Toxic assets still festering ( TARP program has not relieved banks of their troubled loans)

[sabra]

Source: CNN Money

The Congressional Oversight Panel says the economy is still at risk because bad loans remain on banks' balance sheets.

WASHINGTON (CNNMoney.com) -- The economy may show signs of life, but so-called toxic assets are still a major threat to any recovery, a bailout watchdog group warned on Tuesday.

If the economy worsens and unemployment rises further, the troubled assets on bank balance sheets could lose even more value, according to the Congressional Oversight Panel, which keeps tabs on the $700 billion bailout of the financial sector.

The report reminds Congress that the bailout was initially pitched to help deal with troubled assets, hence the name: Troubled Asset Relief Program. Yet the TARP program has not relieved banks of their troubled loans.

The bailout money has instead been used to help banks boost their capital to withstand future losses. Capital injections help ease pressure and potentially free up money for lending -- but the toxic assets are still festering.

Read more: http://money.cnn.com/2009/08/11/news/economy/TARP_report/?postversion=2009081103

[PSPS]

1. Not to worry. The "PPIP" intends to foist all of this crap onto the taxpayers.

I guess the suspension of Mark to Market wasn't Potemkin enough, huh? Pretending a worthless asset is worth whatever you make up usually doesn't work out too well.

[bemildred]

2. The TARP money was just a fraction of the "value" of the troubled assets.

A smoke and mirrors routine to give the Rubes "confidence". The basic strategy with regard to the "troubled assets", i.e. fake "securities", is to stall dealing with them forever. It's not as stupid as it sounds, things are going to get really, really ugly if the "troubled assets" ever have to actually get dealt with according to normal legal and accounting standards, but if you can stall for say 30 years or so, it may not matter much anymore.

[jasi2006]

43. How about the banks rid themselves of "toxic assests" by

agreeing to modify mortgage loans for lower payments and longer years? The banks are refusing to deal in good faith with many mortgage holders because the banks know they can wait them out and prices will rise within the next year and interest reates will go up.

[bemildred]

45. You are assuming there is some sort of rational thought process going on.

There is little more in the way of a plan to fix the problem than to stall as long as possible and hope something makes it go away. This is, unfortunately, typical.

[bemildred]

46. The reason Paulson never wanted to explain his "plan" was that he never really had a plan. nt

[OhioChick]

3. US banks may need more govt support to cleanse bad assets

Source: Reuters

12 Aug 2009, 0225 hrs IST, REUTERS

WASHINGTON: The treasury department should consider expanding programmes to cleanse troubled assets from bank balance sheets if current efforts fail to restart markets or if economic conditions worsen, a US bailout watchdog panel said on Tuesday.

The Congressional Oversight Panel said in its latest monthly report that toxic loans and securities continue to pose a threat to the financial system, particularly for smaller banks that face mounting losses on commercial real estate loans. These banks may need similar stress tests and capital support afforded to larger institutions, the panel added. It also advocated that stress tests for the largest 19 institutions be repeated if the economy worsens beyond the worst-case assumptions used in initial tests conducted in April.

Despite improved financial market conditions, the panel said a “continuing uncertainty is whether the troubled assets that remain on bank balance sheets can again become the trigger for instability”. The panel said, “Treasury must assure robust legacy securities and legacy loan programs or consider a different strategy to do whatever can be done to restart the market for those assets,” the panel said.

The report comes as the treasury is preparing to launch a significantly scaled-down version of its toxic asset programme, a series of public-private investment funds to purchase toxic mortgage securities with $30 billion in government subsidies.


Read more: http://economictimes.indiatimes.com/US-banks-need-more-funds-to-rid-bad-assets/articleshow/4883580.cms

[sendero]

4. What is happening..

.. is exactly what those of us who were against the bailouts from the start SAID would happen.

The banks are SO FAR UNDERWATER they will keep coming back for more, and more and more and more and more taxpayer money.

Welcome to saddling your kids and their kids with endless debt and hobbling the economy to bail out the criminals that brought down our economy.

