91 Banks Miss May TARP Payment, 68 Banks Miss Multiple Payments; Top 10 Sovereign Debt Default Risks; New “Merle Hazard” Song – “Legal Tender”
by ilene - June 17th, 2010 11:48 pm
91 Banks Miss May TARP Payment, 68 Banks Miss Multiple Payments; Top 10 Sovereign Debt Default Risks; New "Merle Hazard" Song – "Legal Tender"
Courtesy of Mish
Six hundred small banks still hold $130 billion in unpaid TARP payments with taxpayers on the hook. Records show Over 90 Banks Miss their May TARP Payment.
Statistics, compiled by SNL Financial from U.S. Treasury data, showed 91 banks and thrifts skipped the May dividend payment under the Troubled Asset Relief Program, or TARP. It was the first missed payment for 23 of the banks; for the others, it was at least their second miss.
The number of banks missing their TARP payments rose for the third straight quarter. In February, 74 banks deferred their payments; 55 deferred last November. SNL Financial’s analysis found 20 banks have missed four or more payments since the program began in 2008, while eight banks have missed five payments.
While many of the largest U.S. banks easily repaid billions in TARP aid, more than 600 smaller banks still hold $130 billion from the program, created at the height of the financial crisis.
Most of the banks failing to make TARP payments are bankruptcy candidates.
Top 10 Sovereign Debt Default Risks
Inquiring minds might also be interested in a slideshow of Government Debt Issuers Most Likely to Default.
Minus the slide images here are the results.
1. Argentina – CPD: 50.14% – Mid Spread: 1081.14
2. Venezuela – CPD: 49.76% – Mid Spread: 1013.78
3. Ukraine – CPD: 44.12% – Mid Spread: 884.91
4. Pakistan – CPD: 42.17% – Mid Spread: 803.20
5. Dubai, UAE – CPD: 32.46% – Mid Spread: 572.92
6. Republic of Latvia – CPD: 29.13% – Mid Spread: 513.31
7. Iraq – CPD: 28.25% – Mid Spread: 475.97
8. Iceland – CPD: 27.03% – Mid Spread: 476.34
9. Greece – CPD: 24.92% – Mid Spread: 341.54
10. Dominican Republic – CPD: 23.37% – Mid Spread: 375.00
From the article: "The countries are ranked by their cumulative probability of default (CPD), which gives the market’s assessment of an issuer’s likelihood of default over the life of a CDS contract."
Those numbers are from March as ranked by CMA. Greece is certainly higher now.
New "Merle Hazard" Song – "Legal Tender"
“Legal Tender” is an original lyric by Merle Hazard and…
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DiggJUST ANOTHER BANK BAILOUT
by ilene - May 11th, 2010 7:50 pm
JUST ANOTHER BANK BAILOUT
Courtesy of The Pragmatic Capitalist
Harsh fiscal austerity for Main Street and bailouts for the bankers. Sound familiar? Well that’s what we have here in this massive European bank bailout. The countries of (particularly Southern) Europe will now be forced into a government imposed recession and the bankers will be made whole. Michael Hudson calls the bailout exactly what it should be called – TARP for German and other European bankers:
“The “Greek bailout” should have been called what it is: a TARP for German and other European bankers and global currency speculators. The money is being provided by other governments (mainly the German Treasury, cutting back its domestic spending) into a kind of escrow account for the Greek government to pay foreign bondholders who bought up these securities at plunging prices over the past few weeks. They will make a killing, as will buyers of hundreds of billions of dollars of credit-default swaps on the Greek government bonds, speculators in euro-swaps and other casino-capitalist gamblers. (Parties on the losing side of these swaps now will need to be bailed out as well, and so on ad infinitum.)”
And just like in the United States, this bailout does nothing to resolve the actual long-term structural flaws that caused this whole mess to begin with. This is why, as Stephen Roach puts it, the crises are becoming larger and more frequent. And so here we are again. Stocks rally, bond yields come in, spreads tighten, bankers start counting their bonuses and the unemployment rate continues to tick higher ALMOST TWO YEARS AFTER LEHMAN BROTHERS! Ultimately, this system of Ponzi finance will reach its tipping point and at the rate we’re going the house of cards is going to be too large for any
This Wasn’t The First European Bank Bailout
by ilene - May 10th, 2010 9:32 pm
This Wasn’t The First European Bank Bailout
Courtesy of Tom Lindmark at But Then What
If you’re like me, you probably bought into the meme that the $1 trillion that was more or less committed yesterday by European nations to forestall inevitable debt restructurings amounts to their version of TARP. While TARP was originally a program to rescue the US financial system (we’ll ignore the slush fund that it degenerated into at this time), the European plan is being advertised as a solution to sovereign debt issues, a defense of the Euro and a bit of help for the financial system.
