of vital importance to all stakeholders,” she added.

Gordon also said one of the first priorities of the Consumer Financial Protection Bureau should be to “quickly move to regulate the [loan] servicing industry” and whether they are complying with contractual obligations to the Federal Housing Administration and the Veterans Administration. The bureau officially opens its doors in July with wide-ranging powers to write regulations that protect consumers from abusive practices by the financial services industry.

Likewise, the FHA and VA should ensure their loan servicers are following all relevant laws, Gordon said. And the Housing and Urban Development Department should terminate contracts with loan servicers that don’t follow the rules, and disclose the “loss mitigation” efforts by servicers to renegotiate mortgage terms to help homeowners avoid foreclosure, she said.

The Dodd-Frank reform law requires loan servicers to disclose how they arrived at the decision to deny a loan modification. The Treasury Department is also required to create a website so homeowners can access the HAMP program’s net present value model and see if loan servicers used it accurately in their case.

HAMP, created in early 2009, offered $50 billion in incentives for U.S. banks to restructure home mortgages and initially projected the program would help 3 to 4 million homeowners. However, as of last month, only 429,000 mortgages were permanently modified under the program.

Insultingly Simplistic Response from the White House on SIGTARP Report

Jen Psaki posted the White House response

to the recently released SIGTARP report.
"All of this financial talk can get complicated..." We dumb
Americans so appreciate Jen taking the time to post, given
her hair appointment for the Sadie Hawkins Dance...

Posted by Jen Psaki
The White House Blog
10/27/10

Jen Psaki's last movie

Some people just don’t like movies with happy endings. How else to explain this week’s report by the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP)? Rather than focusing on the growing evidence we’ve seen in recent months that TARP will be far less costly than anyone expected, SIGTARP instead sought to generate a false controversy over AIG to try and grab a few, cheap headlines.

SIGTARP's last movie

Last month, the Administration released a new report showing that – after giving effect to a proposed restructuring and based on current market prices – Treasury’s overall investment in AIG is expected to break even or turn a profit. This valuation reflects AIG’s recently announced exit strategy to pay back taxpayers, including the conversion of Treasury’s illiquid preferred stock stake in that company to 1.7 billion shares of publicly traded common stock.

Unlike the preferred stock we currently hold, AIG’s common stock has a readily identifiable value on the New York Stock Exchange. Under federal accounting rules, we are required to value that common stock at the current market price. And based on current market prices, the sale of that AIG common stock would provide a substantial profit for taxpayers.

The math isn’t that complicated. It’s simple multiplication. Our calculations on AIG are straightforward, and we have published our methodology for all of the American people to see.

SIGTARP, however, incorrectly claims that our report is inconsistent with TARP’s audited financial results from March 2010. And in doing so, SIGTARP seems to be arguing that when Treasury conducts any evaluation of the cost of its investment in AIG, it should pretend that the company’s exit strategy was never announced.

SIGTARP’s analysis seems to be stuck in a time warp if they believe that we should ignore AIG’s exit strategy in evaluating our investment in that company. Moreover, they demonstrate a fundamental misunderstanding of the difference between audited financial results – which are backward looking and represent a snapshot in time – and forward-looking valuations of future profits, such as Treasury’s recent report.

Additionally, invaluing our expected common stock holdings in AIG, Treasury employed the exact same methodology we use for valuing the common stock we own in other publicly traded companies. And we made it clear that the valuation was based on giving effect to the restructuring and subject to certain conditions, which AIG is moving to fulfill. The fact that AIG will raise at least $18 billion in its offering of AIA – announced in the last few days – brings us one big step closer to completing the restructuring and ensuring that taxpayers are paid back.

All of this financial talk can get complicated, but here’s the bottom line: Any truly independent observer would say that Treasury’s stake in AIG will be worth more than taxpayers originally invested in that company. Of course, as with any investment, prices could rise or fall in the future. That’s the nature of any financial transaction. But Treasury is confident that we are in a much stronger position today to recoup our investment in AIG than two years ago – or even a few short months ago. And that’s very good news for taxpayers.