[CoffeeCat]

34. What did the banks DO with the bailout $$$?

We were told that the banks would use the bailout money to "unfreeze credit markets" and also
to rid their balance sheets of the toxic assets.

Hello?????????? The banks did NEITHER of those things!

Banks aren't lending. Banks are being stingier than ever. And those toxic assets are still on the books. In fact,
it was our government that allowed the banks to determine the value of those toxic assets--and this made their balance
sheets appear healthier than was the case.

But those toxic assets are still on those bank balance sheets--which means our financial system most likely, continues
to be insolvent.

Now, these banks might need more money to do what they said they would do with the first billions of bailout funds????

Is anyone else completely sickened and outraged?

Just what in the hell is going on?

[DJ13]

5. Screw that

If the trillion+ $'s they've already received isnt sufficient then they need to be seized and broken up by our complicit government.

Enough with this coddling of crooks and con men, just end this slow drip of criminality now.

[jimmybama]

13. Fuck em'

I REALLY MEAN, FUCK THEM!!!!!

[NMMOM]

33. Yeah. What jimmybama said!

:thumbsup:

[SammyWinstonJack]

49. +1

:thumbsup: Before they fuck us, AGAIN!

[KakistocracyHater]

31. significant economic disruption: Patriot Act has protocols for that

so use it already. I whole-heartedly agree with you, enough with these criminal Banksters.

[bemildred]

6. Gee, who could have predicted this? nt

[Deja Q]

16. Nobody from posh colleges, apparently.

[texastoast]

7. Then they should borrow some money from other banks

that are not so far under. Or go back and collect from the bonusees.

We should never, ever have started this bailout the corporatists mess.


Several financial giants that received federal bailout money in the last year paid out bonuses to employees in 2008 that greatly exceeded the amount of profit generated by the banks, according to a study on executive compensation released by New York State Attorney General Andrew Cuomo Thursday.


snip

According to the report:

• Goldman Sachs, which earned $2.3 billion last year and received $10 billion in TARP funding, paid out $4.8 billion in bonuses in 2008 - more than double their net income.

• Morgan Stanley, which earned $1.7 billion last year and received $10 billion in bailout funds, handed out $4.475 billion in bonuses, nearly three times their net income.

• JPMorgan Chase, which earned $5.6 billion in 2008 and received $25 billion from the government, paid out $8.69 billion in bonus money.

http://www.cbsnews.com/stories/2009/07/30/business/main5197668.shtml

[Aragorn]

12. oh man

that's what I was gonna say. But you forgot - they could also sell stock.

[Owl]

25. K&R

[salin]

8. so they can use even more public $ to buy up more toxic assets and/or buy up other

banks - seems that over the past five months I have read a bit about both types of actions by banks. Interesting that this story is from outside of the US. The mild, meek and quiet msm in the US continues on a path toward irrelevance.

[Deja Q]

19. The meek shall inherit the Earth...

Is it worth inheriting...

[Robb]

9. No. No. No. HELL no.

They need to eat it. They rolled the dice on commercial loans, right along with the commercial developers, when anyone with half a brain could see a recession coming and a glut of available commercial property.

No. No more. The banks need to take responsibility the same way the borrowers are being asked to.

[mbperrin]

11. Right! HELL no!

I was against this from the beginning, and now I get to say I TOLD YOU SO to all those "measured response" pawns.

[Robb]

17. Heh. That's me, I guess.

:hi: Sorry you were right, though.

[mbperrin]

28. Me, too, really.

Lot of bad stuff coming.

But :fistbump: we didn't actually do it. That's good!

[jannyk]

10. Tell 'em to use the fucking Bonus payouts!!!

[cornermouse]

14. No. No more money.

I don't care if they do go belly up. No more money.

[Deja Q]

20. Which, I thought, was the point of "free market"...

In reality, it's socializing the rich and free marketing the poor.

[Deja Q]

15. Banks are a symptom. NOT THE PROBLEM.

A bank's job is to lend money. To people and to businesses.