In fact, it’s probably mostly about rescuing Europe’s banks which were on the verge of another liquidity crisis. I suspect that the specter that prompted the radical decisions reached over the weekend was not a Greek default or the knock-on effects it might have, rather it was the very real possibility that if they didn’t do something their banks might not have survived today.
But, the point that seems to have been missed is that this isn’t TARP l for Europe. The WSJ Deal Journal points out that they’ve already doled out a boat load of money to their banks.
Remember it was only two years ago that many of these very same European banks that are rallying today were the recipients of an earlier round of government largesse.
Today’s trillion dollar rescue comes on top of the $64 billion that the UK injected into its banks in October 2008, the $94 billion that German injected in its own troubled banks that Fall, the $54 billion that France spent and the $9 billion that Spain spent. The Netherland spent $14 billion propping up and Switzerland spent $5.3 billion bailing out UBS.
And those are just direct capital injections. Germany also spent $513 million in government guarantees to support bank lending in 2008.
We can’t forget the controversial bail out of AIG, either. Sure, it was a U.S. company, but there were nearly two dozen European banks, including Deutsche Bank, Banco Santander, RBS and Lloyds that received $50 billion of U.S rescue funds to cover their trades with AIG.
Add those bailout measures together and it comes out to roughly to $900 billion.
We know we are probably leaving out few billion here or there. But like we said, it is hard to keep track.
…
NY Fed Cited in Cover-Up By SIGTARP’s Barofsky – Possible Criminal Charges
by ilene - April 28th, 2010 3:20 pm
NY Fed Cited in Cover-Up By SIGTARP’s Barofsky – Possible Criminal Charges
Courtesy of JESSE’S CAFÉ AMÉRICAIN
It’s never the crime, it’s always the cover up.
This is beyond a doubt the story of the week. Neil Barofsky has been a thorn in the side of the Treasury Department and the Fed since he first took office.
I doubt there will be criminal charges filed against Turbo Tim personally, since in his case the clueless CEO defense may have some traction. Unless, that is, they have wiretaps and/or emails showing collusion with some of the bailed out banks, in either insider trading or the manipulation of assets for extraordinary gains.
It is a boiling scandal, but emblematic of the corruption that has pervaded financial regulation in Washington for the past ten years at least. It did not start with Obama, but it may still bring down key members of his Administration.
Reform the financial system, and audit the Fed.
Bloomberg
Barofsky Says Criminal Charges Possible in Alleged AIG Coverup
By Richard Teitelbaum
28 April 2010April 28 (Bloomberg) — …That tense relationship [between Treasury and Barofsky] has grown out of Barofsky’s mandate to monitor and root out fraud and waste in the management of TARP, the $700 billion program passed in October 2008 to remove toxic debt from the banks. The special inspector general, in a series of reports, interviews and congressional hearings, has heaped criticism on the Treasury Department’s operation of the program.
Barofsky’s most recent broadside came on April 20, when a SIGTARP report labeled a housing-loan modification program funded with $50 billion of TARP money as ineffectual.
…The TARP watchdog has also criticized Treasury Secretary Timothy F. Geithner in reports and in congressional testimony for his handling of the process by which insurance giant American International Group Inc. was saved from insolvency in 2008, when Geithner was head of the Federal Reserve Bank of New York.
The secrecy that enveloped the deal was unwarranted, Barofsky says, adding that his probe of an alleged New York Fed coverup in the AIG case could result in criminal or civil charges.
In Senate Finance Committee testimony on April 20, Barofsky said SIGTARP would investigate seven AIG-linked mortgage-related securities similar to Abacus 2007-AC1, the instrument underwritten by Goldman Sachs Group Inc. that is at the center
…
How is that GM Bailout Coming Along?
by ilene - April 23rd, 2010 6:02 pm
New GM Cars Run on Efforts of U.S. Taxpayers
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By Excerpt: "…we thought it best to cut out the middle man and have taxpayers themselves power GM cars."
More Op-Toons Review on GM innovation here.>>
See also:
GM Repays Government Debt; Was The Bailout A Success?
Courtesy of Mish
GM repaid $6.7 billion in US loans and another $1.4 billion in Canadian government loans. So where does that leave GM? Let’s take a look.