Thank you so much for uncomplicating the financial talk Jen.

It's so comforting that Timmy Geithner has the situation

completely under control for we mere mortals.

Will Geithner's AIG TARP Loss Estimate be Greater after the Election??

The Treasury failed to make clear it had changed its calculation method

Insensitivity to the values of transparency...  

By Donna Smith
10/25/10
WASHINGTON, Oct 25 (Reuters)

The Obama administration's latest estimate of taxpayer costs of the Wall Street bailout is too rosy and could ultimately damage public trust in government, the top bailout cop said on Monday.

In its quarterly report to Congress, the Special Inspector General for the Troubled Asset Relief Program said the Treasury Department's bailout cost estimate for American International Group (AIG.N) was an example of using misleading numbers to paint a positive pre-election account of the program.

The administration on Sept. 30 slashed its estimate of the overall cost of the U.S. financial bailout by more than half to less than $50 billion on the back of a new plan to sell the government's stake in insurer AIG.

The SIGTARP report said the Treasury Department, in coming up with the fresh estimate, had changed its calculation method to estimate a $5 billion cost for AIG. That was a shift from an earlier projection of $45 billion that used a broader measure to calculate the cost.

Public anger at the bailout of Wall Street has been a major factor in congressional races ahead of a Nov. 2 election in which Republicans are poised to make major gains against Democrats who now control Congress.

The Treasury failed to make clear it had changed its calculation method and that it was relying solely on recent stock market prices for AIG shares in making the new estimate, the SIGTARP report said. It concluded that Treasury needed more transparency in its public disclosures about TARP costs.

"This conduct has left Treasury vulnerable to charges that it has manipulated its methodology for calculating losses to present two different numbers depending on its audience," the report said.

A different set of numbers will be reported to the Government Accountability Office for an assessment of the program that is set to be released in November, it said.

"Treasury's unfortunate insensitivity to the values of transparency has led it to engage in conduct that risks further damaging public trust in government," the report said.

Republican Senator Charles Grassley said the quarterly report showed a pattern of the administration trying to cast the bailout in the most favorable light.

"It raises the question of whether administration officials are trying so hard to put a positive spin on program losses that they played fast and loose with the numbers," he said.

"You can't change the way you calculate losses to come up with a rosy scenario in October and then go back to the real numbers in November without seriously damaging your credibility with the American people," Grassley added.

Treasury officials said the AIG estimate reflected a recapitalization plan that shifted preferred stock the government holds to common stock and that the Treasury's report made that clear.

"It's a complicated recapitalization plan, but I don't think there is any lack of transparency by the Treasury in the way in which we were valuing the position either in the retrospective or previously," Jim Millstein, chief restructuring officer at the Treasury Department, told reporters in a conference call.

The department in that retrospective estimated the $700 billion TARP program would end up costing taxpayers about $50 billion and once the government sold its AIG shares, the cost would drop to about $30 billion.

SIGTARP also criticized the department for failing to heed suggestions that it set "meaningful benchmarks and goals" for the government program that is supposed to help struggling homeowners who face foreclosure.

"As a result, a program that began with much promise now must be counted among those that risk generating public anger and mistrust," it said. The report urged the Treasury Department to "acknowledge" the failings of the Home Affordable Modification Program and publish more "meaningful" goals.

Tim Geithner and Treasury use questionable methods when calculating AIG TARP losses

By Ian Katz and Hugh Son
Oct. 25 (Bloomberg)
The Treasury Department’s plan to recoup taxpayer funds from the bailout of American International Group Inc. uses questionable methods and may be too optimistic, the Troubled Asset Relief Program’s inspector general said.

