22 posts tagged “bailout”
The congressional panel investigating what happened to all that bank bailout money has issued a subpoena to the Federal Reserve, asking them to hand over all documents relating to the takeover of Merrill Lynch by the Bank of America.
On January 1, BofA finalized its purchase of Merrill Lynch for just over $29.1 billion. That made the bank eligible for an additional $20 billion in federal rescue money, bringing BofA's total to some $45 billion. Now, Reps. Dennis Kucinich (D-OH) and Edolphus Towns (D-NY) want to know exactly what the banks and the Federal Reserve agreed to when they arranged the deal last year.
Full text of the press release from Kucinich's office:
Washington D.C. (June 8, 2009) -- House Oversight and Government Reform Committee Chairman Edolphus Towns (D-NY) and Ranking Member Darrell Issa (R-CA) today served a subpoena on the Federal Reserve (the Fed) to compel it to turn over documents related to Bank of America’s acquisition of Merrill Lynch.
The full committee and Domestic Policy Subcommittee, under the leadership of Chairman Dennis Kucinich (D-OH), have been investigating the circumstances surrounding the federal government’s bailout of the Bank of America-Merrill Lynch transaction. Specific documents subpoenaed include emails, notes of conversations and other documents.
New York Attorney-General Andrew Cuomo has claimed that, in 2008, then-Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke strong-armed BofA into buying Merrill -- a move that, if true, could expose Paulson and Bernanke to prosecution.
Last week, news services reported that the House had asked Bank of America CEO Kenneth Lewis to testify before the House Committee on Oversight and Government Reform. That hearing takes place on Thursday (June 11).
The Raw Story
Elizabeth Coleman, Inspector General of the Federal Reserve. What the hell does she even do then? You have to love how someone holds a position like that without a clue as to what the hell it is they do.
Make sure to remember which politicians these are at the next election! Railing against bailouts while taking money from them is disgusting!
Can anyone see how this is going to end? If you can’t, let me tell you. AIG, despite fleecing us taxpayers for billions, will file bankruptcy and close. If you look at the business that you have left, then you quickly realize that they lack the capacity to remain viable. They only have a couple arms that remain profitable, and the profits generated by those are small and continue to dwindle. When you factor in public sentiment towards the company, the efforts made by other businesses-as well as their partners- to distance themselves from the company, it doesn’t take much to realize that this is a sinking ship.
There is one other large factor in all of this: the work force. Don’t think for a second that the employees at AIG are unaware of the future of the company. Many, including some of those that received million-dollar plus bonuses, have already left, and many that remain have put out feelers on Craigslist, Monster, and Twitter.
The real problem at AIG is that the cat is out of the bag. The company was making so much in hedge funds that it focused all of its efforts there at the expense of its legitimate businesses. Due to the enormity of the collapse and how much they leveraged, they have, in effect, dug themselves a hole that they can never get out of.
Therefore, there remains two possible options: we either let them fail and we take our lumps, or we continue to shovel money towards them in order to delay the inevitable. The bottom line is that they do not possess the means to repay the government loans. Continuing to fund them is both asinine and irresponsible. Yet we will continue to do so. Why?
Because it is political suicide to do otherwise. Look at all of the flack Obama and his administration has taken from the media already for telling people the truth about the economy. There is a thought process that believes he has to lie to the people and tell them that everything is fine; that we are on the road to recovery; things aren’t as bad as they seem; that they have the answers to fix this…that belies the fact that this doesn’t serve anyone. If people begin to invest again, based upon false information, then all we are doing is returning to the status quo. A status quo that got us here in the first place.
It’s something any bank would demand to know before handing out a loan: Where’s the money going? But after receiving billions in aid from U.S. taxpayers, the nation’s largest banks say they can’t track exactly how they’re spending the money or they simply refuse to discuss it.
The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what’s the plan for the rest?
None of the banks had an answer
If you have any working knowledge of how things are actually done in our modern business climate, then you already know that OUR money is being misappropriated. While I would like to say that I cannot believe that our government would dole out billions od dollars of TAXPAYERS money without any sort of oversight, I cannot. I totally expect behavior of this sort. As someone who has the utmost respect for the principles that this country was founded upon, I would like to ask a question of those who still have faith in our current government...
