David Kirkpatrick

August 24, 2010

Fed must reveal details of bailout

Filed under: Business, Politics — David Kirkpatrick @ 1:38 pm

Bloomberg News won in court to require the Federal Reserve to disclose the nuts and bolts of the financial bailout when the U.S. Court of Appeals in New York turned down an appeal of Fed court loss in March. I’m with Bloomberg on this. Public money was used and there’s no conceivable reason why the public should be kept in the dark on the who’s and how muches went into the bailout. If some businesses (or the government) get embarrassed, so be it. And if financial institutions didn’t want make any business details public, they shouldn’t have taken any public money. That public thing ought to be a two-way street. Looks like the New York Appeals Court agrees.

From the link:

The full U.S. Court of Appeals in New York has refused to review a March decision by three of its judges requiring the Fed to release records of the $2 trillion in emergency loans it extended to banks and other institutions beginning in 2008.

From Bloomberg:

Unless the court stays its decision, the Fed will have seven days to disclose the documents. In the event of a stay, the central bank and the Clearing House Association LLC, an organization of 20 commercial banks that joined the Fed in defense of the lawsuit, will have 90 days to petition the Supreme Court to consider their appeal. The Clearing House has already said it will ask the high court to rule on the case.

A Fed spokesman said the central bank was “considering our options.”

Bloomberg sued the Fed in November 2008, arguing that the public has the right to know the names of the banks that borrowed from the agency, the amounts of the loans and what kind of collateral was posted.

May 27, 2010

Fallout from the financial meltdown and bailout

Lehman Brothers Holdings is suing JP Morgan Chase.

From the link:

Lehman claims JP Morgan “siphoned off” billions of dollars of assets in the days leading up to its bankruptcy.

JP Morgan was Lehman’s main short-term lender before its September 2008 collapse. It is accused of contributing to the failure by demanding $8.6bn of collateral as credit markets tightened.

JP Morgan has called the lawsuit “ill-conceived”.

May 13, 2010

GOP wants to block “Euro bailout”

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 7:07 pm

This is simply shortsighted, puts the cart before the horse and is, well, really inane. I abhor the idea that US dollars could be used to bailout foreign companies or governments, but the reality is we do it regularly. And whatever code words someone wants to throw around, like “new world order” to offer one example, we actually do live in a global economy where if any of its moving parts — US, Asia or yes, even the European Union — catastrophically fails, everybody else does, too. Ever try to drive a car with one blown-out tire?

From the link:

After a week of preemptive attacks on a possible IMF bailout of Greece, Rep. Mike Pence (R-Ind.) introduces the European Bailout Protection Act, aimed at preventing taxpayer dollars from going to a rescue plan.

“This legislation would require that countries like Greece cut spending and put their own fiscal house in order,” says Pence, backed up by other members of the House GOP, “instead of looking to the United States for a bailout. We face record unemployment and a debt crisis of our own, and American taxpayers should not be forced to bear the risk for nations that have avoided making tough choices.”

(Hat tip: Drudge Report)

May 2, 2010

GM lying about paying back fed bailout

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 6:12 pm

To paraphrase Paul Harvey, here’s the rest of the story

From the second link:

General Motors CEO Ed Whitacre has bragged in TV commercials and newspaper columns that GM has paid back its bailout “in full and ahead of schedule.”

As with the Pontiac Aztek, an ugly exterior masks an ever darker problem: Whitacre is being fanciful to the point of deceit. GM received $50 billion in TARP funds (never mind that TARP was only supposed to cover financial institutions). About $7 billion of that came in the form of a straight-up, low-interest loan. And about $13 billion came in the form of an escrow account.

So how has GM, which lost $38 billion in 2007 even as it sold 9.4 million cars, paid back its debt? It took money from the escrow account to pay back the $6.7 billion loan.

April 6, 2010

The bailout ROI

I dissed the entire bailout move and have now been proven beyond wrong. Who knows how we got to this point, but the return-on-investment has been dramatic.

From the link:

U.S. taxpayers earned an annualized 8.5 percent return from the government’s bailout of 49 financial firms, underscoring efforts by the industry to speed up repayments and warrant repurchases, according to a report by SNL Financial.

Firms such as Citigroup, (C) which still has common shares held by the U.S. Treasury Department, and rivals that have made partial redemptions were excluded from the analysis, SNL Financial said in a statement on Monday.