Treasury’s estimate that it will lose $5 billion on its TARP investment in AIG “represents a dramatic shift from the $45 billion loss that Treasury had projected in its AIG investment just six months earlier,” Neil Barofsky, special inspector general for TARP, said in a report today. “While AIG’s fortune may have indeed improved during the course of those six months, there is a serious question over how much of this decrease comes from a change in Treasury’s methodology for calculating the loss as opposed to AIG’s improved prospects.”

AIG, once the world’s largest insurer, turned over a majority stake to the U.S. in 2008 as part of a rescue that grew to $182.3 billion. The exit plan converts the government’s preferred stock into 1.66 billion common shares for sale on the open market and taps a Treasury facility for as much as $22 billion to retire Federal Reserve bailout vehicles.

For Treasury to break even on its $49.1 billion investment in AIG stock, the shares must be sold for almost $30. The company traded below that level for more than two months this year, reaching a low of $22.15 on Feb. 8.

AIG slipped 13 cents to $41.43 at 2:16 p.m. in New York Stock Exchange composite trading today. The insurer has advanced about 38 percent this year.

TARP Bailed Out Companies Fund Candidates

" A hypocrite despises those whom he

deceives, but has no respect for himself.

He would make a dupe of himself too,

if he could." 

(William Hazlitt)

By T. W. Farnham

Washington Post Staff Writer
Sunday, October 24, 2010; 10:02 PM

Senate Minority Leader Mitch McConnell (Ky.) was a fierce critic of the federal bailout of General Motors and Chrysler last year, saying he could not "ask the American taxpayer to subsidize failure."

But GM doesn't seem to hold a grudge.

The political action committee formed by the company, which is now largely owned by taxpayers, cut McConnell a $5,000 campaign check in September, a small piece of the $190,000 it donated to campaigns in the past month.

Although GM suspended its contributions while it solicited the government for financial help, it is now back in the game of political giving, increasing donations from its federal PAC steadily over the past few months.

It is not alone: Companies that received federal bailout money, including some that still owe money to the government, are giving to political candidates with vigor. Among companies with PACs, the 23 that received $1 billion or more in federal money through the Troubled Assets Relief Program (TARP) gave a total of $1.4 million to candidates in September, up from $466,000 the month before.

Most of those donations are going to Republican candidates, although the TARP program was approved primarily with Democratic support. President Obama expanded it to cover GM and other automakers.

Greg Martin, a GM spokesman, said that the company's PAC donations come from voluntary contributions from its employees. "We contribute to candidates who thoughtfully approach issues that are important to the auto industry and manufacturing," he said. "If you look at our giving, we have given equally to both parties' leadership."

Some of the generosity to Republicans can be explained by the expectation that the party will make huge gains in Congress. But another factor is the Democratic Party's push for financial-regulation legislation this year. The new law, which passed the Senate with the votes of three Republicans and all but one Democrat, placed new curbs on banks and introduced a regulator to vet financial products for consumers. Most Republicans, and banks, say the law creates too many new restrictions.

Scott Talbott, a lobbyist with the Financial Services Roundtable, said another factor could be the tone some Democrats used against financial firms. At one point, Obama called Wall Street executives "fat cats."

"The entire industry was painted with a broad brush, and there was dissatisfaction with that," Talbott said.

Democrats have been abandoned by individual Wall Street donors as well as corporate PACs, leaving the party without an important source of funding as it fends off aggressive Republican challengers.

One company that used TARP funds to invest in toxic assets from other banks is getting into the political giving mode for the first time. The investment fund BlackRock created a federal PAC in March, only a few months after the company used $2 billion in government money to invest in those assets. Its newly formed PAC has cut campaign checks to federal lawmakers including Rep. Barney Frank (D.-Mass.), the chairman of the House Financial Services Committee.

More on hypocritical Politicians

The Barney Frank's Campaign Contribution Shuffle rakes in $40,000 from bailed out banks

In a statement last night, a Frank spokesman said the congressman

has declined to take contributions only from the top 10 TARP

recipients, but he noted he would accept donations from those

institutions once they repaid their debts.

