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Posts Tagged ‘TARP’

Treasury’s Housing Program: “Big Hat, No Cattle”

Posted by Larry Doyle on April 21st, 2010 12:04 PM |

High five to 12th Street Capital for pointing out the quarterly release of the Special Inspector General for the Troubled Asset Relief Program. While this report covers a wealth of topics, let’s zero in on the SIGTARP’s summation of the Treasury’s HAMP (Home Affordable Modification Program).

As our friends at 12th Street write:

Ultimately, the report goes on to focus on HAMP and I would say this sums it up best:

“In sum, until Treasury fulfills its commitment to provide a thoughtfully designed consistently administered, and fully transparent program, HAMP risks being remembered not for catalyzing a recovery from our current housing crisis, but rather for bold announcements, modest goals, and meager results.”


Gaming Uncle Sam’s Mortgage Modification Program

Posted by Larry Doyle on March 31st, 2010 11:08 AM |

A new release by the SIGTARP (Office of the Special Inspector General for the Troubled Asset Relief Program) is exceptionally enlightening in detailing how a likely significant percentage of those homeowners who entered the trial mortgage modification process gamed the system.

Once again, major high five to our friends at 12th Street Capital for sharing this report and providing insightful commentary. As 12th Street points out this morning:

With all of the hoopla surrounding the government and Bank of America announcements to push principal forgiveness to the top of the waterfall for mortgage modification triage, it would have been easy to miss the latest report from the SIGTARP (Special Inspector General of TARP). I have attached the report here and would encourage you to print it out and read it. (more…)

Barack Really is Going to Pay Her Mortgage

Posted by Larry Doyle on March 26th, 2010 8:24 AM |

My blood is boiling. Why?

The assault on the principles of free market capitalism is escalating with news that banks are poised to start reducing principal balances on certain mortgages.

I empathize with those who are strapped, but I have never felt more strongly on a topic than this principal reduction. Despite any and all bulls*%# put forth by those in Washington, the principal reduction program is an enormous escalation of the violation of moral hazard which our country sadly continues to embrace. I have no doubt it will expedite the development of a socialized housing finance system.

Do not think for a second that banks will take the hit on these principal reductions. Who will take the hit? Me and you. Those who have worked hard, saved, played by the rules, and taught our children to do the same. (more…)

Treasury’s Herb Allison Needs a Truth Enema

Posted by Larry Doyle on March 4th, 2010 12:33 PM |

According to testimony this morning from Treasury official Herb Allison, currently charged with overseeing the management of the TARP, there are no financial firms now guaranteed as ‘too big to fail.’

What rock did Herb just crawl out from?

The Wall Street Journal addresses Herb’s ridiculous comment in writing, Treasury Official: ‘No Too Big to Fail Guarantee’ for Big Financial Firms:

There is no U.S. government guarantee to protect the largest financial firms, a Treasury Department official said Thursday, as a congressional watchdog criticized the $45 billion in government aid provided to Citigroup Inc. (more…)

Judd Gregg Exposes Peter Orszag

Posted by Larry Doyle on February 3rd, 2010 10:10 AM |

Are we a nation of laws or not? Do we merely do what is expedient and politically correct as opposed to what is right and principled? Do we allow political polls and political winds to override the pursuit of truth, transparency, and integrity? All too often, our nation gets so caught up in the moment that we lose sight of who we truly are, from where we have come and where we hope to be going. As a result, I believe we have lost both our moral and economic compass.

I broach these questions and make that assertion based on yesterday’s engagement (video clip below) between Senator Judd Gregg (R-NH) and Peter Orszag, White House Director of the Office of Management and Budget.

As a backdrop to Gregg exposing Orszag’s arrogant and presumptuous demeanor, please recall that the law enacted to implement the TARP (Troubled Asset Recovery Program) required that any funds recovered through this program be effectively returned to taxpayers to pay down our national debt. That’s the law.