Proceeds from Troubled Asset Relief Program (TARP) warrant repurchases and auctions led to a surge in returns through March 30, SNL said. So far, since the start of the program in late 2008, 64 institutions have fully repaid government aid.

March 13, 2010

Want to get mad at the bank bailout all over again?

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 2:50 pm

Read this report on the shenanigans Lehman Brothers undertook to hide its precarious financial state. Recall the Lehman bankruptcy is what really freaked everyone out and even though it might not have been the actual cause of the bank bailouts, it was most likely the key trigger.

From the link:

It is the Wall Street equivalent of a coroner’s report — a 2,200-page document that lays out, in new and startling detail, how Lehman Brothers used accounting sleight of hand to conceal the bad investments that led to its undoing.

The report, compiled by an examiner for the bank, now bankrupt, hit Wall Street with a thud late Thursday. The 158-year-old company, it concluded, died from multiple causes. Among them were bad mortgage holdings and, less directly, demands by rivals like JPMorgan Chase and Citigroup, that the foundering bank post collateral against loans it desperately needed.

And:

According to the report, Lehman used what amounted to financial engineering to temporarily shuffle $50 billion of assets off its books in the months before its collapse in September 2008 to conceal its dependence on leverage, or borrowed money. Senior Lehman executives, as well as the bank’s accountants at Ernst & Young, were aware of the moves, according to Mr. Valukas, the chairman of the law firm Jenner & Block and a former federal prosecutor, who filed the report in connection with Lehman’s bankruptcy case.

Richard S. Fuld Jr., Lehman’s former chief executive, certified the misleading accounts, the report said.

December 7, 2009

The bank bailout may end up in the black

Who’d a thunk this a year ago?

From the link:

The Treasury Department expects to recover all but $42 billion of the $370 billion it has lent to ailing companies since the financial crisis began last year, with the portion lent to banks actually showing a slight profit, according to a new Treasury report.

The new assessment of the $700 billion bailout program, provided by two Treasury officials on Sunday ahead of a report to Congress on Monday, is vastly improved from the Obama administration’s estimates last summer of $341 billion in potential losses from the Troubled Asset Relief Program. That figure anticipated more financial troubles requiring intervention.

The officials said the government could ultimately lose $100 billion more from the bailout program in new loans to banks, aid to troubled homeowners and credit to small businesses.

Still, the new estimates would lower the administration’s deficit forecast for this fiscal year, which began in October, to about $1.3 trillion, from $1.5 trillion.

August 14, 2009

Here’s a handy bailout tracker …

from CNNMoney.

Want to see what’s happening with all that bailout money and what’s gone where with Troubled Asset Relief Program, Federal Reserve rescue efforts, Federal stimulus programs, FDIC bank takeovers and other financial and housing initiatives, plus the dollars handed over to Amerian International Group, take a few minutes and hit the link.

February 11, 2009

A brilliant bank bailout plan …

Filed under: Business, Politics — Tags: , , , , , , , — David Kirkpatrick @ 4:47 pm

… from Andy Kessler. Andrew Sullivan called this idea “wacky,” but I like it. Certainly not all that wacky — just a way outside the box.

From the link:

Now with TARP 2.0, renamed a friendly Financial Stability Plan, the idea is to entice private capital to buy these bad loans and derivatives in an effort to set the “market price.” But Mr. Geithner hasn’t solved the dilemma of banks not wanting to sell and become insolvent. Moreover, no one is going to buy these securities ahead of Mr. Geithner’s action with the “full resources of the government” to bring down mortgage payments and reduce mortgage interest rates. Lower mortgage payments means mortgage-backed securities would be worth even less. Six months to a year from now, big banks may still be weak and the ugly “n” word of nationalization will be back.

Mr. Geithner should instead use his “stress test” and nationalize the dead banks via the FDIC — but only for a day or so.

First, strip out all the toxic assets and put them into a holding tank inside the Treasury. Then inject $300 billion in fresh equity for both Citi and Bank of America. Create 10 billion new shares of each of the companies to replace the old ones. The book value of each share could be $30. Very quickly, a new board of directors should be created and a new management team hired. Here’s the tricky part: Who owns the shares? Politics will kill a nationalized bank. So spin them out immediately.

