What the government will do when prime mortgages go foul
Posted on November 20, 2009 at 11:10 am
Analyst David Hendler of CreditSights sees more of what got us to today’s government-supported, not-really-healthy-at-all housing and banking sectors.
“[T]he prime residential mortgage crisis is probably going to require another massive government assistance program in that range of half a trillion [dollars] or more,” Hendler said. “And if this program is extended, it will lead to more bank regulatory restrictions with more capital and higher prudential liquidity levels. This would reduce the banks’ appetite and ability to take lending risks and put pressure on profitability.”
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I’m betting there are some hedge funds that beg to differ
Posted on October 23, 2009 at 7:46 am
Pay czar Kenneth Feinberg says he doesn’t think his plan to slash compensation at the country’s biggest banks will drive away key executives.
SEE ALSO: Turns out the mere threat pushes the big shots out the door.
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Hey, at least you’re not being Ken Lewis-ed
Posted on October 22, 2009 at 7:59 amReports say the Obama administration is planning to order companies who received billions in bailouts to slash the compensation plans of their top execs – as well as ask permission for just about everything but the sprinkles on their ice cream.
The pay restrictions for all seven companies will require any executive seeking more than $25,000 in special benefits — things such as country club memberships, private planes and company cars — to get permission for those perks from the government.
Oh, and don’t look for any sympathy from Cramer.
We’re almost ready to put a price tag on the toxic stuff
Posted on October 5, 2009 at 10:38 am
In the long-ago days before TARP, there was talk of PPIP, a plan to use government cash to clear the worst of the bad assets off banks’ books. More than a year later, the pieces are in place for investment firms to pool some newly raised capital with federal money and begin buying mortgage-backed securities.
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Another banking bailout coming?
Posted on September 28, 2009 at 6:39 amThis time, smaller banks who were deemed too weak to get TARP cash — remember how that program was first pitched as ‘good money for good banks’ — may be given government capital. One potentially critical catch: They may have to raise private money to match the federal funds.
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The government’s money isn’t helping the people
Posted on September 24, 2009 at 8:01 amFormer Labor Secretary Robert Reich says all those federal billions being pumped into the economy aren’t making their way to the common man and woman.
Despite the happy Dow and notwithstanding the upbeat corporate earnings, most corporations are still shedding workers and slashing payrolls. And the big banks still aren’t lending to Main Street.
Trickle-down economics didn’t work when the supply-siders were in charge. And it’s not working now, at a time when — despite all their cries of “socialism” — big business and Wall Street are more politically potent than ever.
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Bair pushes for ‘comprehensive resolution regime’
Posted on July 23, 2009 at 7:44 amBloomberg News says FDIC Chairman Sheila Bair will today tell lawmakers they should collect cash from the country’s large banks for a fund that would manage the bailouts of failed financial companies. Oh yeah, and throw the bums out.
“In contrast to the current situation, this new regime would not focus on propping up the current firm and its management,” Bair said. “Without a new comprehensive resolution regime, we will be forced to repeat the costly, ad hoc responses of the last year.”
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The birth of Government Motors
Posted on May 31, 2009 at 10:54 pm
This morning’s bankruptcy filing by the largest of Detroit’s Big Three will trim its shareholder base to four groups: The U.S. government (60 percent), the UAW’s health trust (17.5 percent), the governments of Canada and Ontario (12.5 percent) and bondholders (10 percent).
Other nuggets on this topic:
Bloomberg News on the new company’s expected world view:
The new GM would emerge armed with vehicles from its Cadillac, Chevrolet, Buick and GMC units. It will be built to survive on 10 million annual car sales, the Obama administration said. That’s down from the present break-even sales of 16 million vehicles. GM intends to close 11 factories and idle an additional three, while attempting to reopen one idled facility to build a new small car.
Reuters via CNBC gives the skeptics some time at the mic:
“I don’t think they’re going to be successful in answering the fundamental problems of this company — they are addressing the financial issues, but not the business issues,” said Stuart Hirshfield, a bankruptcy lawyer with the Mintz Levin law firm.
And this pithy quote:
“I think this is going to be Obama’s Vietnam,” said automotive historian Bob Elton. “Every time he turns around, there goes another $20 billion.”
Might those next $20 billion go to suppliers? The Journal takes a look at the dominos of a Chapter 11 filing:
It’s possible struggling suppliers will get indirect help from the government through GM in the form of a more payments to suppliers than might be the case in a traditional bankruptcy. A person familiar with the Treasury Department’s discussions expects more suppliers to file for Chapter 11 and said, “We will support GM — and Chrysler for that matter — in trying to make it orderly.”