Please consider Gas in the tank: GM repays $8.1B in gov’t loans
Fallen giant General Motors Co. accelerated toward recovery Wednesday, announcing the repayment of $8.1 billion in U.S. and Canadian government loans five years ahead of schedule.
Much of the improvement comes from GM slashing its debt load and workforce as part of its bankruptcy reorganization last year. But the automaker is a long way from regaining its old blue-chip status: It remains more than 70 percent government-owned and is still losing money — $3.4 billion in last year’s fourth quarter alone. And while its car and truck sales are up so far this year, that’s primarily due to lower-profit sales to car rental companies and other fleet buyers.
The U.S. government still owns 61 percent of GM. The automaker is counting on a public stock offering to allow the U.S. government to begin recouping its remaining $45.3 billion investment. The Canadian government’s $8.1 billion stake, which equals a 12 percent ownership interest, also could also be unlocked if GM sells shares to the public.
GM lost $88 billion between 2004, when it last turned a profit, and last year when it declared bankruptcy. It endured years of painful restructuring, closing 14 factories and shedding more than 65,000 blue-collar jobs in the U.S. through buyouts, early retirement offers and layoffs.
GM received $52 billion from the U.S. government and $9.5 billion from the Canadian and Ontario governments starting in 2008. At first the entire amount of U.S. aid was considered a loan as the government tried to keep GM from going under and pulling the fragile economy into a depression.
But during bankruptcy, the U.S. government reduced the loan portion to $6.7 billion and converted the rest to company stock. Canadian governments also converted part of their debt to shares, reducing its loan balance to $1.4 billion. The final installments on those loans were repaid Tuesday, comfortably beating
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WHY IS THERE OPPOSITION TO FINANCIAL REGULATORY REFORM?
by ilene - April 19th, 2010 3:08 pm
WHY IS THERE OPPOSITION TO FINANCIAL REGULATORY REFORM?
Courtesy of The Pragmatic Capitalist
Let me close with this thought. My father grew up in the Great Depression. Like so many of his generation, he was shaped by sacrifice – hardened by economic hardship and war – keenly aware of the financial recklessness that made his life so much harder than it needed to be. His generation learned the lessons of financial disaster so that the country could avoid it for decades. Let us learn the lessons of our time. Let us be diligent and thoughtful today, so that our financial and economic system can rebound fully, and enrich and sustain the Americans of tomorrow.
- Phil Angelides
I think we are all fairly well versed in the various causes of the financial crisis by now. This was a widespread break-down of the entire financial system. Consumers got greedy, the banks got greedy, the government stopped enforcing the rules (or dismantled them altogether) and monetary and fiscal policy broke down on several levels. I’ve spent a great deal of time here talking about the consumer break-down and how Americans spend more than they make and are generally fiscally irresponsible. Fortunately, the consumer is de-leveraging and continues to reshape and improve their balance sheet. Hopefully, this is a continuing trend. Corporations have also been very effective in reducing leverage and paying down debt. One of the few bright spots in all of this is that U.S. corporations remain quite robust. Unfortunately, the monetary and fiscal response has been similar to what caused this crisis, but that is a mess derived from years of misunderstood (in my opinion) and backwards thinking with regards to our monetary system. That is something that can only be resolved with time and education. What remains entirely unresolved, however, is financial regulatory reform. It’s time that we update our antiquated regulatory system and install a system that ensures the Enron banking system is contained.
Since the early 1980’s we have been slowly breaking down the regulatory system that helped the United States avoid a major financial crisis for almost 60 years. As banks have evolved and financial innovation has grown the regulators have failed to keep pace. As big banks and corporations sought to maximize profits…
Bernanke: The Lies Continue
by ilene - April 9th, 2010 11:18 am
Bernanke: The Lies Continue
Courtesy of Karl Denninger at The Market Ticker
Chairman Bernanke spewed froth (sic) last evening:
Good evening. It is a great pleasure to share a meal with the Center for the Study of the Presidency and Congress, and especially with the Center’s fellows. Doubtless your participation in the fellowship program as undergraduate and graduate students--writing and thinking about leadership, governance, and public policy--will prove immensely valuable as you develop your own intellectual and leadership skills and embark on careers that I hope will include a period of public service.
Translation: You need to learn how to lie very convincingly in order to succeed in public policy. I’m one of the best, so listen to me dissemble here and nod your heads as I provide an excellent object lesson.
The first lesson--economic prosperity depends on financial stability--seems obvious, but this connection was not always well understood.