Once jobs started disappearing, the system was thrown into disarray.

Bailing out the banks is like throwing planks of wood into a burning house and saying the planks will stabilize the house and telling the firemen to go rescue some cat-ridden trees instead. Find the highwaymen who throw ciggie butts out their car windows, which in turn ignited the fire that put the house into jeopardy seems the logical solution.

[wickerwoman]

36. Banks are part of the problem...

My brother's been trying to buy a house recently. There's some great ones on the market, as you can imagine... but most of them are short sales. He's pre-approved for a loan, and could actually buy the house outright with some help from our parents but many of the banks will not accept his offer, even when he offers the list price and doesn't bargain. Many of them still seem to believe that the market will recover and they won't have to take a loss on their toxic assets.

For example, he offered $300,000 (the list price) on a house valued around $349,000. There are no other offers on the house and it's been on the market for 50 days but the bank won't approve the sale because they think they can get more. But they had the balls to ask him to sign a paper saying he wouldn't place a bid on any other houses and then wouldn't give him any guarantee that they wouldn't jump on the next offer that came along.

It's even worse on another house he's interested in because it has a second mortgage on it so now he has to deal with two banks squabbling over who is going to take the loss.

TARP should have included regulations forcing banks to sell toxic assets if they got a reasonable offer for them.

[Deja Q]

48. Sounds brutal.

Thank you for the explanation; I've never bought a home before and, with current economic climate, the banks are nuts if they think they would get the full $349,000.

[No Elephants]

42. You forgot the banks' zeal to make poor loans so that they could sell the lousy mortgages to

issuers of derivatives. And compensation and bonuses that were out of whack.

Banks were plenty part of the problem. So were appraisers. So were issuers of derivatives. So were rating companies who rated the derivatives. So was AIG, which insured the whole mess. So was the Reagan culture of de-regulation and love of big business, including big oil, big pharma, etc., followed by the two Bushes, with a bit of Clinton/DLC/Morris triangulation in between. So was a culture of greed. (Ever see the movie Wall Street? Stone has done a sequel now. No coincidence.)

It's a Hydra's head. If we could had gotten some old school Roosevelt Democrats in office, we might have had a shot. Instead, we have more of the same. Reagan's victories so freaked out Democrats that they became stealth Republicans, whether Blue Dog, DINO or just fraidy cat Dems who cannot think of anything besides getting re-elected.

[Deja Q]

47. Thanks for the reminder.

+1
:yourock:


It's still too early to tell about Obama as President, but of whatever crookery, the banks certainly don't deserve another dime.

[bvar22]

18. ?

NOW we have Your Children’s Money too !!!
And there is not a fucking thing you can do about it!
Now THIS is “Bi-Partisanship” !
Better get used to it!!
Hahahahahahahahaha!

[IndianaGreen]

21. Chavez nationalized the bad banks

We should have done the same, and lowered interest rates on credit cards, and restructure the mortgages that were in trouble.

[WriteDown]

22. No...

better to let them fail and then have the actual good performing businesses continue on.

[No Elephants]

40. That would have been something to discuss BEFORE the

"no strings attached" Paulson engineered bailout.

[Deja Q]

23. I now wonder if I've been wrong about Chavez...

Like most human beings, he's done good things and he's done questionable things.

But while tighty-righties kept mewling "nationalization, oh noez!", the government went out of its way to show it wasn't.

I wonder if the same will happen with health care, because all the old fuddie-duddies say "No socialized medicine; leave my medicare alone! Get off my lawn! Where'd my teeth go!!"

[IndianaGreen]

24. And they don't realize that Medicare is a single payer system

Single-Payer National Health Insurance

Single-payer national health insurance is a system in which a single public or quasi-public agency organizes health financing, but delivery of care remains largely private.

Currently, the U.S. health care system is outrageously expensive, yet inadequate. Despite spending more than twice as much as the rest of the industrialized nations ($7,129 per capita), the United States performs poorly in comparison on major health indicators such as life expectancy, infant mortality and immunization rates. Moreover, the other advanced nations provide comprehensive coverage to their entire populations, while the U.S. leaves 45.7 million completely uninsured and millions more inadequately covered.