Some $6 trillion in income taxes were paid by individuals in 2006, 2007 and 2008. On a pro-forma basis, send out those 10 billion shares of each bank to taxpayers. They paid for the recapitalization.

Each taxpayer would get about $100 worth of stock for each $1,000 of taxes paid. Of course, each taxpayer has the ability to sell these shares on the open market, maybe at $40, maybe $20, maybe $80. It depends on management, their vision, how much additional capital they are willing to raise, the dividend they declare, etc. Meanwhile, the toxic assets sitting inside the Treasury will have residual value and the proceeds from their eventual sale, I believe, will more than offset the capital injected. That would benefit all citizens, not the managements and shareholders who blew up the banking system in the first place.

February 9, 2009

Bush administration overpaid in bailout

No surprise there. Bush 43 was an eight-year corporate Xmas morning.

From the link:

The Bush administration overpaid tens of billions of dollars for stocks and other assets in its massive bailout last year of Wall Street banks and financial institutions, a new study by a government watchdog says.

The Congressional Oversight Panel, in a report released Friday, said last year’s overpayments amounted to a taxpayer-financed $78 billion subsidy of the firms.

The findings added to the frustrations of lawmakers already wary of the $700 billion rescue plan, known as the Troubled Asset Relief Program. Congress approved the plan last fall, but members of both parties criticized spending decisions by the Bush administration and former Treasury Secretary Henry Paulson.

Financially ailing insurance giant American International Group, which the Treasury Department deemed to be too big to be allowed to fail, received $40 billion from the Treasury for assets valued at $14.8 billion, the oversight panel found.

February 6, 2009

Geithner to announces latest bailout on Monday

This ought to be interesting. Bush’s sad sack team had their shot, now Obama’s team begins in earnest. I honestly don’t know what the answer is here, or that there is an answer for that matter. I do know I’m not alone in having deep suspicion and reservations about all this corporate socialism.

I wish Geithner and the rest of Obama’s team the best of luck. Anyone who hopes for failure (read: Rush Limbaugh and other nut jobs on the right) is only hoping for the failure of the United States.

From the link:

Treasury Secretary Timothy Geithner and other top officials are putting the finishing touches on a plan to overhaul the U.S. government’s $700 billion financial rescue program.

A Treasury official said Geithner will deliver a speech on Monday outlining the new plan.

But Treasury officials would not comment on a report Thursday that the administration is considering proposing changes to the current accounting standard that require banks to carry assets such as mortgage-backed securities on their books at fair value, a process known as “mark to market.”

Critics of this process contend that it has made the current financial crisis worse by forcing banks to slash the value of assets that are currently depressed because of market conditions. Treasury officials said the administration’s plan was not yet complete and would be revealed in Geithner’s speech in Washington next week.

Geithner met Thursday with Federal Reserve Chairman Ben Bernanke and other officials who serve on the President’s Working Group on Financial Markets. The group was formed in the wake of the 1987 stock market crash with the goal of better coordinating the government’s response to market crises.

“This is a critically important group,” Geithner told reporters before the meeting began. “Together this group has the authorities and instruments and experience and talent that are going to be critical to helping solve the financial problems facing our country.”

February 4, 2009

Half million cap on bailout exec salaries

Filed under: Business, Politics — Tags: , , , , , , — David Kirkpatrick @ 1:47 pm

A bold move by Obama. Not sure if I agree with the government-imposed salary cap, but I do agree with the concept in spirit. If nothing else this might knock down the number of corporate begging hands out there.

Instead of stealing from taxpayers, some C-level execs might just think they can keep their salary and right the ship themselves. You know, let capitalism work the way it’s supposed to work.

From the link:

President Barack Obama on Wednesday imposed $500,000 caps on senior executive pay for the most distressed financial institutions receiving federal bailout money, saying Americans are upset with “executives being rewarded for failure.”

Obama announced the dramatic new government intervention into corporate America at the White House, with Treasury Secretary Timothy Geithner at his side. The president said the executive-pay limits are a first step, to be followed by the unveiling next week of a sweeping new framework for spending what remains of the $700 billion financial industry bailout that Congress created last year.