Do the laws of our nation stand for anything or can they be presumptuously overrun at the administration’s whim and fancy?

I commend Judd Gregg for standing his ground and exposing Peter Orszag in this engagement. America deserves to witness this undressing because the very core of Gregg’s argument is the lack of respect so many in our country have for principle. You may feel differently and believe Orszag’s goals are worthy. I would ask you if the ends justify the means. Do you really want to go there?

What do you think of Judd Gregg? Peter Orszag? Are we a nation of laws or not?


More Insider Trading on Wall Street?

Posted by Larry Doyle on February 1st, 2010 1:56 PM |

Profit over principle. Where does one draw the line?

I worked with some incredibly sharp individuals on Wall Street. In fact, two individuals with whom I worked were banned from casinos in Vegas because of their ability to count cards. While casinos do not appreciate card counters, I would not include that skill as a negative in my thoughts about their personal character. To be perfectly frank, both of these individuals were gracious, charitable, and professional. The overwhelming majority of those with whom I worked were also true professionals.  That said, the very nature of the Wall Street enterprise attracts an element that prioritizes profit over principle. I am reminded of that fact again today. How so?


Treasury Leaves TARP on the Field

Posted by Larry Doyle on December 9th, 2009 12:15 PM |

We learned all we need to know about the economy today. How so? The fact that Treasury Secretary Geithner has chosen to extend the TARP (Troubled Asset Relief Program) to October 2010 is a clear indication that our economy, primarily housing and employment, needs Uncle Sam’s support.

While Geithner couches this support in terms of “just in case,” we should not be so naive. The American Banker highlights this development in writing, Treasury Extends Tarp to 2010:

The Treasury Department announced Wednesday that it would extend the Troubled Asset Relief Program to Oct. 3, 2010.

In a letter to lawmakers, Treasury Secretary Tim Geithner cited improvements in the economy but said Tarp must be extended due to remaining challenges for homeowners and small businesses.

That’s right. The outlook for housing and jobs remains challenged, all assertions to the contrary aside.

“This extension is necessary to assist American families and stabilize financial markets because it will, among other things, enable us to continue to implement programs that address housing markets and the needs of small businesses, and to maintain the capacity to respond to unforeseen threats,” Geithner wrote.

Unforeseen threats? Come on, Tim. Be straight with us. Try ongoing bank failures due to losses on loans. (more…)

Will Geithner ‘Walk the Walk?’

Posted by Larry Doyle on November 18th, 2009 9:35 AM |

Do you have any confidence that Washington even knows how to properly address our massive and growing fiscal deficit? Rahm Emanuel, Tim Geithner and others understand that from a political standpoint they need to start talking about deficit control, but will that talk lead to action?

Do you think Congressional leaders, specifically Harry Reid and Nancy Pelosi, have the character and fortitude to ‘tighten the belt?’

The first real test for this crowd is already upon us. How so? The TARP, with a $700 billion commitment, expires on December 31, 2009. Of that $700 billion, $400 billion has actually been spent. Why wasn’t the other $300 billion spent? Well, don’t forget that Obama’s Stimulus Bill totaled $770 billion and assorted other programs implemented by Treasury have run into the trillions. As a result, Geithner did not immediately need to allocate those funds.

The question begs as to what will happen to that $300 billion. While Emanuel and Geithner are starting to ‘talk’ the fiscal discipline ‘talk,’ will they ‘walk the walk?’ (more…)

Is Housing Tax Credit Coming to an End?

Posted by Larry Doyle on October 26th, 2009 2:02 PM |

Is the clock about to strike midnight for the Federal tax credit to support housing?

Uncle Sam has implemented a wide array of programs to support the domestic housing market. These programs include:

1. Mortgage modifications.

2. Massive funding support for Freddie Mac, Fannie Mae, and the Federal Housing Administration.

3. Increasing the loan limits on mortgages eligible for purchase by Freddie and Fannie in certain regions of the country.

