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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The housing market question with no easy answer
Posted on November 16, 2009 at 7:26 amBarry Ritholtz asks it:
If stabilization comes only through government subsidies and artificially propped up home prices, is it truly stabilization?
You could ask similar questions of the auto industry and a few other sectors of today’s economy. The folks who months ago said we ought to bite the bullet in housing and banking in order to more quickly begin an authentic recovery — albeit from a slightly deeper hole — are looking wiser with every passing day.
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Uncle Sam builds a floor for the housing market
Posted on October 27, 2009 at 9:21 amGoldman Sachs researchers say the government’s interventions in the housing market have added 5 percent to the value of our homes. The question is how long that crutch will carry us.
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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.
BofA’s Lewis to get nothing in ‘09
Posted on October 16, 2009 at 8:27 am
Outgoing Bank of America CEO Ken Lewis will cut a $1 million check to the company to repay his year-to-date compensation. Pay czar Kenneth Feinberg “suggested” Lewis not be paid anything this year after regulatory questions surfaced about his bank’s purchase of Merrill Lynch.
Loading ...Banks’ actions provide stability now, lower prices later
Posted on October 8, 2009 at 10:59 am
So says a housing market analyst in discussing the shadow inventory of homes, the massive number of troubled or foreclosed properties they will eventually have to bring back to market. The only solution? More D.C. help in stimulating demand.
“Without continued government intervention, home prices will plummet, banks and the GSEs will continue to lose money, and the economy has virtually no chance of increasing overall employment in 2010,” John Burns Real Estate said.
HT: HousingWire
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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BofA looks to wriggle free of the government
Posted on September 22, 2009 at 8:02 am
Bank of America said Monday it has exited several government assistance programs and will pay back $425 million it received as a backstop against Merrill Lynch losses.
“We are a stronger company than we were even a few months ago,” Mr. Lewis, the chief executive, said in a statement. “We believe we have all the pieces in place to emerge from this current economic crisis as one of the leading financial services firms in the world.”
Next up: a partial TARP payback, some legal dancing and plenty of political posturing related to the Merrill acquisition. BofA shares (Ticker: BAC) have almost tripled since March, but have barely budged since early August.
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CRE still in sorry shape
Posted on August 6, 2009 at 7:21 amThe Real Estate Roundtable’s quarterly barometer of industry sentiment is showing signs of stabilizing, but no one’s close to calling the start of the next up market. There can be only one solution: Call in the feds.
“Continued comprehensive policy action is called for to bring liquidity back to the market and avoid a cascade of negative repercussions for the economy,” said Roundtable President and CEO Jeffrey DeBoer. “A sick commercial real estate sector means less revenue for local governments; layoffs and cutbacks for construction, hotel and retail workers; and an even smaller retirement nest egg for millions of investors.”
Check out the full report, which also contains quotes like “The property market stinks and it continues to get worse. We were in the same place in 1990.”
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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Summers to banks: Time to scratch our back
Posted on July 21, 2009 at 7:40 am
Larry Summers, President Obama’s chief economic advisor, says not enough lenders are doing their part to help consumers and business ride out the recession.
“Prudent financial institutions will recognize that the profits they’re enjoying are in part a reflection of the commitment government and the broader society have made to the financial system that has enabled them to enjoy those profits,” Summers said in an interview with Bloomberg News yesterday in Washington.
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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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Whitney: Bank stocks overvalued
Posted on May 11, 2009 at 5:46 pm
Meredith Whitney says bank shares have been riding “The Great Government Momentum Train” but still aren’t in any shape to post good numbers.
“The underlying core earnings power of these banks of negligible … Some of these business models are never going to come back.”
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Corker sees ‘glimmer of hope’ in financial sector
Posted on May 10, 2009 at 10:35 pm“There are glimmers of hope” in the financial sector, Tennessee Sen. Bob Corker said Sunday on CNN’s State of the Union when asked if the industry had turned a corner.
“I think it was a positive step,” said Corker of the Obama administrations’ recent “stress tests” on the nation’s largest banks.
“But there will possibly be additional government dollars [for some financial institutions]. I think that hasn’t fully been said and I think that what we’ve got to be concerned about as we move into the future is not causing [the Troubled Asset Relief Program] to be codified so that it’s there forever.”
“I actually am feeling better about it. I really am,” Corker, a member of the Senate Banking Committee, added.
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