The executive-pay move comes amid a national outcry over huge bonuses to executives heading companies seeking taxpayer dollars to remain afloat. The demand for limits was reinforced by revelations that Wall Street firms paid more than $18 billion in bonuses in 2008 even amid the economic downturn and the massive infusion of taxpayer dollars.

“This is America. We don’t disparage wealth. We don’t begrudge anybody for achieving success,” Obama said. “But what gets people upset — and rightfully so — are executives being rewarded for failure. Especially when those rewards are subsidized by U.S. taxpayers.”

Update — the Wall Street Journal hits back.

January 27, 2009

Bank bailout heading to trillions

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 2:00 pm

Hopefully there’s at least some return on this investment.

From the link:

While the Obama administration hasn’t asked Congress for more money yet, some experts warn that government spending on support for struggling financial services companies will ultimately reach into the trillions of dollars.

The first half of the controversial $700 billion program to help banks has already been spent — mostly on buying up preferred shares of troubled banks.

Part of the remaining $350 billion may be used to purchase troubled assets from bank balance sheets and place them in what Federal Deposit Insurance Corp. chief Sheila Bair has dubbed an “aggregator bank.”

And while taxpayers will surely recover some of that sum eventually, more money is likely to be needed in order for the bank rescue to work.

January 6, 2009

Total bailout cost heading toward $8T

Yep, you read that right — eight trillion dollars. Corporate socialism to the tune of eight trillion dollars. Obama’s plan looks to be in the $700 billion range.

The system, the markets and capitalism have failed on a massive scale. This might simply be a correction in the markets — a correction we are circumventing with this massive bailout — but it’s hard not to place at least some blame at the feet of the economic policies (and lack thereof) of the Bush 43 regime.

There’s a reason Congress feels the need to look into the incompetence of the SEC of the last several years. Instead of competent smaller government, Bush seems to have pressed for bloated government at every step (Department of Homeland Security, anyone) and increasing incompetence across the board with each stride.

With the ongoing financial crisis and this bailout, it really feels like Main Street is full of flaming bags of shit and the taxpayers are being forced to start stomping.

From the first link way up there in the first graf:

Sitting down? It’s time to tally up the federal government’s bailout tab.

There was $29 billion for Bear Stearns, $345 billion for Citigroup. The Federal Reserve put up $600 billion to guarantee money market deposits and has aggressively driven down interest rates to essentially zero.

The list goes on and on. All told, Congress, the Treasury Department, the Federal Reserve and other agencies have taken dozens of steps to prop up the economy.

Total price tag so far: $7.2 trillion in investment and loans. That puts a lot of taxpayer money at risk. Now comes President-elect Barack Obama’s economic stimulus plan, some details of which were made public on Monday. The tally is getting awfully close to $8 trillion.

Obama’s plan would combine tax cuts with infrastructure job creation efforts. Economists say it could serve as an integral piece to the government’s remaining economic recovery puzzle.

“This plan will be the first direct tool to make additions to disposable income,” said Lyle Gramley, an economist with Stanford Group and former Fed governor. “None of the other efforts have done that directly.”

December 22, 2008

Is the auto bailout throwing good money after bad?

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 1:29 pm

Probably.

From the link:

General Motors and Chrysler LLC are finally getting the money they need to avoid an imminent collapse. But will the bailout actually get them back on the road to profits?

The $13.4 billion in federal loans announced by President Bush Friday morning should be enough to get the automakers through the next few months. Then the fate of Detroit will become a problem for President-elect Obama and the newly-elected, much more Democratic Congress to tackle.

But this lifeline won’t solve the immediate problems dogging the entire U.S. auto industry. Tight credit and a weakening U.S. economy have left industrywide auto sales at their weakest point in 26 years.

Chrysler’s North American production is essentially shutting down for at least a month at the end of the day Friday due to weak demand for its vehicles. The North American assembly lines at GM (GM, Fortune 500) will be closed for the entire month of January.

Ford Motor (F, Fortune 500), which benefits from having more cash on hand than its U.S. rivals, only looks good by comparison. It is keeping 10 of its 15 assembly lines idle one week longer than the normal holiday shutdown.

December 10, 2008

Bailout already panned by oversight board

Who could have seen this coming? A crazy, somewhat ad hoc tossing of money toward Wall Street, and looks like the Rust Belt very soon.