4. Capital injections into a number of large banks and mortgage originators via the TARP.

5. An $8k tax credit for new home purchases.

Of all of these programs, most analysts believe the tax credit has had the largest positive impact. Why has that happened? In my opinion, the tax credit directly impacts the buyer while the other programs are an attempt to support housing but are as much or more supportive of the financial organizations than the homebuyers. (more…)

Elizabeth Warren Highlights Washington’s Losing Battle on Housing

Posted by Larry Doyle on October 9th, 2009 9:21 AM |

Who in Washington will give you a straight answer? Elizabeth Warren.

Who is Elizabeth Warren? Her Wikipedia bio reads:

Elizabeth Warren

Elizabeth Warren

Elizabeth Warren (born 1949) is the Leo Gottlieb Professor of Law at Harvard Law School, where she teaches contract law, bankruptcy, and commercial law. In the wake of the 2008-9 financial crisis, she has also become the chair of the Congressional Oversight Panel created to oversee the U.S. banking bailout, formally known as the Troubled Assets Relief Program. In 2007, she first developed the idea to create a new Consumer Financial Protection Agency, which President Barack Obama, Christopher Dodd, and Barney Frank are now advocating as part of their financial regulatory reform proposals.

In May 2009, Warren was named one of Time Magazine’s 100 Most Influential People in the World.

Ms. Warren consistently takes no prisoners or provides no pandering in making honest assessments of the interaction between Washington and Wall Street. She has called the banks on the carpet. She has called Secretary Geithner on the carpet. She has called Congress on the carpet. Why? A general lack of honesty, integrity, and transparency in dealing with the American public.

When she speaks, I listen.

What did she have to say this morning? In commenting on a recently released report on the effectiveness of government programs to support housing, Warren questioned the scalability and the permanence of the impact of the TARP funding. Bloomberg provides further color in writing TARP Oversight Group Says Treasury Mortgage Plan Not Effective. The report highlights:

“Rising unemployment, generally flat or even falling home prices and impending mortgage-rate resets threaten to cast millions more out of their homes,” the report said. “The panel urges Treasury to reconsider the scope, scalability and permanence of the programs designed to minimize the economic impact of foreclosures and consider whether new programs or program enhancements could be adopted.”

New programs or program enhancements? Yesterday I opined “Washington Needs a New Housing Model” and wrote:

While the administration swims upstream on this issue, bank policy of tight credit and restrictive lending only further exacerbates the housing market. Make no mistake, though, banks are taking that approach to tight credit at the behest of regulators who know the level of losses in the banking system and are trying to preserve the industry as a whole.

I like a rallying equity market as much as anybody, but I wouldn’t spend any paper gains just yet. Why? The new housing model is displaying that:

“As defaults become more common, the social stigma attached with defaulting will likely be reduced, especially if there continues to be few repercussions for people who walk away from their loans,” concluded Sapienza.  “This has an adverse effect on homeowners who do pay their mortgages, and the after-effects of more defaults and more price collapse could be economic catastrophe.”

This model needs some quick-dry crazy glue, which could only be applied in the form of a serious principal reduction program. Banks would take immediate and massive hits to capital which they clearly won’t accept.

So how can we generate some support for housing?

Aside from a principal reduction program, the penalty for those who would strategically default on their mortgage needs to be far more onerous.

The principal reduction would negatively impact bank earnings. Too bad. The banks are currently feeding at the taxpayer trough and would not be here without the bailouts. The individuals who are capable of making their payments need to accept the moral responsibility that is embedded in a contract.

Given the massive violation of moral hazards and breaking of contracts by Uncle Sam, that old man does not have a lot of credibility on that front.

What do we really learn here? Ultimately, the market is the market and efforts to manipulate or support a falling market will only be temporary. The market needs to find the clearing level where private money will purchase properties. That private money will wait while Uncle Sam continues to try to prop the market.

In the meantime, do not expect any meaningful support for housing.


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