$1T more for Banks? (Bad bank plan)

[taught_me_patience]

The Obama administration is close to deciding on a plan to purchase bad—or non-performing and illiquid—assets from banks, according to industy sources. The plan could be announced early next week.

The so-called "bad bank" plan, would address the key problem of how to price the assets by using a model-pricing mechanism.

The model would take account of the government's ability to hold onto assets, even to maturity, and pay for the them with cheap funding. Result: the government might end up paying more than current market prices for the securities.




http://www.cnbc.com/id/28879872

[taught_me_patience]

1. kick... I can't believe nobody is discussing this n/t

[slipslidingaway]

2. I was just going to kick this for you...

as I had already given it a quick R before.


"kick... I can't believe nobody is discussing this"

But did you read about the 50 milion dollar plane.

:rant:

[taught_me_patience]

3. Thanks

If the government buys these assets at anywhere near book value, we're going to be losing way more than $50MM. Consider it another handout to the big banks.

This is really starting to piss me off!

[slipslidingaway]

5. My pleasure, we should be told what is being bought...

who knows what they are and their true value.

So the tax payers buy the bad assets in order to clear up the balance sheets of the banks so they can attract investors... then the banks can make money lending to consumers, many of whom are already over their heads in debt and with little saved for retirement.

:shrug:

[truedelphi]

27. Only flaw in your statement is this one:

You say: then the banks can make money lending to consumers, many of whom are already over their heads in debt and with little saved for retirement. "

the banks have no intention of making loans to consumers.

Most consumers are unaware that with the decline in monies made available, their situation as creditors has declined. SO if you were an A+ creditor before this nasty business, now you may only be B- creditor, not because you are a worse candidate for a loan, but because the banks have en masse decided that less monies would be available to you. SO immediately most Americans saw their ability to borrow decline.

What banks are interested in now is in buying up utilities.

I don't expect you to believe me - but google "Kashkari" + "Issa" and also "Kashkari" + "Kucinich" We are being robbed and Obama is either naive or else bought out, in terms of the economic mess we are in.

[slipslidingaway]

32. Thanks for pointing that out! ....

Although this new proposal will be sold as freeing up credit lines.

I watched most of the hearing you mentioned, but honestly do not remember utilities being mentioned specificaly... other companies definitely.

No doubt about it, we are being robbed.

:(

http://www.nytimes.com/2009/01/18/business/18bank.html?pagewanted=2&_r=1&hp

"...None of the bankers who appeared before recent investor conferences offered specific details about their intentions, but recurring themes emerged in their presentations. Two of the most often cited priorities were hanging on to the money as insurance against a prolonged recession and using it for mergers..."

[marketcrazy1]

4. no one seems to give a shit........

our government is going to force the taxpayers to assume TRILLIONS of dollars in bank losses thereby bailing out share holders and major investors with OUR money instead of letting THEM lose on THEIR poor decisions!!! and how will the majority of taxpayers respond,,,, by PRAISING our elected "leaders" for "solving" this crisis!!! I think i am going to puke!!

[OnceUponTimeOnTheNet]

8. I feel abit ill also. So these rip off traders get to skate?

[slipslidingaway]

6. ......n/t

[slipslidingaway]

7. Stocks jump on reports of plan for bad bank assets

http://news.yahoo.com/s/ap/20090128/ap_on_bi_st_ma_re/wall_street_85


"Stocks are sharply higher following media reports that the Obama administration is considering a plan to set up banks that could absorb bad assets from financial companies..."


BKX (Bank index) is up 10% and FAS (Financial bull 3x shares) is up 20%.

[chill_wind]

28. ‘Relief Rally’ (Bloomberg )

(...)

Citigroup added 67 cents to $4.22, while Bank of America, the largest U.S. lender by assets, jumped $1.05 to $7.55. JPMorgan Chase & Co. climbed 8.7 percent to $27.25.

Financial companies in the S&P 500 rallied 9 percent collectively, with 79 of 81 companies advancing.

‘Relief Rally’

The bad-bank initiative may allow the government to rewrite some of the mortgages that underpin banks’ toxic debt, in the hope of stemming a crisis that has stripped more than 1.3 million Americans of their homes. The S&P 500 fell the most since the Great Depression last year after the collapse of Lehman Brothers Holdings Inc. froze credit markets and more than $1 trillion in losses at financial firms eroded profits.

“You’re getting a big relief rally in the financials and that’s lifting the whole market,” said Michael Binger, Minneapolis-based fund manager at Thrivent Asset Management, which oversees about $70 billion. “If the bad assets can be taken out, banks will feel more comfortable in where their capital ratios will be. And if that’s the case, they’ll be more ready to lend and the credit market freeze will thaw.”


http://www.bloomberg.com/apps/news?pid=20602002&sid=amsH7n4KAZzI&refer=markets

[OnceUponTimeOnTheNet]

9. I think I'm in shock.

Trillons of Toxic assets are going to be strapped to the taxpayers back.

Banks skip free.