The Washington Post on the union-investor tug of war:
“The proposal seems to favor the rights and claims of the UAW, a political ally of the current administration and a powerful lobbying force in Washington, over the rights and claims of the company’s diverse group of bondholders,” according to a letter from 20 House members, led by Rep. Jeb Hensarling (R-Tex.), to Treasury Secretary Timothy F. Geithner. “Contractual rights of investors are being trampled by the government under the rationale of ‘extraordinary circumstances.’”
An AP story in the Chicago Tribune examines the tax credits GM will be eligible for when (if) it turns a profit:
Decades ago, Congress severely restricted the ability of money-losing companies to cash in on the tax breaks if they are taken over by other companies. The goal was to discourage corporate takeovers for the principle purpose of avoiding taxes, Willens said.
The government, however, doesn’t want to penalize firms for participating in the taxpayer-financed bailout, so the Treasury Department has issued several notices in recent months creating exceptions for firms that get bailout money. Under the new rules, corporations can keep their tax breaks if the government becomes a majority owner.
And finally, the GM coverage by the Detroit Free Press includes a look at what might happen to the company’s iconic Renaissance Center HQ.
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AIG boss walking
Posted on May 22, 2009 at 1:05 am
Ed Liddy has told the insurer’s board he is out as soon as his chairman and CEO roles are filled by two different people.
I am proud that we are now implementing this repayment plan. As we all know too well, our pace of success will depend on global economic conditions and financial markets. It is likely to take several years. All of you should have a leadership team committed to a similar time horizon and prepared to carry the plan to completion.
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AIG chief: Rebuilding company could take till 2014
Posted on May 13, 2009 at 2:44 pm
Testifying before a House committee, Edward Liddy says the fallen insurance giant and owner of Brentwood’s American General has a long way to go to clear up its corporate structure.
“We must take the time and exercise the diligence to do this restructuring properly,” Mr. Liddy told lawmakers. “Let me be clear — our plan is explicitly designed to avoid having to divest A.I.G. assets at fire-sale prices.”
…
In a recent memo to A.I.G. employees, Mr. Liddy said the company had developed a restructuring plan called “Project Destiny” that entails either spinning off many of the insurance subsidiaries, either by selling them to other companies or by turning them into independent companies and selling minority stakes through in public stock offerings.
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Banking’s forgotten little guys
Posted on May 11, 2009 at 3:49 pm
Economist Mike Moebs says the government’s crisis plan to fix the country’s large banks has ignored the real drivers of Main Street’s expansion during the next upswing.
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More AIG bonuses we didn’t know about
Posted on May 6, 2009 at 12:52 pmResponding to lawmakers’ questions, the insurance giant has disclosed for the first time that it paid out more than $450 million in 2008 performance bonuses.
The payments are in addition to an about $120 million corporate bonus pool designated for holding company employees and executives at subsidiary companies. The performance bonus plans for the various AIG units were set before the company teetered on the brink of bankruptcy, forcing them to take government aid last September.
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Guv candidate: Local AIG group lost $1B
Posted on April 12, 2009 at 10:56 pmWard Cammack knows this because he and a partner looked at buying American General’s Brentwood division. But the losses sustained due to an asset-lending program designed to goose returns ended that conversation.
From a Cammack blog post:
Maybe AIG should have voluntarily disclosed the details of how the collateral from the asset lending program was invested. The fact that the AIG Tennessee subsidiary was involved in asset lending was artfully hidden in a two-page note to their financial statements. Contrast that to the required disclosure of their invested assets. Each asset is individually detailed in their annual statement, so that policy holders, investors, regulators, and employees can know exactly what the risks are from those investments.
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This is what bankers mean when they say they’re worried about the changing rules
Posted on April 6, 2009 at 7:17 amAfter Rick Wagoner’s ouster, Tim Geithner says bank bosses can expect the same treatment if his team deems them unworthy.
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The growing angst over government involvement
Posted on March 30, 2009 at 10:59 pmThe weekend ousting of Rick Wagoner as CEO of GM has prompted teeth gnashing from many corners of the business world about the role of government in business when government is a shareholder as well as a stakeholder. Some tasters:
From Dennis Kneale on CNBC.com: “The bigger worry is this summary execution betrays a deep antipathy toward Big Business on the part of the Obama Administration. Lamentably, the president’s henchmen may have imposed this coup mainly for reasons of image and example-setting. No wonder stocks are down big today.”
From Jeff Davis, bank analyst at Howe Barnes: “No doubt there will be widespread concern among business people regarding the government’s actions, but it should not be surprising as it is another indication of the costs of accepting government aid and capital. TARP preferred repayment likely will become more urgent for those banks that can afford to do so.”
New York investment banker Dan Ripp to the Wall Street Journal: “Why invest money in American industry when the government is capable of firing an experienced (if not, capable) executive and taking on the responsibilities of the firm itself?”
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