By Dave Wedge
Boston Herald
10/22/10
U.S. Rep. Barney Frank, in an intensifying clash with GOP upstart Sean Bielat, has pledged not to take campaign cash from lenders that got federal bailouts — yet has raked in more than $40,000 from bank execs and special interests connected to the staggering government loans, a Herald review found.

Frank vowed in February 2009 that he wouldn’t accept campaign donations from banks that received money under the $700 billion Troubled Asset Relief Program (TARP) or political action committees tied to such institutions.

But Frank has hauled in thousands from top execs at Bank of America, Citizens Bank, Wainwright Bank, JP Morgan Chase and other institutions that received billions in TARP money.

Just yesterday, Frank made new campaign finance disclosures showing he received $17,000 from top executives of Bank of America — including $2,000 from CEO Brian Moynihan. B of A received $45 billion in bailout money. In all, Frank has hauled in at least $27,000 since 2009 from bank execs — and $13,000 from PACs — connected to banks that received TARP funding, including:

• $5,000 earlier this month from the Bank of America Corp. Federal PAC;
• $10,000 in August and September from the Bipartisan PAC/ Bank of New York Mellon Corp.; Mellon received $3 billion from TARP;
• $2,000 in June 2009 from the Financial Services Roundtable PAC, which counts TARP recipients B of A, JP Morgan Chase and Wells Fargo among its members; and
• $1,000 in March from U.S. Bancorp PAC; the Minnesota-based bank received more than $6 billion in TARP funds.

“Now that he’s in the political fight of his life, Barney Frank tossed aside his phony pledge and lined his pockets with cash from his closest allies — Wall Street executives,” said National Republican Congressional Committee spokesman Tory Mazzola. “He made a promise to voters, but obviously he cares more about saving his career as a politician than with keeping his word.”

In a statement last night, a Frank spokesman said the congressman has declined to take contributions only from the top 10 TARP recipients, but he noted he would accept donations from those institutions once they repaid their debts.

Meanwhile, in a release responding to a Herald report yesterday that Bielat is tapping Wall Street bigwigs in a bid to force Frank into a Martha Coakley-style collapse, Frank said, “Mr. Bielat’s eagerness to serve as the agent of those wealthy Wall Streeters who seek to undo the financial reform bill explains why this race has become so expensive and why it is so important in order to prevent another economic crisis.”

The 15-term Democratic congressman has scrambled to stem the surging Bielat, pumping $200,000 of his own cash into his campaign. New filings show Frank has shelled out $700,000 in the first two weeks of October and has $650,000 to Bielat’s $420,000. Bielat, a 35-year-old Marine, reported he has raised $650,000 so far in October, records show.

In a Feb. 23, 2009, article in the Washington publication Roll Call, Frank is quoted saying, “I won’t take any PAC money from banks that took TARP funds, nor would I take it from the top executive.” The article made no mention of the policy only applying to the top 10 TARP fund recipients. Frank said he floated the loan to his campaign to counter an expected flood of right-wing attack ads, including from the national Tea Party

A Trip Down Memory Lane Courtesy of:

Open Secrets.org (Center for Responsive Politics)

Lindsay Renick Mayer

February 10, 2009

The eight financial institutions at Wednesday's hearing have given $63,250 to the chairman of the committee, Rep. Barney Frank (D-Mass.), and JPMorgan has given him more money than any other company, union or organization since 1989. The House Financial Services Committee has jurisdiction over the housing and financial sectors. Complete article

Big Banks and Hedge Funds...The New Tax Man, courtesy of TARP...and not even a thank you note from the banks.

At first, property owners may owe

little more than a few hundred dollars,

only to find their bills soaring

into the thousands.

Five big banks involved in the industry,

known as tax lien investing, collected a total

of more than $106 billion in bailout money

through the government's Troubled Asset Relief Program, known as TARP.