How can you have faith in such a system as this? I suspect that a few people will throw up the defense of pointing out one or two (are there even that many?) representatives who may serve honorably. I would retort-with examples illustrating my point-that even if one or two such people existed (harder to believe each day...), that those one or two people cannot make difference or stand up to a system that has become inherently corrupt.
I spent Sunday afternoon brooding over a great piece of Times reporting by Eric Dash and Julie Creswell about Citigroup. Maybe brooding isn’t the right word. The front-page article, entitled “Citigroup Pays for a Rush to Risk,” actually left me totally disgusted.
So many people were in on it: People who had no business buying a home, with nothing down and nothing to pay for two years; people who had no business pushing such mortgages, but made fortunes doing so; people who had no business bundling those loans into securities and selling them to third parties, as if they were AAA bonds, but made fortunes doing so; people who had no business rating those loans as AAA, but made fortunes doing so; and people who had no business buying those bonds and putting them on their balance sheets so they could earn a little better yield, but made fortunes doing so.
Citigroup was involved in, and made money from, almost every link in that chain. And the bank’s executives, including, sad to see, the former Treasury Secretary Robert Rubin, were clueless about the reckless financial instruments they were creating, or were so ensnared by the cronyism between the bank’s risk managers and risk takers (and so bought off by their bonuses) that they had no interest in stopping it.
These are the people whom taxpayers bailed out on Monday to the tune of what could be more than $300 billion. We probably had no choice. Just letting Citigroup melt down could have been catastrophic. But when the government throws together a bailout that could end up being hundreds of billions of dollars in 48 hours, you can bet there will be unintended consequences — many, many, many.
Also check out Michael Lewis’s superb essay, “The End of Wall Street’s Boom,” on Portfolio.com. Lewis, who first chronicled Wall Street’s excesses in “Liar’s Poker,” profiles some of the decent people on Wall Street who tried to expose the credit binge — including Meredith Whitney, a little known banking analyst who declared, over a year ago, that “Citigroup had so mismanaged its affairs that it would need to slash its dividend or go bust,” wrote Lewis.
“This woman wasn’t saying that Wall Street bankers were corrupt,” he added. “She was saying they were stupid. Her message was clear. If you want to know what these Wall Street firms are really worth, take a hard look at the crappy assets they bought with huge sums of borrowed money, and imagine what they’d fetch in a fire sale... For better than a year now, Whitney has responded to the claims by bankers and brokers that they had put their problems behind them with this write-down or that capital raise with a claim of her own: You’re wrong. You’re still not facing up to how badly you have mismanaged your business.”
Lewis also tracked down Steve Eisman, the hedge fund investor who early on saw through the subprime mortgages and shorted the companies engaged in them, like Long Beach Financial, owned by Washington Mutual.
“Long Beach Financial,” wrote Lewis, “was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking homeowners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, Calif., a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.”
Lewis continued: Eisman knew that subprime lenders could be disreputable. “What he underestimated was the total unabashed complicity of the upper class of American capitalism... ‘We always asked the same question,’ says Eisman. ‘Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.’ He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S.& P. couldn’t say; its model for home prices had no ability to accept a negative number. ‘They were just assuming home prices would keep going up,’ Eisman says.”
That’s how we got here — a near total breakdown of responsibility at every link in our financial chain, and now we either bail out the people who brought us here or risk a total systemic crash. These are the wages of our sins. I used to say our kids will pay dearly for this. But actually, it’s our problem. For the next few years we’re all going to be working harder for less money and fewer government services — if we’re lucky.
Sorry that I haven't been on in about a week. I had a bit of a health issue. There wasn't a ton of exciting things going on, but rather more of the usual.
Housing crisis? Yep. Still happening. Bailout fiasco? Yep. Still happening. I am encouraged however, by our "leaders" (God -or your diety-help us!) sudden, and sure to be short-lived backbone on the matter. I am certain that they will cave, with the caveat that they held the auto industry to all kinds of conditions and stipulations. Ummm...yeah right.
As far as the housing crisis stands? This bastards (mortage lenders) should all be shot. Seriously. They are the epitome of wall street greed and corruption. Want proof? Here it is:
http://www.msnbc.msn.com/id/27844894/
As if they haven't done enough damage. Thousands of subprime mortgage lenders and brokers — many of them the very sorts of firms that helped create the current financial crisis — are going strong. Their new strategy: taking advantage of a long-standing federal program designed to encourage homeownership by insuring mortgages for buyers of modest means.
