The Term Asset Backed Securities Loan Facility (TALF) program has succeeded in reviving the consumer loan-backed market and may even return a profit for the Federal Reserve, according to William Dudley, one of the main architects of the facility.
In an interview with Dow Jones Newswires, Dudley, the president and chief executive officer of the Federal Reserve Bank of New York, said that the TALF program has reignited the market for securities backed by loans on vehicles and credit-card debt.
TALF was launched by the Fed to entice buyers to buy new bonds backed by auto and student loans. At the time, investors were reluctant to purchase securities backed by shaky collateral, fearing they would lose their entire investment.
Bailout
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AIG Could Seek Another Bailout as it Struggles to Return to Profitability
American International Group Inc. (NYSE: AIG), the insurance giant that received billions in federal bailout money, on Friday reported an $8.9 billion fourth-quarter loss. AIG dismissed the loss as part of its rebuilding process, but it also acknowledged that it may require even more government financing.
The loss is not nearly as bad as the previous year's $61.7 billion fourth-quarter stumble - the biggest quarterly loss in corporate history - but at $65.51 a share, it's still much higher than analysts predicted.
Amid scrutiny, AIG in September 2008 received a $182.3 billion bailout, which gave the government an 80% stake in its business. Since then, AIG's debt pay-off funds have generally come from the sale of its non-core assets. AIG recognizes these "fire-sales" as the best way to pay back its debts while also streamlining its business.
The loss is not nearly as bad as the previous year's $61.7 billion fourth-quarter stumble - the biggest quarterly loss in corporate history - but at $65.51 a share, it's still much higher than analysts predicted.
Amid scrutiny, AIG in September 2008 received a $182.3 billion bailout, which gave the government an 80% stake in its business. Since then, AIG's debt pay-off funds have generally come from the sale of its non-core assets. AIG recognizes these "fire-sales" as the best way to pay back its debts while also streamlining its business.
Where's the "Big Money" Headed Now?
The remarkable week that just concluded actually began on February 12, which was two Fridays ago. Stocks plunged in the opening minutes of trading that morning as investors' faith in the global economic recovery was shaken. In China, policymakers again tightened monetary policy in a fight against rapid credit growth and fast rising asset prices. In Europe, which is plagued by concerns over the bailout of deeply indebted Greece, a report showed economic growth slowing dramatically.
For a few minutes, it looked like all of the prior week's advance would be lost and stocks were preparing to plunge into oblivion. But then, encouraged by a positive retail sales report, buyers swamped the tape -- focusing their attention on smaller, riskier companies, particularly in the technology sector. And off we went for the next six sessions.
To find out where the "Big Money" is headed now, click here.
For a few minutes, it looked like all of the prior week's advance would be lost and stocks were preparing to plunge into oblivion. But then, encouraged by a positive retail sales report, buyers swamped the tape -- focusing their attention on smaller, riskier companies, particularly in the technology sector. And off we went for the next six sessions.
To find out where the "Big Money" is headed now, click here.
Warning: This is Not Another Wall Street Conspiracy Theory, These are the Facts
Just last week, the House Committee on Oversight and Government Reform held a hearing on the U.S. Federal Reserve's decision to directly pay billions of dollars to banks as part of its scheme to bail out insurance giant American International Group Inc. (NYSE: AIG).
According to committee Chairman Dennis Kucinich, D-Ohio, the testimony that congressmen heard just didn't "pass the smell test."
What really stinks about the whole mess is not only the cover-up of what really happened and why, but the inability of anybody in Congress to actually do their homework and be able to frame pointed questions and get to the truth.
It's not complicated, but it is convoluted. Here are the facts and some questions that Congress needs to ask - and that the American people deserve straight answers to.
According to committee Chairman Dennis Kucinich, D-Ohio, the testimony that congressmen heard just didn't "pass the smell test."
What really stinks about the whole mess is not only the cover-up of what really happened and why, but the inability of anybody in Congress to actually do their homework and be able to frame pointed questions and get to the truth.
It's not complicated, but it is convoluted. Here are the facts and some questions that Congress needs to ask - and that the American people deserve straight answers to.
For the inside story on AIG's collapse, read on...
Geithner's Fed Pressured AIG to Keep Quiet on "Back Door Bailouts"
The Federal Reserve Bank of New York, while headed by current Treasury Secretary Timothy Geithner, pressured American International Group Inc. (NYSE: AIG) to withhold information about payments it made to banks during the peak of the financial crisis, according to a report by Bloomberg News yesterday (Thursday).
A series of emails between the Federal bank and AIG lawyers show that the insurer was told to delete details from public disclosures about payments it made on credit default swaps to such banks as Goldman Sachs Group Inc. (NYSE: GS) and Deutsche Bank AG (NYSE: DB), which were settled for 100 cents on the dollar.