The reason we spend more and get less than the rest of the world is because we have a patchwork system of for-profit payers. Private insurers necessarily waste health dollars on things that have nothing to do with care: overhead, underwriting, billing, sales and marketing departments as well as huge profits and exorbitant executive pay. Doctors and hospitals must maintain costly administrative staffs to deal with the bureaucracy. Combined, this needless administration consumes one-third (31 percent) of Americans’ health dollars.

Single-payer financing is the only way to recapture this wasted money. The potential savings on paperwork, more than $350 billion per year, are enough to provide comprehensive coverage to everyone without paying any more than we already do.

Under a single-payer system, all Americans would be covered for all medically necessary services, including: doctor, hospital, preventive, long-term care, mental health, reproductive health care, dental, vision, prescription drug and medical supply costs. Patients would regain free choice of doctor and hospital, and doctors would regain autonomy over patient care.

Physicians would be paid fee-for-service according to a negotiated formulary or receive salary from a hospital or nonprofit HMO / group practice. Hospitals would receive a global budget for operating expenses. Health facilities and expensive equipment purchases would be managed by regional health planning boards.

A single-payer system would be financed by eliminating private insurers and recapturing their administrative waste. Modest new taxes would replace premiums and out-of-pocket payments currently paid by individuals and business. Costs would be controlled through negotiated fees, global budgeting and bulk purchasing.

http://www.tikkun.org/tikkundaily/2009/08/10/only-you-can-save-health-care-reform-so-please-act-now/

[No Elephants]

39. That's what Lindsey Graham and a few other Republicans were saying shortly after the bailout.

They did not trumpet it or push for it, but they did say it.

[Skink]

26. The article means they'll just tap into the slush fund I mean TARP...

that Paulson and a few of the other insiders came up with.

[MasonJar]

27. No! They will not even insure that all Americans have health care.

Let them eat their toxic waste. If I am a stockholder, I just have to suck it up. Enough already. Without these uncalled for wars and bailouts of banks who should have been regulated there would be plenty of money for everything we need: healthcare, schools, roads, bridges, mass transit, etcs.

[Deja Q]

29. Meet our new welfare queens: banks

[defendandprotect]

30. And when is it that they're planning to re-regulate financial markets????????

Unregulated capitalism is merely organized crime !

[Libertas1776]

32. Fuck the Banks!

I want a taste of that government socialism for a change.

[earcandle]

35. More goodwill if the government gives the money to the people to pay their debts to the bank

directly, don't you think?  Put their credit back intact. 
Does nothing but feed bonuses and cause collection costs at
the bank.

[No Elephants]

37. Who gives out a trillion bucks of money that is not their own, with almost no conditions?

If the appropriate conditions had been put on the bailout money before we handed it the the financial institutions, we would have been doing so much better now--and we would not have been talking about executive compensation and bonuses for the last year, or $3000 waste baskets, or company junkets, or, worst of all, how the toxic assets are still there and the banks still aren't lending.

Bush, Paulson, Hanky Panky Bernanke and our Congress betrayed us.

[Lagomorph]

38. Say the bank is...

...upside down on their debt. They borrowed money to lend money. They borrow 20 billion, but when the word gets out that they're up-side-down, due to toxic mortgages, their stock takes a hit and their capital investments take a hit when everybody's stock tumbles. If the hit is greater than 20 billion, it simply evaporates......gone.

They get 25 billion in gov't money and pay back their 20 billion in outstanding loans, leaving them a paltry 5 billion for bonuses, marble toilets and corporate junkets.

This leaves them temporarily solvent, but unable to borrow anymore money against their toxic mortgages to loan to the public.

[No Elephants]

41. That's where they were BEFORE the bailout, except for the bonuses and junkets, but

but taxpayers were a trillion or so bucks richer. What's wrong with this picture?

See also, Reply ##'s 18 and 42.

[Lagomorph]

44. Good Question....nt