Then you have the spectacle of Merrill Lynch CEO John Thain asking for (and quickly backtracking on) a $10 million bonus in a year that saw his company get bought out after recieving $10 billion in government money in October. Talk about out of touch, and exactly why this bailout is ridiculous. Wall Street is still playing by different rules.

I’m no fan of oversight and regulation, but the rules change when government money is involved. Business is one thing, but once you go on the dole the rules change and any business ought to expect and accept a high level of oversight, and maybe even a higher level of regulation (wait, while I take a deep breath after typing that), until that business can repay the government and go back to market on its own two feet, so to speak. 

From the first link:

The report said that Treasury must establish clear measures to gauge the $700 billion Troubled Asset Relief Program. The special panel, which was set up by Congress to oversee the bailout, also said it is “essential” that the Treasury ensure taxpayer funds are being used for their intended purpose.

“American taxpayers need to know that their money is having a tangible effect on improving financial stability, credit availability, and the economy as a whole,” the draft report said. “As a first step, Treasury needs to provide a detailed assessment of whether the funds it has spent so far have had any effect – for better or worse – in these areas.”

Auto bailout looming

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 10:24 am

Looks like a legislative deal is getting close. I know there’s good reasons to help automakers out — namely all the makers are tied via suppliers, etc., and if say GM eats it some suppliers that Toyota, Honda, et.al. depend on will go under as well thusly undermining otherwise healthy manufacturers.

Doesn’t make me feel any better about this entire process — starting with the financial sector — though.

From the link:

Congress and White House negotiators reached an agreement in principle late Tuesday for $15 billion in loans to keep General Motors (GM) and Chrysler afloat into the first quarter.

“We are making progress and are optimistic that we will have a reasonable compromise that will protect taxpayers and ensure the long-term viability of the American auto companies,” said Brendan Daly, spokesman for House Speaker Nancy Pelosi.

Update — Maybe not so fast there on this bailout.

From the link:

Congressional Republicans, left out of negotiations on the package, blasted it. Their opposition reflected the tricky task of enacting yet another federal rescue in a bailout-weary Congress, with Bush’s influence on the wane.

“People realize that this bill is an incredibly weak bill, (and) is the product of an administration that wants to kick the can down the road and let somebody else deal with it,” said Sen. Bob Corker, R-Tenn. “I think it has minimal—very little support in our caucus.”

December 9, 2008

Inside dope on Detroit’s bailout …

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 12:56 am

… from Jonathan Cohn at the New Republic’s “The Plank” blog.

Here’s his scoop and take:

By late Monday night, a rescue for the nation’s ailing automakers was looking a lot more likely. Democratic House leaders released the draft of a new plan and White House officials, though raising some objections, indicated that agreement on a package was close. Senate Democrats remained nervous that they might not yet have the votes in their chamber, where it would take 60 votes to break a Republican filibuster. But Wall Street signalled its optimism by jumping on stocks for Ford (up 24 percent) and General Motors (up 21 percent).

I had a chance read through a draft of the proposal and then talk it over with a few people involved with the discussions. There’s still a fair amount of confusion out there–apologies if anything I am about to say turns out to be inaccurate–but the essential elements seem to be pretty straightforward.

The government will make up to $15 billion in loans available to the industry right away–enough, presumably, to keep Chrysler and General Motors from shutting their doors in the next few months. (Ford, which is in better shape financially, may not need loans at all.) By March 31, the companies would have to submit detailed restructuring plans that follow up on the outlines their executives offered in their testimony last week.

If they met that deadline and provided satisfactory plans, they could perhaps get more loans as necessary–although it’s not clear (to me or to my sources) whether that would require Congress to authorize the money. If the companies failed to submit satisfactory plans, then they couldn’t get more money and would have to pay back what they could, a move that would presumably trigger bankruptcy.

And who would decide whether the plans were “satisfactory?” Ah, that’s where it gets interesting. The Democrats had originally proposed to create an oversight board, perhaps composed of officials from various cabinet agencies including Commerce and Energy. The Bush Administration preferred to appoint a single overseer–that is, an auto “czar.”

November 28, 2008

Will the bailout steal Xmas?

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 11:14 pm

Maybe in a grinchlike fashion.