The swap payments, which totaled $62 billion and have been characterized as "back door bailouts" by some lawmakers, are at the center of allegations that Geithner failed to negotiate a better deal for taxpayers.
A series of emails between the Federal bank and AIG lawyers show that the insurer was told to delete details from public disclosures about payments it made on credit default swaps to such banks as Goldman Sachs Group Inc. (NYSE: GS) and Deutsche Bank AG (NYSE: DB), which were settled for 100 cents on the dollar.
The swap payments, which totaled $62 billion and have been characterized as "back door bailouts" by some lawmakers, are at the center of allegations that Geithner failed to negotiate a better deal for taxpayers.
Would You Like to Be My Partner?
I'd like to make you a business offer. Seriously. This is a real offer. In fact, you really can't turn me down, as you'll come to understand in a moment.
Here's the deal. You're going to start a business or expand the one you've got now. It doesn't really matter what you do or what you're going to do. I'll partner with you no matter what business you're in - as long as it's legal. But I can't give you any capital - you have to come up with that on your own. And I won't give you any labor - that's definitely up to you. What I will do, however, is demand that you follow all sorts of rules about what products and services you can offer, how much (and how often) you pay your employees, and where and when you're allowed to operate your business.
That's my role: to tell you what to do.
Here's the deal. You're going to start a business or expand the one you've got now. It doesn't really matter what you do or what you're going to do. I'll partner with you no matter what business you're in - as long as it's legal. But I can't give you any capital - you have to come up with that on your own. And I won't give you any labor - that's definitely up to you. What I will do, however, is demand that you follow all sorts of rules about what products and services you can offer, how much (and how often) you pay your employees, and where and when you're allowed to operate your business.
That's my role: to tell you what to do.
GMAC to Receive Additional $3.5 Billion TARP Bailout
The U.S. government is negotiating to provide GMAC Financial Services with approximately $3.5 billion in bailout funds in addition to the $12.5 billion the company has already received, according to multiple reports.
The U.S. Treasury told the company to raise additional capital as part of government-led stress tests of large banks conducted earlier this year. The tests were designed to identify banking firms that would need more capital to continue lending if the economy faltered in 2009 and 2010.
While the government views GMAC's survival as critically important to the revival of the auto industry, the company's financial troubles are actually linked to its mortgage lending unit Residential Capital LLC, or ResCap.
The U.S. Treasury told the company to raise additional capital as part of government-led stress tests of large banks conducted earlier this year. The tests were designed to identify banking firms that would need more capital to continue lending if the economy faltered in 2009 and 2010.
While the government views GMAC's survival as critically important to the revival of the auto industry, the company's financial troubles are actually linked to its mortgage lending unit Residential Capital LLC, or ResCap.
"Financial Reform" Just Camouflage for Wall Street's Latest Power Play
Anti-Wall Street sentiment makes for a good cover, but behind the scenes and rhetoric, legislators are working with the country's largest financial firms to fashion a new system that concentrates even more risk and reward at fewer banks.
And what's more, the underlying socialization of the system will guarantee the success of excess with the full faith and credit of taxpayers.
On Dec. 11, the U.S. House of Representatives passed the Wall Street Reform and Consumer Protection Act of 2009, which among other things, creates a consumer protection agency, strips the U.S. Federal Reserve of certain powers and subjects it to politicization, calls for big banks to finance a $150 billion bailout fund and gives the government power to break up or coddle financial firms as they see fit.
The Senate will try and reconcile the House bill with an earlier version of its own bill. Legislators are hoping to have a final bill ready sometime in early 2010.
But, in a testament to the power of Wall Street, what's on the table is what works for bankers and the Street. The resulting de-facto socialization of American banking is nothing more than Wall Street's secret agenda to eliminate competition, grow bigger profit engines and rely on the perception of a socialized system to support cheap funding.
And what's more, the underlying socialization of the system will guarantee the success of excess with the full faith and credit of taxpayers.
On Dec. 11, the U.S. House of Representatives passed the Wall Street Reform and Consumer Protection Act of 2009, which among other things, creates a consumer protection agency, strips the U.S. Federal Reserve of certain powers and subjects it to politicization, calls for big banks to finance a $150 billion bailout fund and gives the government power to break up or coddle financial firms as they see fit.
The Senate will try and reconcile the House bill with an earlier version of its own bill. Legislators are hoping to have a final bill ready sometime in early 2010.
But, in a testament to the power of Wall Street, what's on the table is what works for bankers and the Street. The resulting de-facto socialization of American banking is nothing more than Wall Street's secret agenda to eliminate competition, grow bigger profit engines and rely on the perception of a socialized system to support cheap funding.
