Blog Entries tagged 'bailout'

AIG vs. Goldman reveals the flaw in financial reform

ronaldfink6@gmail.com — Wed, 30 Jun 2010 23:00:00 +0100

The latest revelations concerning the dispute between AIG and Goldman over collateral show how weak the new financial reform package really is.

After all, Goldman's demands for collateral from AIG as it was failing ended up costing taxpayers billions of dollars. Yet according to the testimony today during the crisis panel's latest hearings, the whole question hinged on what constituted fair value.

To hear Goldman CFO David Viniar tell it, the Vampire Squid can [...]

French, German banks most exposed to Greek crisis

marinecole@hotmail.com — Sun, 16 May 2010 23:00:00 +0100

Large French and German banks appear to be the largest creditors to Greece and therefore stand to benefit the most from the 110 billion euros rescue package to Greece, at least indirectly since Greece won't default on its debt.

French financial institutions have the largest exposure in the world to Greek debt, holding about 50 billion euros of Greek debt, both from the private and public sectors.

The most exposed bank is Credit Agricole, which has more than 25 billio [...]

Lumbering EU giant awakes

denise.bedell@tc-worldwide.com — Sun, 09 May 2010 23:00:00 +0100

The European Union has finally stepped up to the plate with a bailout package for member states - after months and months of hemming and hawing - and it only took the potential bottoming out of the euro and fears of another global panic to light a fire. Never mind troubles in Greece since last November, never mind Ireland, or the UK, or Portugal or Spain.

The bailout package agreed by EU finance ministers early this morning will supply countries in [...]

Treasury votes to keep KPMG as Citi’s auditor

jobs@cfozone.com — Wed, 05 May 2010 23:00:00 +0100

Submitted by Francine McKenna, republished from Going Concern, Accounting News for Accountants and CFOs.

The US Treasury recently decided to vote its proportionate ownership interest in Citigroup to affirm reappointment of KPMG as Citi's auditor for the 41st consecutive year.

Maybe Treasury married KPMG all over again because they're cheap compared to what Goldman and AIG are paying PwC.

Maybe KPMG knows this client best - a dubious honor. KPMG has been [...]

Financial innovation inevitably leads to crisis, says new research

ronaldfink6@gmail.com — Thu, 22 Apr 2010 23:00:00 +0100

Paul Krugman's column today called my attention to a paper that anyone interested in financial reform should check out.

The paper completely contradicts the conventional wisdom that innovation in finance is a good thing.

Indeed, the authors, including a behavioral finance theorist who has long challenged the "rational expectations" school (whose assumptions produced that so-called wisdom), say innovation inevitably leads to financial crisis built on what amount [...]

Fed’s Bear Stearns assets rotten in more than one way

marinecole@hotmail.com — Wed, 31 Mar 2010 23:00:00 +0100

The New York Federal Reserve has finally disclosed the assets it holds as a result of its bailout of Bear Stearns' creditors. And, as expected, it's not a very pretty portfolio.

Most of Maiden Lane 1, the vehicle used to absorb the assets, is made of jumbo mortgages, collateralized debt obligations and commercial real estate assets, all of which are impairing the Fed's balance sheet -- and its reputation, as Bloomberg noted Thursday.

That's not to say the whole t [...]

Banks still gun shy when it comes to lending

mquinn@cfozone.com — Thu, 11 Mar 2010 23:00:00 +0100

There have been many attempts to call a bottom to credit quality. Much time has been spent scouring through bank filings, combing over charge-off data. The thinking -- or hope, at least -- is that once credit quality stabilizes banks will fully get back into the business of banking.

But, as American Banker reports, executives at major banks are pretty comfortable with how their loan books are performing -- and they still don't plan to start doling out more money [...]

Citi continues to make nice

mquinn@cfozone.com — Thu, 04 Mar 2010 23:00:00 +0100

I wrote about it before, but it's worth mentioning again: Nobody plays nicer with the government than Citigroup.

While American International Group is just starting to fully appreciate all the nice things the US taxpayer has done for it, Citi, which is 27 percent owned by Uncle Sam, has always gotten it.

In testimony before a bailout oversight panel on Thursday, the bank's CEO, Vikram Pandit, voiced support for Obama administration financial reform goals, includi [...]

AIG counterparties got more than 100 cents on the dollar

ronaldfink6@gmail.com — Wed, 27 Jan 2010 23:00:00 +0100

Ever since the Federal Reserve bailed out AIG in late 2008, the true significance of the so-called Maiden Lane III component of the deal has escaped me.

For those new to my horribly "populist" interest in the Fed, the bank set up vehicles called Maiden Lane to hold the assets it bought from a number of bailed-out institutions, evidently thinking that parking dodgy assets in vehicles named after one of those dark and windy little streets in the downtown Manhattan shadows of the [...]

Geithner gets to have it both ways

ronaldfink6@gmail.com — Tue, 26 Jan 2010 23:00:00 +0100

Matt Quinn and I are struck by the contradiction at the heart of Tim Geithner's stated role in the bailout of AIG when he was president of the New York Fed.