Here’s one opinion from Cato-at-Liberty:

What do people do when they’re scared about the state of the economy? They stop spending. With each new government “investment” announced by our new overlord Hank Paulson, Americans are going to clutch ever more fiercely at their wallets. They will eat out even less than they’ve been doing. They will rediscover the true spirit of Christmas and give each other hugs instead of Blue-Ray disc players. They will forgo that new coat or pair of winter boots. And they will bring the U.S. economy to a halt.

I do have to say this is a little more chicken-little than I prefer, even though I’ve been pretty gloomy about all this corporate socialism myself. The point is well-taken. The media deserves some blame on the coverage, bloggers (including me) deserve a little blame for continuing to harp on the subject, but at the same time some very wise money managers I know have basically all taken their winter nuts and buried them deeply underground for the duration.

To expect anyone else to do otherwise is not fair and more than a bit foolish.

November 25, 2008

Laffer on the bailout

Arthur Laffer, Reagan’s economist and namesake of the Laffer curvedisses the ongoing financial crisis bailout. I think I’ve made my thoughts about this bailout well known. Probably two words suffices to sum up my opinion — corporate socialism.

From the (second) link:

As you read this, our government is committing enormous sums of money above and beyond normal spending, solely to stimulate the economy and prop up failing companies and markets. These additional sums are huge by any reasonable measure, with estimates as high as $3 trillion in an economy with a GDP of about $15 trillion.

Here’s the bottom line: Instead of making things better, increased spending will only drive our economy further into the ground.

And there is still a lot more spending to come. First it was a $170 billion stimulus package in February of 2008, then material add-ons to both the housing and agricultural bills, followed by Federal Reserve asset swaps with Bear Stearns and a bailout of AIG (which, by the way, isn’t over yet) and then came the debt guarantees of Fannie Mae and Freddie Mac.

Shortly after that, the administration anted up $700 billion in a bailout package, and now Obama, Reid, Pelosi and Bernanke want another stimulus package of $300 billion. Just this week the powers that be are debating bailouts for Michigan’s auto industry. With the slowdown in the economy, tax receipts are now projected to fall sharply. The logic here is totally upside down, and each new measure, far from helping the economy, does enormous damage.

November 19, 2008

Congress wants bailout answers …

… and Paulson is taking the heat. Rightfully so. This whole thing is a disgrace.

I was against it from the get-go, and now that it’s a done deal Paulson and the Treasury Department seem to be no better than a room full of drunk monkeys in handling the process. I wouldn’t let Paulson manage my sock drawer at this point.

From the link:

Members of the House Financial Services Committee grilled Paulson for not doing enough to help distressed homeowners and for failing to force banks that get some of the bailout money to specifically use it to bolster lending to customers, one of the prime reasons behind the rescue package.

“It is essential” that some of the bailout money be used to ease foreclosures, said the panel’s chairman, Rep. Barney Frank, D-Mass., a key player in shaping the package that Congress passed and President George W. Bush signed into law Oct. 3.

Amid fits and starts in the administration’s rollout and direction of the program, “I have to say at this point that public confidence in what we have done so far is lower than anybody would want it to be, to the point where it could be an obstacle to further steps,” Frank lamented.

In a break with the administration, Federal Deposit Insurance Corp. Chairman Sheila Bair, made a fresh pitch for using $24 billion of the bailout pool to help Americans at risk of losing their homes. House Speaker Nancy Pelosi is urging Paulson to support the FDIC plan.

“As foreclosures escalate, we are clearly falling behind the curve,” Bair warned the panel. “Much more aggressive intervention is needed if we are to curb the damage to our neighborhoods and broader economic health.”

October 27, 2008

Well, the “bailout” was a rousing success

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 1:35 pm

Not so much.

From the link:

First, the $700 billion rescue for the U.S. economy was about buying devalued mortgage-backed securities from tottering banks to unclog frozen credit markets.

Then it was about using $250 billion of it to buy stakes in banks. The idea was that banks would use the money to start making loans again.

But reports surfaced that bankers might instead use the money to buy other banks, pay dividends, give employees a raise and executives a bonus, or just sit on it. Insurance companies now want a piece; maybe automakers, too, even though Congress has approved $25 billion in low-interest loans for them.

Three weeks after becoming law, and with the first dollar of the $700 billion yet to go out, officials are just beginning to talk about helping a few strapped homeowners avoid losing their homes in foreclosures.

