Wall Street Bailout

The bailouts continue

Most people think that the Wall Street bailouts ended at least a year ago. They would be wrong.

(Reuters) - Increased housing commitments swelled U.S. taxpayers' total support for the financial system by $700 billion in the past year to around $3.7 trillion, a government watchdog said on Wednesday.

Is This Change We Can Believe In?

President Obama announced a new 'fee' or tax on possibly 50 of the largest financial conglomerates. Are they finally getting it? We will see. I admit I was very skeptical of this notion when the White House first floated this idea a few days ago. After all they have a good track record with protecting the financial oligarchy. Was this more of the same? Possible not. The administration is calling this tax a fee: “financial crisis responsibility fee”. Boy, that name is dripping with spin. Name aside, on paper this tax may actually work. Here are some of the details from Treasury Department Fact Sheet:

A New Year But Same Old Story

A new year but same old story from the Obama Administration - more reports of coddling of the financial oligarchy and Wall Street. This time from Bloomberg: No Good Deed Goes Unpunished as Banks Seek Profits from Bailouts. This story of centers around the now infamous PPIP program. The one crafted by the financial oligarchy's biggest protector in the Administration - Timothy Geithner.

The supposed purpose of PPIP was to purchase, through government and private investors, some the bad debts that were the books of "troubled banks". Well, guess what. Financial conglomerates are not stupid (they may be incompetent when it comes to assessing risk):

Only months after it was started, the U.S. program designed to purge debts of no immediate discernable value from the balance sheets of troubled banks has helped transform the frozen debt into a money-maker as the bonds have rallied. Bank of America Corp. and Citigroup Inc., who received 22 percent of the $418.7 billion American taxpayers loaned to troubled financial institutions, boosted holdings on their trading books of home- loan bonds that lack government guarantees while investors were raising cash for the program, according to Federal Reserve data.

Got that? According to Bloomberg reporters' analysis, the two biggest zombie banks actually went out and purchased more "toxic assets". But these two zombie banks were not alone:

Now that's embarassing

It seems the Treasury ran into a small problem today regarding Citi.

The U.S. government abruptly shelved plans to start trimming its 34% stake in Citigroup Inc., after investors demanded a price so low that the Treasury Department would have lost hundreds of millions of dollars on the deal.
The embarrassing reversal came two days after the Treasury said it planned to sell as much as $5 billion of stock in the New York company, as part of Citigroup's plan to pay back $20 billion in taxpayer aid the troubled bank received last year.
At the expected sale price of $3.15 a share, the U.S. government would have suffered a loss of 10 cents per share on its 7.7 billion-share stake in Citigroup, or about $770 million.

Could it be that the Treasury lost a whole bunch of money on the bailouts that it refuses to recognize?

Taxpayers lose $61 Billion on AIG, auto bailouts

Despite whatever you might have heard about these bailouts being a good investment, the taxpayers lost money on this deal.

The Treasury Department is acknowledging for the first time that it lost $61 billion on two key programs designed to stabilize the economy after the largest financial crisis in decades.
The government is losing more than $30 billion on lifelines extended to insurance giant American International Group Inc., according to Treasury data released Wednesday in an audit by the Government Accountability Office. It also is losing more than $30 billion on rescues of struggling automakers Chrysler and General Motors.
Treasury says the losses are offset in part by profits earned from bank bailouts. It says the bank bailouts will net taxpayers $19.5 billion.

IMF: The cost of a second bailout may be democracy

Wall Street CEO's are deaf to Main Street while awarding themselves record bonuses from taxpayer bailout money. Democrats in Congress, in the White House, and regulators in the Federal Reserve who propose a permanent TARP bailout program are also deaf to Main Street.

But even the IMF has heard the increasingly angry rumble of Main Street, and they are warning the plutocrats that their insatiable greed will only be tolerated for so long.

The public will not bail out the financial services sector for a second time if another global crisis blows up in four or five years time, the managing-director of the International Monetary Fund warned this morning.

Is the Fed the central bank of the U.S. or...?

or the central bank for "Hank" Greenberg and Goldman Sachs. Bloomberg is out with a very interesting story that raises a lot of questions that probably will not get answered: "New York Fed’s Secret Choice to Pay for Swaps Hits Taxpayers".

The first question that comes to mind is why Timothy Geithner Treasury Secretary. Actually, we know the answer to that questions: protector of the financial oligarchy.

Back to the Bloomberg story:

In the months leading up to the September 2008 collapse of giant insurer American International Group Inc., Elias Habayeb and his colleagues worked nights and weekends negotiating with banks that had bought $62 billion of credit-default swaps from AIG, according to a person who has worked with Habayeb.

CIT's Peek - The Guy Who Destroyed CIT Gets Paid Before We Do?

Jeffrey Peek, CEO of CIT, has held this post since 2003. Peek has tried to transform CIT from a boring lender to "mom and pop" businesses to a Wall Street player.

He installed CIT's top brass in a glitzy office building on Manhattan's Fifth Avenue, eschewing the company's historical base near a big shopping mall in Livingston, N.J., and brought CIT into his high-society orbit as well. CIT became a sponsor of the New York City Opera. Its role as a donor to the Metropolitan Museum of Art may have helped Mr. Peek win a prestigious spot as a museum trustee in 2008.

Mr. Peek threw parties both at the office and in his home. At an Edwardian-themed fete at his home on Valentine's Day 2008, male guests donned top hats provided by the Peeks.

Banks underpaying government to exit bailout

Just so it wasn't clear the first time around, the taxpayer is getting screwed over both coming AND going.

(AP) -- The Treasury Department is selling its financial stakes in bailed-out banks for one-third less than they're worth, potentially shorting taxpayers up to $2.7 billion, a bipartisan congressional watchdog says.

The estimated shortfall concerns warrants, financial instruments that allow Treasury to buy shares of the firms at a set price in 10 years. If the stock prices of the banks go up, as they are expected to do, taxpayers could reap a healthy profit.
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