By Fred Schulte and Ben Protess
Huffington Post Investigative Fund
10/18/10

Nearly a dozen major banks and hedge funds, anticipating quick profits from homeowners who fall behind on property taxes, are quietly plowing hundreds of millions of dollars into businesses that collect the debts, tack on escalating fees and threaten to foreclose on the homes of those who fail to pay.

The Wall Street investors, which include Bank of America and JPMorgan Chase & Co., have purchased from local governments the right to collect delinquent taxes on several hundred thousand properties, many in distressed housing markets, the Huffington Post Investigative Fund has found.

In many cases, the banks and hedge funds created new companies to do their bidding. They gave the companies obscure, even whimsical names and used post office boxes as their addresses, masking Wall Street's dominant new role as a surrogate tax collector.

In exchange for paying overdue real estate taxes, the investors gain legal powers from local governments to collect the debt and levy fees. At first, property owners may owe little more than a few hundred dollars, only to find their bills soaring into the thousands. In some jurisdictions, the new Wall Street tax collectors also chase debtors over other small bills, such as for water, sewer and sidewalk repair.

Some states allow the investors to tack on as much as 18 percent interest and a passel of legal fees and other charges. When property owners fail to make full payment, the investors can sue to foreclose - in some states within as little as six months.

In June, Bank of America snatched up liens on properties in Florida owned by low-income residents and nonprofit public interest groups, including a Salvation Army shelter, a preschool and a wildlife rescue group involved in the Gulf of Mexico oil spill cleanup, the Investigative Fund found in its examination. Bank of America also bought liens on properties of the wealthy, including a professional basketball star with the Los Angeles Lakers, Lamar Odom. Link to complete Article

Geithner Myth: TARP was a gift for Wall Street that did nothing for Main Street. UPDATE: Wall Street Pay: $144 BILLION

Tim Geithner tackles TARP Myths in his

October 10th Washington Post Op-Ed piece

Myth #2

The TARP was a gift for Wall Street that did nothing for Main Street.

Geithner's Myth Buster

To protect Main Street from the damage caused by a financial crisis, you must first put out the financial fire. That is precisely what the government did. And we focused resources directly on the victims of the crisis, rather than on the institutions that helped cause it.


By Liz Rappaport, Aaron Lucchetti and Stephen Grocer
10/11/10
The Wall Street Journal

Pay on Wall Street is on pace to break a record high for a second consecutive year, according to a study conducted by The Wall Street Journal.

About three dozen of the top publicly held securities and investment-services firms—which include banks, investment banks, hedge funds, money-management firms and securities exchanges—are set to pay $144 billion in compensation and benefits this year, a 4% increase from the $139 billion paid out in 2009, according to the survey. Compensation was expected to rise at 26 of the 35 firms.

The data showed that revenue was expected to rise at 29 of the 35 firms surveyed, but at a slower pace than pay. Wall Street revenue is expected to rise 3%, to $448 billion from $433 billion, despite a slowdown in some high-profile activities like stock and bond trading.

Overall, Wall Street is expected to pay 32.1% of its revenue to employees, the same as last year, but below the 36% in 2007. Profits, which were depressed by losses in the past two years, have bounced back from the 2008 crisis. But the estimated 2010 profit of $61.3 billion for the firms surveyed still falls about 20% short from the record $82 billion in 2006. Over that same period, compensation across the firms in the survey increased 23%.

"Until focus of these institutions changes from revenue generation to long-term shareholder value, we will see these outrageous pay packages and compensation levels," said Charles Elson, director of the Weinberg Center for Corporate Governance.

Firms surveyed said it is too early to comment on 2010 compensation levels. Many firms say that if they don't adequately compensate employees, they risk losing top talent.

The pay numbers show that firms, benefiting from low interest rates and strong international markets, continue to base their pay on economic and market conditions rather than the level of pressure coming from regulators in Washington and overseas.

