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HomeTreasury’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?
LD
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…)
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 (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.
LD
The TARP Has a $159 Billion Loss !!
Posted by Larry Doyle on June 30th, 2009 3:27 PM |
The American taxpayer was going to make money on the investments in assets related to Bear Stearns, AIG, Citigroup, Bank of America, ad nauseum, correct?
Is it even possible to track the massive government outlays across the entire economic landscape? Is it further possible to measure the actual cost of the outlays as a percentage of the overall subsidies? Can we navigate this terrain without getting bogged down in the midst of a thicket of government data and statistics? You have come to the right place.
Our trusty financial primer, Subsidyscope (right sidebar here at Sense on Cents) has just released a report, entitled Estimated TARP Subsidy Rate Rises, which links to a report from the Congressional Budget Office highlighting all aspects of the TARP (Troubled Asset Relief Program).
Just as “you can’t tell the players without a program” when attending a sporting event, “you can’t track Uncle Sam without Subsidyscope and Sense on Cents.”
What do we learn? Uncle Sam is still holding some TARP firepower. The TARP was launched as a $699 billion capital commitment. If you recall, the TARP legislation was passed as a vehicle to purchase toxic assets from banks. It has moved a long way away from that.
The TARP now covers 4 initiatives:
1. capital purchase and repayments from financial institutions
2. additional support for large financial institutions
3. financial assistance to automakers and related businesses
4. other actions, such as mortgage modification, TALF subsidies, and purchasing securities backed by Small Business Administration loans.
To be perfectly frank, I think it is very plausible that the actual capital commitments and activities ongoing under the TARP may not have met the pure letter of the initial legislation. That said, in an environment in which so many initiatives are capital constrained, there is no real legislative pushback. When was the last time we worried about the spirit or letter of our laws when we had bigger issues concerning money?? Money is more important than legal precedents, correct? We’ll get into that on another post.
On the numbers front:
Of the $699 billion in total capital, $142 billion has yet to be committed. Of the funds already allocated, Uncle Sam has incurred a total cost of $159 billion. What does that mean?
Recall the number of times that government officials told taxpayers that we would make money on investments in AIG and the like. Well, so far we’ve lost $159 billion dollars across all our TARP investments. The loss is calculated as the difference in funds committed and allocated to securities and the market value of those securities. That loss represents 36% of the funds committed and actually allocated.
Not that anybody in the media or the financial industry would want you to know that.
Program, here….get your program….step right up…program, here!!
Enjoy the ballgame, folks!!
LD
Dianne Feinstein Exposes Herself Under the TARP
Posted by Larry Doyle on April 28th, 2009 3:30 PM |
Senators Dianne Feinstein (D-CA) and Olympia Snowe (R-ME) proposed legislation earlier this year to create transparency in the distribution and use of TARP funds. From Feinstein’s own website:
Senators Feinstein and Snowe are the authors of bipartisan legislation, called the Troubled Asset Relief Program Transparency Reporting Act, which would promote transparency and establish strict accountability standards for firms receiving TARP funds. The bill was originally introduced during the 110th Congress on November 20, 2008, and was reintroduced with a new bill title for the 111th Congress on January 6, 2009.
“American taxpayers put hundreds of billions of dollars on the line to rescue financial institutions, but we still don’t know how this money is being spent,” said Senator Feinstein. “This lack of transparency is simply unacceptable. Taxpayers deserve better, and the time has come to restore confidence in this unprecedented effort. Clear restrictions must be imposed on firms receiving assistance. These include tougher reporting requirements, lobbying prohibitions, and a ban on lavish and unnecessary expenditures.” (more…)