Is this for real?

[taught_me_patience]

11. It's real

but it may not be as bad as it looks. If the government buys these bad assets at book value, then we get completely and totally screwed. If they buy these assets at market value, perhaps $.10 on the dollar, then it may not be as bad. However, the mere fact that they announced this program sends the market price higher for these "assets". My guess is that the government makes bad purchases at poor prices and the taxpayer gets screwed.

[truedelphi]

43. It does look like we are going to get reamed once again.

Sigh and sigh.

[slipslidingaway]

10. Take Bad Assets Out of Banks: Obama Adviser

http://www.cnbc.com/id/28889809

"Repairing financial markets and revitalizing lending will require governments to remove bad assets from banks and recapitalize them, Laura Tyson, an economic adviser to the Obama administration, said on Wednesday.

"The natural next step is, which is real simple, you take the bad assets out, the balance sheets are hit really hard, you recapitalize banks with different rules, and they go out again and lend," Tyson said in a panel discussion at the annual meeting of the World Economic Forum..."

[marketcrazy1]

14. yep laura it`s real simple

let the tax payers eat the losses and leave the bank CEO`s and their well connected investors to reap the profits of their new found solvency, let them lend again and re leverage the new loans with "new" low risk tripple A rated securities!! after all it worked so well last time!!!! bank profits will surge once more, CEO`s will get huge bonuses and in ten years we can start this process all over again!! sounds like a plan!! YIPPEE we`re (screwed) saved!!

[slipslidingaway]

19. So true..."in ten years we can start this process all over again!!"

This is the big picture IMO, unfortunately too many are distracted by convenient diversions.

:(

Volcker said last week that several trillion will be needed - and there was hardly a blink of an eye.

:shrug:

[chill_wind]

26. Laura Tysen held a bailout club over the heads of Dems. "The street wouldn't like it."

Though House Democrats spent yesterday claiming that the original Paulson plan was amended to include stronger protections for taxpayers (CEO pay limits, aid for homeowners, equity stakes in financial houses for taxpayers, etc.), the Treasury Department was simultaneously holding a secret conference call with Wall Street analysts explaining how those new provisions were specifically written to be unenforceable (you can listen to the conference call here).

The conflicts and corruption surrounding the bailout have even impacted internal Democratic Party deliberations. At an afternoon press conference (video here or at right), Rep. Peter DeFazio (D-OR) recounted how when progressives and Blue Dog Democrats proposed a financial industry tax to pay for the bailout, Democratic leaders sent in Laura Tyson to kill it by saying "the street wouldn't like it." According to DeFazio, Tyson was brought in "under the guise of being a former Clinton economic adviser, forgetting to tell us she's on Morgan Stanley's board of directors." Despite her corporate ties (or perhaps because of them), Tyson is also simultaneously an adviser to Barack Obama's presidential campaign.

Memory lane. Whole piece----

STRATEGY MEMO: Turning a Wall Street Giveaway Into an Economic Rescue for All Americans


By David Sirota

September 30th, 2008

http://www.ourfuture.org/blog-entry/2008094030/strategy-memo-turning-wall-street-giveaway-economic-rescue-all-americans

From the campaign days:

Laura D'Andrea Tyson is an American economist and former Chair of the US President's Council of Economic Advisers during the Clinton Administration. She also served as Director of the National Economic Council. She is currently a professor at the Haas School of Business of the University of California, Berkeley, as well as an economic adviser to President-elect Barack Obama <1> . She is considered a contender for a key economic policy position in the Obama Administration <2>.

From 2002 to 2006, Tyson was the first female Dean of London Business School. From 1998 to 2001, she was Dean of the Haas School of Business. She served in the Clinton Administration as Chairman of the President's Council of Economic Advisers from 1993 to 1995 and Director of the National Economic Council from 1995 to 1996. Tyson has been a member of the Council on Foreign Relations since 1987, a Director of Morgan Stanley since 1997, a Director of AT&T Inc. since 1999 and a Director of Eastman Kodak.

http://en.wikipedia.org/wiki/Laura_Tyson

[Romulox]

12. The "value" of an asset is what a willing buyer would part with, and a willing seller would accept

"Result: the government might end up paying more than current market prices for the securities."

By definition they are paying more than current market prices; the assets in question are unsalable.

[taught_me_patience]

13. The mere fact that they announced this plan

means that assets prices will rise above their true value. The taxpayers will be screwed in this deal... I guarantee it.

[Romulox]

15. Agreed. But the American people are ignorant and easily manipulated. So the banks will get their $

[truedelphi]

41. Or as Dennis Kucinich tried asking of Kashkari

Since the bank deemed the more solvent of the banks shows interests in the more insolvent bank, or "worthless" bank, yet still pays out two billion dolalrs for that worthless entity, but why?

Who is kidding whom? We the Taxpayers are really getting treated like chumps.