As the crisis worsens, the government’s reaction keeps changing. Lawmakers in both parties are starting to gripe that the bailout is turning out to be far different from what the Bush administration sold to Congress.

October 14, 2008

Winners and losers in the bailout

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 12:44 pm

If you’re looking for a quick, dirty and dense breakdown on the Emergency Economic Stabilization Act of 2008 — the “bailout” — check out this article from CFO.com. Keep in mind the details are pretty dense and probably require some understanding of the underlying finance and tax principles.

From the link:

The Emergency Economic Stabilization Act of 2008, popularly known as the bailout legislation, contains tax provisions that will benefit some taxpayers and penalize others. Among the widely-reported authorities the new law grants, the $700-billion government bailout legislation allows the Treasury Department to buy troubled mortgage assets from banks and other financial institutions, and invest directly in sputtering banks to bolster their liquidity position. But the new law changes some of the tax rules, too.

Here’s a rundown of those provisions and the affected tax law.

October 3, 2008

House passes bailout on take two

No surprise.

From the WSJ link:

The 263-171 vote was a stark reversal from Monday, when House lawmakers shocked investors and their own leaders by voting against a more narrow version of the plan to buy up distressed assets from financial institutions. That vote sent financial markets tumbling and forced the Bush administration and congressional leadership to scramble and salvage the rescue plan.

The result: a $700 billion bailout for financial firms combined with $152 billion in unrelated tax breaks and broader tools for federal regulators to deal with the growing economic crisis. The Senate passed the bill with a strong, bipartisan tally of 74-25 on Wednesday evening.

October 2, 2008

Bailout news, jobless rate, short selling and rate cuts — oh, my

I’ve done a lot of blogging on the bailout and derided this ongoing process — including banning shorting some stocks (see more below on this) — as “corporate socialism.” I still don’t like the bailout, but now that the Senate passed its revised version I’m guessing the House will go along tomorrow unless the GOP stalwarts feel particularly feisty.

From the second link:

House members are getting another chance to vote on a financial bailout bill that has infuriated millions of voters after the Senate added tax cuts and other sweeteners and passed it handily.

Senators advanced the much-criticized measure in a 74-25 vote late Wednesday, sending it to the other side of the Capitol for a showdown vote expected Friday. The move was calculated to win over enough dissenting House members to get the bill through and reverse Monday’s stunning defeat in the House, party leaders there planned to press rank-and-file members Thursday for the dozen converts they believe they need.

But bailout news isn’t the only story with this ongoing financial crisis. Go below the fold for more on the jobless rate, the latest on shorting and possible additional rate cuts.

(more…)

October 1, 2008

Senate version of bailout plan passes

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 11:43 pm

Predictably.

We’ll see what the House does on Friday.

From the link:

In stark contrast to the House rejection of the plan on Monday, a bipartisan coalition of senators — including both presidential candidates — showed no hesitation in backing a proposal that had drawn public scorn, though the outpouring eased somewhat after a market plunge followed the House defeat. The Senate margin was 74 to 25 in favor of the White House initiative to buy troubled securities in an effort to avoid an economic catastrophe.

Only Senator Edward M. Kennedy, who is being treated for brain cancer, did not vote.

The two Senate leaders, Senators Harry Reid, Democrat of Nevada and the majority leader, and Mitch McConnell of Kentucky, the Republican leader, strongly urged their colleagues to approve the plan despite the political risk given public resentment.

Bailout still in DC debate

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 2:04 pm

Looks like the Senate is voting tonight on a bailout version that might be a bit more palatable to the House GOPers, although I’m with the fiscal conservatives who urge calm over freak-out.

After Monday the markets seem to have settled down to a quiet boil. Major money is flowing into T-bills and away from the open market.

Even though there’s a relative calm, I’ve heard the Martini sisters — Ivana and Anita — are still in high demand on Wall Street. Thanks folks, I’ll be here all week. Be sure to tip your waitstaff and come back Friday for the prime rib lunch special.

From the first link:

Senate leaders scheduled a Wednesday night vote on a $700 billion financial bailout package after accepting tax breaks and a higher limit for insured bank deposits in a bid to win House approval and send legislation to President Bush by the end of the week.

Top lawmakers said the Senate proposal, worked out after a day of maneuvering behind the scenes, would include tax breaks for businesses and alternative energy and higher government insurance for bank deposits.