You read that correctly. Some of the same people who propelled us toward the housing market calamity are now seeking to profit by exploiting billions in federally insured mortgages. Washington, meanwhile, has vastly expanded the availability of such taxpayer-backed loans as part of the emergency campaign to rescue the country's swooning economy.
To summarize, they are making risky loans again. They are loaning money to people that shouldn't be lent to. The SAME EXACT THING that got them into this situation in the first place. Its truly disgusting...
Given the speed at which the federal government is throwing money at the financial crisis, the average taxpayer, never mind member of Congress, might not be faulted for losing track.
CNBC, however, has been paying very close attention and keeping a running tally of actual spending as well as the commitments involved. Try $4.28 trillion dollars. That’s $4,284,500,000,000 and more than what was spent on WW II, if adjusted for inflation, based on our computations from a variety of estimates and sources*. Not only is it a astronomical amount of money, its’ a complicated cocktail of budgeted dollars, actual spending, guarantees, loans, swaps and other market mechanisms by the Federal Reserve, the Treasury and other offices of government taken over roughly the last year, based on government data and new releases. Strictly speaking, not every cent is directed a result of what’s called the financial crisis, but it arguably related to it.
Some 68-percent of the sum falls under the Federal Reserve’s umbrella, while another 16 percent is the under the Treasury Asset Relief Program, TARP, as defined under the Emergency Economic Stabilization Act, signed into law in early October.
(The TARP alone is bigger than virtually any other US government endeavor dating back to the Louisiana Purchase.)
|
Financial Crisis Balance Sheet |
| Government Entity | Sum in Billions of Dollars |
| Federal Reserve | |
| (TAF) Term Auction Facility | 900 |
| Discount Window Lending | |
| Commercial Banks | 99.2 |
| Investment Banks | 56.7 |
| Loans to buy ABCP | 76.5 |
| AIG | 112.5 |
| Bear Stearns | 29.5 |
| (TSLF) Term Securities Lending Facility | 225 |
| Swap Lines | 613 |
| (MMIFF) Money Market Investor Funding Facility | 540 |
| Commercial Paper Funding Facility | 257 |
| (TARP) Treasury Asset Relief Program | 700 |
| Other: | |
| Automakers | 25 |
| (FHA) Federal Housing Administration | 300 |
| Fannie Mae/Freddie Mac | 350 |
| Total | 4284.5 |
|
Note: Figures as of Nov. 13, 2008 |
Even as the company was pleading the federal government for another $40 billion dollars in loans, AIG sent top executives to a secret gathering at a luxury resort in Phoenix last week.
Reporters for abc15.com (KNXV) caught the AIG executives on hidden cameras poolside and leaving the spa at the Pointe Hilton Squaw Peak Resort, despite apparent efforts by the company to disguise its involvement.
"AIG made significant efforts to disguise the conference, making sure there were no AIG logos or signs anywhere on the property," KNXV reported.
A hotel employee told KNXV reporter Josh Bernstein, "We can't even say the word [AIG]."
A company spokesperson, Nick Ashooh, confirmed AIG instructed the hotel to make sure there were no AIG signs or mention of the company by staff.
"We're trying to avoid confrontation, keep our profile low," said Ashooh. "Some of our employees have been harassed."
Remember when AIG got their first check? The executives at the company went on a $463,000 retreat!? I hope these bastards rot in hell.
Wait, there is more!
With the Justice Department investigating companies involved in the mortgage and financial meltdown, executives around the country are hiring defense lawyers. Like many large companies, Fannie and Freddie had contracts promising to cover legal bills for their executives.
When the Treasury Department delivered a $200 billion bailout to Fannie and Freddie, that obligation passed to the government, which may find itself paying for the lawyers defending the executives against the government's own prosecutors.
In some shocking twist, the Bush administration is working to avoid it. The Federal Housing Finance Agency, which controls Fannie and Freddie, said in regulatory filings it soon will try to prohibit the two companies from paying legal fees to their executives. But such a prohibition almost certainly would lead to a costly court fight over who's responsible for the bills when the Justice Department comes knocking. This is a rather remarkable change from the status quo, even if it is only posturing.