This, of course, is why The Fed sat back and watched the housing bubble inflate. It is often lamented that the lending standards were "violated", but exactly what "standards" existed for a NINJA loan? You know: No job, no income, no assets? Right – none. How do you violate non-existent standards?
Never mind the other conundrum – The Fed’s incessant claim that "it can’t see bubbles." An 80% stock market rally in one year caused by legalized accounting fraud isn’t an obvious bubble? Oil going from $30-85 while supply rockets to record highs – to the point that tankers are leased for speculative storage by banks – isn’t an obvious bubble? Treasuries aren’t an obvious bubble when "magical demand" appears that allegedly is from foreign central banks, but which isn’t reflected in either TIC data or custodial holdings? Pull the other one you jackass.
In contrast, more recent work on the subject, to which I contributed, showed that the health of the financial system and the performance of the broader economy are closely interrelated, both in the short run and in the long run.
Oh, so you allowed all this game-playing, and still do, on purpose so as to create imbalances that you know will damage the economy? How does this escape the definition of economic terrorism?
For example, in October 2008, just weeks after the sharp intensification of the crisis, the Congress authorized the Troubled Asset Relief Program (TARP) to support stabilization of
…
The trouble with commercial real estate
by ilene - February 12th, 2010 2:36 am
The trouble with commercial real estate
Courtesy of Tim Iacono at The Mess That Greenspan
Elizabeth Warren, Chairwoman of the Congressional Oversight Panel, talks about the ongoing troubles that community banks are having with commercial real estate loans as detailed in the panel’s latest report on the subject released earlier today – the outlook isn’t good.
The discussion that begins at about the 3:10 mark is pretty interesting as Fox Business News host David Asman references big Wall Street banks "having their arms twisted" to take TARP money in late-2008, a view with which Warren disagrees vehemently (I’m pretty sure she disagreed vehemently there but, admittedly, it was hard to tell).
SIGTARP Probing Insider Trading
by ilene - February 2nd, 2010 10:00 am
SIGTARP Probing Insider Trading
By Yves Smith at Naked Capitalism
You have to love it. If the allegations prove true, it provides further evidence that the banksters cannot contain themselves. Here they get their bacon saved by the TARP (which was way too cheaply priced relative to the risk involved) and a host of hidden subsidies and supports. Yet the employees cannot stand to let an opportunity for personal enrichment go to waste, legal or not.
The Financial Times appears to have broken the story that the Office of the Special Inspector General is investigating reports of insider trading in connection with the TARP. And what makes this probe potentially serious (aside from the brazenness of it) is that the suspects include executives as well as foot soldiers:
Eight of the largest banks in the US received between $2bn and $25bn in October 2008 under a programme to prop up the financial system led by Hank Paulson, then Treasury secretary.
Dozens more institutions followed and Mr Barofsky, who examines the troubled asset relief programme, is looking into whether information improperly made its way to trading rooms during a feverish period in which the government and banks were frequently exchanging information.
“We have pending investigations looking into that – typically into insider trading,” he said. “Once upon a time getting Tarp funds actually meant your stock price would go up and we are looking at specific trading around Tarp announcements by insiders or looking at potential tips from insiders.”
Yves here. With the notable exception of the network surrounding Raj Rajaratnam, nearly all insider trading scandals have involved junior employees as the ones leaking confidential information, usually on corporate mergers. While most M&A deals involve lots of junior level support, knowledge of pending TARP financings at a particular firm would presumably be limited to comparatively few people, and then largely the very top officers… continue here.>>
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Be sure to watch this one also, via Mish
Neil Barofsky Says Handcuffs Are Coming
The Harvard-Goldman Filter Keeps Too Big To Fail Banks Intact
by ilene - December 20th, 2009 11:40 am
The Harvard-Goldman Filter Keeps Too Big To Fail Banks Intact
Arnold Kling explains why our political leaders won’t break up the Too Big To Fail banks:
My answer to both relates to what I call the Harvard-Goldman filter.
The Harvard-Goldman filter works like this.
1. To get into a position of power, you have to pass through a filter. The easiest way to show that you can pass through the filter is to go to Harvard and then work for Goldman.
2. If you do not go to Harvard and work for Goldman, then you have to show that you can get along with people who did.
3. The best way to show that you can get along with people who pass the Harvard-Goldman filter is to show that you believe in applying the Harvard-Goldman filter.
Why was Tim Geithner regarded as such an obvious, in fact necessary, choice to be Treasury Secretary? Because he satisfies the Harvard-Goldman filter, particularly point (3). He is not going to bring people from the wrong social caste into the policymaking arena.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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