On the one hand, Geithner claims he had very little to do with it, and so isn't responsible for the fact that the bank failed to use its leverage to negotiate better terms for taxpayers instead of paying Goldman Sachs and other AIG counterparties 100 cents on the dollar.

Yes, his claim today is limited to the disclosur [...]

Banks' case against the TARP tax doesn't stand a chance

ronaldfink6@gmail.com — Sun, 17 Jan 2010 23:00:00 +0100

This New York times article on the bank lobby's plans to challenge the constitutionality of the bank tax proposed by the Obama administration last week fails to point out several clear-cut historical precedents in support of it.

Yes, the article notes that legal experts say the challenge rests on shaky ground, but it never really explains why.

And it's not because taxes aren't "punishment," as the reporter suggests. Instead, it's because taxes of this so [...]

New York Fed: You said what over email?

mquinn@cfozone.com — Wed, 06 Jan 2010 23:00:00 +0100

One of the big stories today is the emails between the Federal Reserve Bank of New York and American International Group in which the regulator told the insurer to withhold details from public filings about certain payments it made to banks during the crisis.

Bloomberg reports :

"AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps [...]

Shocking news: Banks outsmart Treasury

mquinn@cfozone.com — Sun, 03 Jan 2010 23:00:00 +0100

A good story over on Bloomberg about how some big banks that received huge bailouts piled into illiquid mortgage debt ahead of a government program designed to purge bank balance sheets of the frozen assets.

Bank of America, Citigroup, Morgan Stanley and Goldman Sachs added a combined $3.36 billion of home-loan bonds that lack government guarantees to their short-term trading assets during the third quarter, up 16 percent from the second quarter, Bloomberg found [...]

Risk begets risk, IMF finds

ronaldfink6@gmail.com — Wed, 30 Dec 2009 23:00:00 +0100

The results of this study by the International Monetary Fund would be funny if they weren't so scary: The more risk financial firms take, the more they spend lobbying against regulation, the study finds.

Using detailed information on lobbying and mortgage lending activities, the authors found that lenders lobbying more on issues related to mortgage lending have higher loan-to-income ratios, securitize more intensively, and have faster growing portfolios.

They s [...]

Good money after bad: GMAC getting another $3.8 billion

mquinn@cfozone.com — Tue, 29 Dec 2009 23:00:00 +0100

Reports on Wednesday indicated GMAC is about to get another $3.8 billion from the Treasury Department. That will bring its total bailout to $16 billion, which is the equivalent of nearly 9 percent of all GMAC's assets.

We can be breathless over the tens of billions received by Bank of America, Citigroup, J.P. Morgan Chase, Morgan Stanley and Goldman Sachs and others. But those banks are very, very big. And the funds they received, proportionately, are nothing compared to [...]

Fannie, Freddie and a FUBAR financial system

ronaldfink6@gmail.com — Tue, 29 Dec 2009 23:00:00 +0100

The back and forth over the apparent lifting of any limit on government capital available to Fannie Mae and Freddie Mac shows no sign of ending, as the blogosphere seems to be trying to fill in the blanks left by the Treasury's cryptic Christmas Eve announcement.

It still looks to us as if the announcement amounts to an acknowledgement that the housing market is still in serious trouble, as the governmental blank check for the two agencies came only days before Fannie reported that [...]

Fresh funds for Fannie and Freddie show housing still needs help

ronaldfink6@gmail.com — Mon, 28 Dec 2009 23:00:00 +0100

I wasn't sure what to make of some of the rumblings in the blogosphere over the disclosure on Christmas Eve that the Treasury had extended fresh capital to Fannie Mae and Freddie Mac.

Interesting timing, for sure. The Treasury clearly wanted to minimize the bad press that would attend the news. But the timing only got the tin foil atop the heads of the more advanced theorists flashing away big time.

Still, it seems there might be a relatively straightforwar [...]

The bank bailout disconnect

mquinn@cfozone.com — Sun, 27 Dec 2009 23:00:00 +0100

A blogger over at Zero Hedge seems as perplexed as I am over how easy it's been for banks that nearly brought the global economy to its knees to raise capital.

Investors are clearly clamoring to hold bank equity, as shocking as that might seem. You can thank the Federal Reserve's near-zero interest rate policy in part for that by once again making it look easy to borrow cheap and lend high.

"If the clients want something, give it to them in spades, whether [...]

Bernanke vs. the bank lobby?

ronaldfink6@gmail.com — Mon, 21 Dec 2009 23:00:00 +0100

How can the Senate vote to confirm Ben Bernanke when he gives an answer like this on the question of moral hazard?

After all, the question wasn't limited to its existence but to its growing importance, as other central bankers have come to realize, including the one who now describes the vicious cycle of bailouts and risk taking, where more of one leads to more of the other, as a "doom loop."

Sure, the Fed chairman says more power to the Fed will take [...]