Still, politicians and market watchdogs have been successful in influencing the structure of pay, if not its levels. They have pushed for more compensation in stock and other deferred instruments. Firms have found other ways to limit the risks employees take for short-term gains, which was mandatory for firms that accepted government funds during the financial crisis.

Many large Wall Street firms have come out from under the Treasury Department's rules about pay. But with the passage of financial-overhaul legislation that aims to change pay policies, many public firms are still awaiting specific rules. Those rules, as required by the Dodd-Frank financial regulatory bill, won't be written for several months.

"The current wave of regulation is helping keep comp relatively flat," said Steven Eckhaus, a partner at law firm Katten Muchin Rosenman LLP.

There are some signs that pay might slow down in coming quarters. Tough new rules about how much capital banks must hold could force Wall Street to cut back on compensation in an effort to preserve returns on equity for shareholders, analysts say. Since Wall Street firms pay out up to half of their revenue in compensation, cutting back on that large cost can meaningfully increase profits left for shareholders. Complete WSJ Article

Janet Tavakoli: 'This is the biggest fraud in the history of the capital markets'

By Ezra Klein
Washington Post
October 8, 2010

Ezra Klein: What’s happening here? Why are we suddenly faced with a crisis that wasn’t apparent two weeks ago?
 
Janet Tavakoli: This is the biggest fraud in the history of the capital markets. And it’s not something that happened last week. It happened when these loans were originated, in some cases years ago. Loans have representations and warranties that have to be met. In the past, you had a certain period of time, 60 to 90 days, where you sort through these loans and, if they’re bad, you kick them back. If the documentation wasn’t correct, you’d kick it back. If you found the incomes of the buyers had been overstated, or the houses had been appraised at twice their worth, you’d kick it back. But that didn’t happen here. And it turned out there were loan files that were missing required documentation. Part of putting the deal together is that the securitization professional, and in this case that’s banks like Goldman Sachs and JP Morgan, has to watch for this stuff. It’s called perfecting the security, and it’s not optional.
 
EK: And how much danger are the banks themselves in?
 
JT: When we had the financial crisis, the first thing the banks did was run to Congress and ask for accounting relief. They asked to be able to avoid pricing this stuff at the price where people would buy them. So no one can tell you the size of the hole in these balance sheets. We’ve thrown a lot of money at it. TARP was just the tip of the iceberg. We’ve given them guarantees on debts, low-cost funding from the Fed. But a lot of these mortgages just cannot be saved. Had we acknowledged this problem in 2005, we could’ve cleaned it up for a few hundred billion dollars. But we didn’t. Banks were lying and committing fraud, and our regulators were covering them and so a bad problem has become a hellacious one.
 
EK: My understanding is that this now pits the banks against the investors they sold these products too. The investors are going to court to argue that the products were flawed and the banks need to take them back.
 
JT: Many investors now are waking up to the fact that they were defrauded. Even sophisticated investors. If you did your due diligence but material information was withheld, you can recover. It’ll be a case-by-by-case basis.
 
EK: Given that our financial system is still fragile, isn’t that a disaster for the economy? Will credit freeze again?
 
JT: I disagree. In order to make the financial system healthy, we need to recognize the extent of our losses and begin facing the fraud. Then the market will be trustworthy again and people will start to participate.
 
EK: It sounds almost like you’re saying we still need to go through the end of our financial crisis.
 
JT: Yes, but I wouldn’t say crisis. This can be done with a resolution trust corporation, the way we cleaned up the S and Ls. The system got back on its feet faster because we grappled with the problems. The shareholders would be wiped out and the debt holders would have to take a discount on their debt and they’d get a debt-for-equity swap. Instead we poured TARP money into a pit and meanwhile the banks are paying huge bonuses to some people who should be made accountable for fraud. The financial crisis was a product of our irrational reaction, which protected crony capitalism rather than capitalism. In capitalism, the shareholders who took the risk would be wiped out and the debt holders would take a discount but banking would go on.
 
