Posts Tagged ‘Troubled Assets Relief Program’

Obama Takes Big Banks to the Woodshed Over Bonuses

Wednesday, January 27th, 2010

Obama seeks TARP restitution through a fee to be levied on banks – if Congress agrees.  President Barack Obama is angry with the big Wall Street banks that took TARP dollars and plans to do something about it.  “We want our money back and we’re going to get it,” Obama said in a White House speech when he proposed the Financial Crisis Responsibility Fee.  “If these companies are in good enough shape to afford massive bonuses, they surely are in good enough shape to afford to pay back every penny to taxpayers.”

The President’s proposal – which requires Congressional approval – would apply to approximately 50 of the nation’s largest financial institutions and rake in $9 billion a year for at least a decade.  Envisioned is an annual 0.15 percent fee on liabilities – except for insured deposits – and would be assessed on banks, insurance companies and financial firms with a minimum of $50 billion in assets.  The objective is to counterbalance $117 billion in losses from TARP.  The 10 largest financial firms would pay approximately 60 percent of the fee.

“My commitment is to recover every single dime the American people are owned,” according to the President.  “And my determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at some of the very firms who owe their continued existence to the American people, folks who have not been made whole and who continue to face real hardship in this recession.”

Not surprisingly, banks were not pleased with President Obama’s proposal.  “Two-thirds of the TARP investment from banks has already been repaid, with a large profit to the taxpayer,” countered Steve Bartlett, president of the industry trade group, the Financial Services Roundtable.  “This tax is strictly political.”

Another viewpoint advanced is that banks that haven’t repaid TARP funds haven’t done so because they served the original intent of the program – they made loans to consumers and businesses.

Securitization Slowly Starts Rolling Again

Wednesday, December 2nd, 2009

One year later, securitization is making a slow comeback in the commercial markets.

The commercial bond market may be opening up slightly as Bank of America (BofA) prepares to sell $460 million worth of bonds collateralized by properties owned by Fortress Investment Group. The bonds that BofA is arranging are ineligible for TALF, another positive sign that the commercial mortgage market might finally be showing signs of improvement.

The transaction involves 44 properties, primarily Florida office and industrial buildings, with bonds rated in the AAA to BBB range.  Price ranges were not available.  This deal and the recent $400 million sale of shopping malls owned by Ohio-based Developers Diversified Realty represent the initial offeerings since securitization of real estate loans came to a halt in the middle of 2008.  Investors should be wary against being overly optimistic about these sales since commercial mortgage-backed securities (CMBS) are unlikely to be as significant a financing vehicle in the future.  Although financing is opening up for specific new issues, investors have little appetite to refinance the trillions of dollars of risky commercial loans that are coming due over the next few years.

“It is another baby step,” said Thomas Zatko, managing director at Babson Capital Management.

According to an index compiled by Moody’s Investors Service, commercial real estate prices have slid 43 percent from their peak in October of 2007.

$700 Billion Financial Bailout Plan Still Evolving

Friday, November 21st, 2008

Treasury Secretary Henry Paulson is sitting on $350 billion dollars of the taxpayers’ money, and can’t quite settle on the best way to spend it.  When approved by Congress in October, the $700 billion Troubled Assets Relief Program (TARP) bill’s purpose was to purchase bad mortgage assets that had frozen the credit markets. The Treasury Department has already used approximately half of the money to capitalize banks and prevent insurer American International Group (AIG) from going into financial default.  The problem with the TARP bill is that conditions keep changing and Treasury is altering its focus to one of helping banks that are sound to stay healthy – with the ultimate goal of thawing credit.  Meanwhile, Treasury is coordinating with the Federal Reserve to restore consumer confidence so people start buying cars, taking out student loans, or even using their credit cards again.  The question is:  which version of TARP eventually will unfreeze the debt markets.  Given the complexity of the situation, there is no simple answer.  Because both Wall Street and Main Street are equally impacted, TARP is likely to end up providing some amount of relief to both groups.

So, the question is, which TARP is it?  We invite your comments.

http://www.reuters.com/article/ousiv/idUSTRE4AB7P820081112

http://www.chicagotribune.com/business/chi-thu-crisis-bailout-shift-nov13,0,2664351.story