David Kirkpatrick

October 1, 2009

In the red FDIC …

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 4:53 pm

… turns to accounting trickery to get above the water line.

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.

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.

September 30, 2008

FDIC guarantee to rise to quarter million?

Filed under: Business, Politics — Tags: , , , , , , — David Kirkpatrick @ 2:28 pm

The two presidential hopefuls are on board.

Of course do any of the adults in the room understand the FDIC couldn’t cover an honest-to-god run on retail banks?

[crickets chirping]

From the link:

Senators Obama and McCain have arrived at the idea of raising the FDIC deposit insurance limit from $100,000 to $250,000. Obama introduced the idea in a statement this morning, and McCain, in a round-robin series of interviews, made the same suggestion. The FDIC already guarantees retirement accounts up to $250,000.

Of course, the FDIC itself has only about $50b in reserves, so Congress would have to recapitalize the FDIC in the event of a series of bank failures.