Janet Tavakoli is the founder and president of Tavakoli Structured Finance Inc. She sounded some of the earliest warnings on the structured finance market, leading the University of Chicago to profile her as a "Structured Success," and Business Week to call her "The Cassandra of Credit Derivatives." 

Treasury Estimates TARP Bailout Loss at $29 Billion

The Treasury Department expects to lose

$29 billionon the federal bailouts

stemming from the financial crisis

By Louise Story
The New York Times
10/5/10

The Treasury Department expects to lose $29 billion on the federal bailouts stemming from the financial crisis, with most of the losses in its housing finance program and the auto rescue.

In a report released on Tuesday, the administration said it expected a $17 billion loss from its investments in General Motors, Chrysler and the auto finance companies, as well as a $46 billion loss from housing programs like the mortgage modification program known as the Home Affordable Modification Program.

The new figures, which include profits that offset some of the losses, come just as the Obama administration tries to wind down the bailout program known as the Troubled Asset Relief Program, or TARP. Last week, the government announced a plan to exit its investment in the insurer the American International Group.

Treasury officials have declared the bailout a success, emphasizing that much of the program’s money has been returned and that losses are now likely to be less than once expected. The cost, the report says, is far below the $350 billion the Congressional Budget Office once estimated.

“Because of the success of the program, TARP will likely cost a fraction of this amount,” the report said.

Recently, the Congressional Budget Office put the cost at $66 billion. And, after the bailout, the government will still be left with its investments in Fannie Mae and Freddie Mac, the government-backed housing finance companies. The report said Fannie and Freddie were expected to cause “substantial losses,” but it noted that they were financed using other funds, not the troubled asset funds.

The Treasury arrived at its figure by adding in profits that it expects to receive on shares of A.I.G. stock. Those shares were given to the Treasury by the Federal Reserve Bank of New York, and the Treasury expects they will yield a $22 billion profit. Without those shares, the Treasury would have reported a $51 billion loss, rather than a $29 billion loss, the report said.

In total, the Treasury has received back about $204 billion of the bailout funds, or just over half of the money it doled out. The report segregated the money given out under the Bush administration — $294 billion — from the $94 billion awarded under the current administration. All of the large bank bailouts were made under the prior administration, and since then, the money was invested in small banks, automakers, housing programs and A.I.G., the report said.

The bright spot, according to the report, were the bank paybacks. Nearly 80 percent of the money given to banks has been paid back. The Treasury also received $26.8 billion from banks through interest payments on the investments as well as sales of warrants the government received in the banks.

The report did not break down the sources of the automobile losses. The government gave the most money to General Motors and is seeking to recoup some through an initial public offering. The government also gave funds to Chrysler, Chrysler Financial and Ally Bank, formerly GMAC, the auto financing arm of G.M.

The housing programs, the report said, are not expected to return money to the government. Though $45.6 billion has been committed to programs, just $500 million has been paid out, because the Treasury plans to pay out the funds over time if, for instance, modified loans become permanent. The programs include mortgage modifications as well as funds for unemployed homeowners and those whose homes are underwater, or worth less than their mortgage debt.

The last bailout awards were announced last week, as part of the A.I.G. exit plan. The Treasury plans to give A.I.G. $22 billion more. That money will help A.I.G. pay down its debt to the Federal Reserve of New York. In exchange, the Treasury is also receiving the rights to proceeds from two special purpose vehicles from the Fed. The vehicles will pay out based on profits A.I.G. receives on sales of two of its units. The Treasury is predicting no losses on those.

The Government Accountability Office also released a report on Monday about the bailout, which said that the Treasury gave funds to 66 banks that were known to be weak. The bailout program was supposedly intended for banks that were healthy enough to survive without the funds.

In response to that report, a Treasury spokesman said that small banks that received bailout funds lent more money than banks that did not.