“It has been determined, in our judgment, this is the best thing to move forward,” said Senator Harry Reid, Democrat of Nevada and the majority leader, in announcing the surprise move. The House was expected to vote on Friday.

September 29, 2008

The bailout — success from the jaws of defeat?

I’ve done some blogging on the bailout — here on today’s failure in the House and here’s a link to more.

It looks like the WSJ thinks the House vote was a blessing in disguise. I agree with them.

From the link:

Don’t Panic.

By throwing out a deeply flawed bailout plan, the House may have created an opportunity to craft a more effective response to the financial crisis.

With credit markets frozen and the Dow Jones Industrials Index plummeting 777.68 points Monday, the 228-205 defeat of the rescue package appears to come at the worst possible time. Plenty of experts think the “no” vote has the power to wipe what little confidence remains in the markets.

But it also could lead policy makers, particularly Treasury Secretary Henry Paulson, to draw up a plan that more directly addresses the factors causing the financial system to fall apart.

The House scuttles bailout plan

And the market takes a big hit.

From the link:

The House on Monday defeated a $700 billion emergency rescue package, ignoring urgent pleas from President Bush and bipartisan congressional leaders to quickly bail out the staggering financial industry.

Stocks plummeted on Wall Street even before the 228-205 vote to reject the bill was announced on the House floor.

When the critical vote was tallied, too few members of the House were willing to support the unpopular measure with elections just five weeks away. Ample no votes came from both the Democratic and Republican sides of the aisle.

Bush and a host of leading congressional figures had implored the lawmakers to pass the legislation despite howls of protest from their constituents back home.

The vote had been preceded by unusually aggressive White House lobbying, and spokesman Tony Fratto said that Bush had used a “call list” of people he wanted to persuade to vote yes as late as just a short time before the vote.

Lawmakers shouted news of the plummeting Dow Jones average as lawmakers crowded on the House floor during the drawn-out and tense call of the roll, which dragged on for roughly 40 minutes as leaders on both sides scrambled to corral enough of their rank-and-file members to support the deeply unpopular measure.

From the New York Times and news on the Dow freefalling over 400 points on the news.

Update — Dow is down almost 700 points.

I’m glad the vote failed. And no, I don’t think it’s a case of cutting off one’s nose to spite the face. I think it’s a case of a failed administration making one more attempt at a naked and craven power-grab. Get Paulson out of the picture, bring in some adult nonpartisan brains and knock-out a real solution, not some BS version of, “be very afraid and give me unlimited power.”

I think the US public finally woke up, and maybe the GOP did too after the Bush 43 effort at corporate socialism and their presidential standard bearer choosing an unqualified religious nutjob as his running mate.

Go below the fold for additional updates as the situation warrants.

(more…)

September 23, 2008

Newt Gingrich pans the bailout

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 3:12 pm

Newt Gingrich puts in his two cents on the proposed financial sector bailout offered up by the Bush 43 administration. His voice joins those of other true conservatives who are concerned about scope and sheer breathlessness of this stupid non-solution to a very real problem.

From the WSJ’s Political Perceptions link:

For those watching the Washington tea leaves, one sure sign that Treasury Secretary Henry Paulson faces problems selling his Wall Street bailout plan came Sunday, when Newt Gingrich posted his views online.

The former House speaker’s posting, on National Review Online, was a clarion call to fellow conservatives to slow down the rush to pass the plan and to start raising serious questions about it. “Congress was designed by the Founding Fathers to move slowly, precisely to avoid the sudden panic of a one-week solution that becomes a 20-year mess,” Mr. Gingrich wrote.

In an interview Monday, Mr. Gingrich was even more pointed. He predicted “a populist reaction of the first order” against the Wall Street rescue and called on the president to dump his economics team and “try again.” For good measure, Mr. Gingrich’s think tank plans to release poll findings Tuesday showing public skepticism about bailing out financial firms.

As that suggests, the one thing that’s become clear in the last day or so is that the path toward congressional approval of the $700 billion financial-sector rescue plan won’t be nearly as smooth and clear as many thought when the idea emerged late last week. When the Democratic speaker of the House and the Republican presidential nominee both demand similar changes, that’s a sure sign trouble is brewing.

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