Much Ado on Fannie & Freddie

$100 Billion and Rising, that's the cost of the Fannie Mae, Freddie Mac Bail outs.


When Congress was debating the bailout of Fannie and Freddie last July, the official estimate from the Congressional Budget Office was that a bailout would most likely cost taxpayers $25 billion, with only a 5% chance of the price tag reaching $100 billion between them.

In addition, both Fannie and Freddie are likely to need billions of dollars more after they report second quarter results in the coming weeks. Experts believe the cost will only continue to rise in the next year.

"We're assuming they each will cross the $100 billion mark fairly soon. They could be hitting the $200 billion barrier by the end of next year," said Bose George, mortgage analyst at Keefe, Bruyette & Woods, an investment bank specializing in financial services firms.

This one gives Rum & Coke Fridays a whole new meaning!

There is a famous blog series on Dailykos, Rum & Coke Friday, but this story makes that look like someone in Congress took the fun to heart!

Bloomberg is reporting Bailout of U.S. Banks Gives British Rum a $2.7 Billion Benefit :

In June 2008, U.S. Virgin Islands Governor John deJongh Jr. agreed to give London-based Diageo Plc billions of dollars in tax incentives to move its production of Captain Morgan rum from one U.S. island -- Puerto Rico -- to another, namely St. Croix.

DeJongh says he had no idea his deal would help make the world’s largest liquor distiller the most unlikely beneficiary of the emergency Troubled Asset Relief Program approved by Congress just four months later.

Your tax dollars at work might just drive a person to drink!

Goldman Sachs - Biggest Profits Ever - How?

In case you missed it:

Goldman Sachs Goldman to make record bonus payout:

A lack of competition and a surge in revenues from trading foreign currency, bonds and fixed-income products has sent profits at Goldman Sachs soaring, according to insiders at the firm.

Staff in London were briefed last week on the banking and securities company's prospects and told they could look forward to bumper bonuses if, as predicted, it completed its most profitable year ever. Figures next month detailing the firm's second-quarter earnings are expected to show a further jump in profits. Warren Buffett, who bought $5bn of the company's shares in January, has already made a $1bn gain on his investment.

GAO June TARP report

The GAO released their TARP Report: June 2009 Status of Efforts to Address Transparency and Accountability Issues.

Some main points:

  • $330B "dispersed"
  • $69.2B repaid by end of month
  • still buying preferred shares
  • no disclosure from Treasury/Fed on criteria to purchase shares
  • no disclosure from Treasury on warrant repurchase
  • no disclosure on recapitalization on stress test results
  • "difficulties" in measuring TARP effectiveness
  • no set of determinate indicators to measure TARP impact

Most interesting is the criteria for those stress tests to determine additional needed capitalization. The unemployment rate, which many of us have shown, is much worst than forecast by the economists' consensus.

The Headline Manipulation Buzz - 10 Banks Repaying TARP

Ever wonder when one sees pretty much the same headline on every single news site, blog and aggregator without much detail, how that happens?

(me too).

So what's behind this latest headline buzz of 10 banks paying back $68.3 Billion in TARP funds?

JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley were among 10 lenders that won U.S. Treasury approval to buy back $68 billion of government shares, freeing them from added oversight that curbed lending practices, hiring and pay.

Now wait a minute. That is buying back shares, not necessarily repaying the real amount. Is that market value for these shares? Is that the price which the Government paid for them?

The New York Times:

PIPP - Psssss!

Know that sound of a ball deflating right in the middle of your game? Oops, it's time out on PPIP, Geithner's toxic asset plan.

The Financial Times reports the U.S. Treasury's plan to sell toxic assets, PPIP, is in trouble:

The controversial US toxic asset clean-up plan, aimed at clearing bad loans from US banks’ books to enable them to raise capital and lend freely, has fallen behind schedule, and may never be fully implemented.

The plan has fallen prey to concerns from potential investors and regulators and waning interest from the banks themselves. Investors fear that Congress may set caps on pay while regulators are beginning to doubt whether the plan is really necessary.

What is the Fed Worried About?

I could not resist saying something about this Bloomberg article: Fed Said to Raise Standards for Banks' TARP Repayment. In May, the Fed released the results of the not too stressful 'stress tests'. The 'stress tests' concluded that JP Morgan Chase and American Express Co. didn't have to raise any additional capital. Apparently, the Fed has changed its mind.

JPMorgan Chase & Co. and American Express Co. were told they need to boost common equity, less than four weeks after being informed they had enough to withstand a deeper economic slump. Morgan Stanley was directed to raise more funds after already selling stock to cover its stress-test shortfall. One firm was told only yesterday, people with direct knowledge said.

Banks want to sell to themselves Toxic Assets and have Taxpayers foot the bill

The Wall Street Journal is reporting, Banks are trying to sell toxic assets to themselves.

Banking trade groups are lobbying the Federal Deposit Insurance Corp. for permission to bid on the same assets that the banks would put up for sale as part of the government's Public Private Investment Program.

Banks want to sell themselves back their toxic assets (for a profit I will assume), via the PPIP program, which is (cough, cough) the gift that keeps on giving already. So, remember, the PPIP will have U.S. taxpayer subsidies available to clear the books from these worthless (i.e. toxic) assets many banks currently hold.

Here Come the Insurance Companies for TARP money

Now insurance companies are lining up for TARP funds:

Prudential Financial Inc. and Hartford Financial Services Group Inc. are among six insurers granted access to U.S. aid as the government moves to shore up an industry battered by investment losses.

Hartford won preliminary approval for $3.4 billion in capital from the Treasury’s Troubled Asset Relief Program, the Connecticut-based insurer said yesterday in a statement. Prudential, Allstate Corp., Principal Financial Group Inc. and Ameriprise Financial Inc. also are eligible for funds, said Andrew Williams, a spokesman for the Treasury. Lincoln National Corp. said it may receive $2.5 billion.

Need a reference for constituent emal fax ratio to Congress for/against, re TARP

I had read a story or two about communication (email, fax, etc.) to Congress as being something like 600 to 1, or thereabouts. I can't find the reference, after much Googling. Anybody have it?
I want to refer to it for a segment I am writing for my new web site, DemocracyABC .