[slipslidingaway]

16. Stiglitz Interview - mentions the "N" word

No transcript, just a 5 minute video

http://www.cnbc.com/id/15840232?video=1015557210&play=1

[taught_me_patience]

18. Great interview! Thanks for sharing this n/t

[slipslidingaway]

21. YW :) n/t

[truedelphi]

42. Stiglitz would be a great person to be actually on the team

I really don't like the idea of giving the arsonists the job of fire marshall. Maybe Stiglitz's spent a lot of time in academia, but his thinking is sound and rather profound, and I'd rather see him as heading the Federal Reserve, or being the Treasury head or even it secretary than the three that Obama has chosen.

[Still Sensible]

17. I need more details

Would the government (taxpayers) have assets or equity against the loan funds or would this just be more money for remodeling and bonuses?

[slipslidingaway]

20. Soros: 'Bad Bank' for Troubled Assets Is Bad Idea - the "N" word

Video and full transcript at link...
http://www.cnbc.com//id/28893326

"Billionaire financier George Soros told CNBC he disagrees with plans to create a new government entity to buy up troubled bank loans and believes former Treasury Secretary Henry Paulson mis-managed the first rescue attempt of financial institutions.

"That (the "bad bank" proposal) will help relieve the situation, but it will not be sufficient to turn it around," Soros said during a live interview at the Davos economic conference in Switzerland. Instead, Soros said he would create a "good bank" and re-capitalize the good assets.

He admitted his alternative plan is not likely to get support because it too closely approaches nationalization. "The political will to do that is not there," he said...

Click here to read the full transcript "

[chill_wind]

29. Soros. Sadly, no one heeding. n/t

[chill_wind]

22. here's a 5th rec. With luck it will get some attention

I personally gave up elsewhere this am-- except for this:

Soros video:

http://www.bloomberg.com/avp/avp.htm?N=av&T=Soros%20Says%20Bad%20Bank%20Plan%20Won%E2%80%99t%20Help%20Increase%20Lending&clipSRC=mms://media2.bloomberg.com/cache/vK9DiD2dWMHE.asf


http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4928054&mesg_id=4928054


FDIC May Run ‘Bad Bank’ in Plan to Purge Toxic Assets (Bloomberg Update)
http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=avQ3LP7o44oU

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4927489&mesg_id=4927489

[slipslidingaway]

24. This issue could use more than a few threads. n/t

[slipslidingaway]

23. Western Bank Giants (JP Morgan Chase & Citibank) Prepare to Revamp Iraq’s Financial System

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3710836&mesg_id=3710836


"Representatives from J.P. Morgan Chase and Citibank reached a handout to their Iraqi counterparts today, saying they were ready to work with local banks to help modernize the financial system in the war-torn country.

Iraq’s banking system needs a complete overhaul, from boosting international wire transfer capabilities to setting up ATMs to establishing widespread use of credit cards..."

[taught_me_patience]

25. Wells Fargo loses $13.7B

Was this leaked yesterday afternoon in order to soften the blow of this news this morning?

From ClusterStock.com, Jan. 28, 2009:

Wells Fargo lost $2.55 billion in the fourth quarter. Wachovia, which it acquired on December 31st, lost $11.17 billion. Add those numbers together and you've got a $13.72 billion loss for the combined entity.

But here's the good news: despite the fourth quarter losses, Wells Fargo actually made money in 2008. Diluted earnings were $0.75 per share. Earnings! At a big bank! Horray!


http://finance.yahoo.com/tech-ticker/article/164996/Wells-Fargo-and-Wachovia-Lose-%2413.72-Billion

[truedelphi]

44. Yet the government under the Bush admin tried to maneuver Citigroup into positions of power

And tried to force W.F. out of positions wherein it could acquire properties it wanted.

Sort of like the goings on at the Poliboro!

[Tierra_y_Libertad]

30. A plan devised by their Chief Financial Advisor - P.T. Barnum

[chill_wind]

31. Almost 24 hrs .....only 6 recs?? KICK!

eom

[marketcrazy1]

34. read this, it will blow your mind!!!

http://www.marketoracle.co.uk/Article8504.html

[chill_wind]

35. (shivering). You should make that a whole thread.

eom

[marketcrazy1]

36. done!!

as you suggested !!!!! look and rec.. if you like!

[chill_wind]

37. Good. Thanks. Adding your link:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4930752

[truedelphi]

38. That was very revealing. n/t

[slipslidingaway]

33. Financials had a great day in the market...

click on market summary.

http://stockcharts.com/

[chill_wind]

39. .

[kentuck]

40. As usual, I am a day late and a dollar short..

Kick this one time on a reference. :-)

[LSK]

45. yeah that is what the TARP program was SUPPOSED TO DO

But instead Paulson just gave it out to his buddies to redo their offices...

[kentuck]

46. Ask yourself why?

That son of a gun lied to Congress. Within a week, he had already changed his mind about how he was going to use it. He broke the law. He lied to Congress. He should before the judge as we speak. I know for a fact that some members of Congress are dumber than a doorknob. That gives me no room for confidence in what is going on.