Lawmakers Looking to Use Excess TARP Funds for a Second Stimulus
With the unemployment rate still lingering above 10%, House Democrats are suggesting some of the excess funds from the government's Troubled Asset Relief Program (TARP) be used to promote job creation in what would essentially be a second stimulus.
The Obama administration said in August that TARP – which Congress funded with $700 billion of taxpayer money – would only cost the $341 billion once banks repay government loans, injections and other investments. Now, the U.S. Treasury can take another $200 billion off of that, Reuters reported, citing an anonymous Treasury official.
"We're going to explain that we're going to have substantial savings, that we're going to have very substantial resources we can make available to support not just the immediate priorities the country faces in spurring investment in job creation, but also to meet our long term fiscal challenges," Treasury Secretary Timothy Geithner said in an interview with Bloomberg.
The Obama administration said in August that TARP – which Congress funded with $700 billion of taxpayer money – would only cost the $341 billion once banks repay government loans, injections and other investments. Now, the U.S. Treasury can take another $200 billion off of that, Reuters reported, citing an anonymous Treasury official.
"We're going to explain that we're going to have substantial savings, that we're going to have very substantial resources we can make available to support not just the immediate priorities the country faces in spurring investment in job creation, but also to meet our long term fiscal challenges," Treasury Secretary Timothy Geithner said in an interview with Bloomberg.
Investment News Briefs
"New" GM to Begin Bailout Repayment; Dollar Drops to 15-Month Low, Gold Continues Record Highs; SEC to Investigate Trading Prior to 3Com/HP Deal; Sprint Pays Down Loan, Stock is Upgraded; Canon to Buy Europe's Largest Printer Maker; Hitachi to Raise $4.6 Billion in Stock and Bond Sale; Cisco Ups Bid for Video Conference Equipment Maker; Millions of U.S. Taxpayers May Unexpectedly Owe, Treasury Says
Bondholders the Big Winners as CIT Files for Bankruptcy
CIT Group Inc. (NYSE: CIT) on Sunday filed for Chapter 11 bankruptcy protection. CIT's filing is the fifth largest bankruptcy in U.S. history, behind Lehman Brothers Holdings Inc. (OTC: LEHMQ), Washington Mutual Inc. (OTC: WAMUQ), WorldCom Inc., and General Motors Corp.
But unlike Lehman Bros. and Washington Mutual, which were completely broken apart and branches of their businesses sold off, CIT expects to wipe out $10 billion in unsecured debt and emerge from its bankruptcy with its core business intact.
"None of CIT's operating subsidiaries, including CIT bank, will be included in the filings," the company said in a statement. "As a result, all operating entities are expected to continue normal operations during the pendency cases."
But unlike Lehman Bros. and Washington Mutual, which were completely broken apart and branches of their businesses sold off, CIT expects to wipe out $10 billion in unsecured debt and emerge from its bankruptcy with its core business intact.
"None of CIT's operating subsidiaries, including CIT bank, will be included in the filings," the company said in a statement. "As a result, all operating entities are expected to continue normal operations during the pendency cases."
Hidden Traps Make Bank Stocks a Bad Deal
Billionaire investor George Soros said yesterday (Monday) that the U.S. recovery would be a slow one because of all the "basically bankrupt" financial companies impeding it. U.S. Federal Reserve Chairman Ben S. Bernanke and Congress agreed Friday that the financial system – not the American taxpayer – should bear the costs of bank bailouts. Sheila […]
CIT Offers Debt Exchange, Draws Up Bankruptcy Plans
In what is being viewed as a last-ditch effort to avoid filing for protection from its creditors, commercial lender CIT Group Inc. (NYSE: CIT) is offering bondholders a debt exchange, while still preparing for a likely chapter 11 bankruptcy filing. CIT in July raised $3 billion from bondholders to keep afloat after it was denied […]
It's the Best Investment in North America – and It Isn't the United States
The U.S. stock market has run up magnificently in the last six months. The U.S. economy has begun to recover, but its performance has fallen short of expectations. And with good reason. The United States has a bigger and more-troubled financial sector than most countries. It also has a bigger overhang from the housing bubble, […]
Citigroup Lifts Curtain on $36.5 Billion in TARP Money; Will Other Banks Follow?
By Mike Caggeso Associate Editor Money Morning Citigroup Inc. (C) is lifting the curtain on the $45 billion in taxpayer capital it received, saying it plans to use $36.5 billion to fund U.S. mortgage loans and assist credit card holders and businesses. In the first of four quarterly reports, Citigroup said the money it received […]