Free Republic

Agency's cash running low; automatic bailout possible if loss continues The Federal Housing Administration, which has played a crucial role supporting American home buyers after the collapse of the mortgage market, has burned through a huge cash reserve in less than a decade and could soon wind up with what amounts to an automatic taxpayer bailout if the agency's fortunes don't improve, according to a review of FHA finances. Senior FHA officials have assured Congress that the agency will not need a bailout, which would be politically sensitive for lawmakers to approve after the government has already spent hundreds of...

Goldman wasn’t the only contributor to the systemic risk that nearly toppled the global financial markets, but it was the key contributor to the systemic risk posed by AIG’s near bankruptcy. When it came to the credit derivatives, American International Group, Inc. (AIG) was required to mark-to-market, Goldman was the 800-pound gorilla. Calls for billions of dollars in collateral pushed AIG to the edge of disaster. The entire financial system was imperiled, and Goldman Sachs would have been exposed to billions in devastating losses. A Goldman spokesman told me its involvement in AIG’s trades was only as an “intermediary,” but...

A federal bailout of AIG last year attracted angry protesters who for weeks gathered outside the insurance giant's headquarters in New York and stalked company executives at their homes. But there has been little response to the bailout of Peter Miller, who runs a two-person lobster-fishing crew in Maine. Miller, who gets 50 cents on the dollar for his catch these days, a few months ago received a $35,000 loan from a new Small Business Administration program that was crafted in February during final negotiations on the federal stimulus package. The loan program offers an unprecedented 100 percent guarantee to...

With what looks like imminent passage of the Mother of All Bailouts (following on the heels of a year’s worth of government-funded rescues of private homeowners, lenders, insurers and automakers), Washington has turned Aesop’s famous fable about prudence and hard work on its head. The time is ripe for a revised 2008 edition of “The Ant and the Grasshopper:”

Bankruptcy, taxpayer bailouts appear inevitable. States and municipalities are in deep financial trouble. Pension performance has faltered. Over a trillion dollars worth of municipal pension fund assets have been erased in the recent market meltdown. The average public pension plan is 35% under-funded, and things are getting worse. A wave of municipal bankruptcies could well follow. To avoid such a fate, there are three possible responses cities and towns can take to the problem of under-funded pension plans. None of them are appealing. First, it's important to understand that "under-funded" basically means municipalities lack the money in the pot to...

Meadowman performs his song Government Santa

More Extortion By The BanksThe Market TickerSaturday, November 7. 2009 Posted by Karl Denninger in Corruption at 13:14 Yeah, that's a strong word. In my opinion it is also the only word that's appropriate for the circumstances: The Fed has been informed by dealers that they would be willing to enter into very sizable amounts of reverse repos with the Fed, if asked to do so, provided they could get some relief from Tier I capital constraints, MNI also understands. Ah, the old "let us lever up and we'll do it, but if it blows up, we'll then be back...

I had lunch last week with Rolfe Winkler, who is an up and comer in the blog world, a thinking man’s Felix Salmon. He is similarly annoyed with St. Warren — but rather than engage in my sophmoric venom spew, he went to the spreadsheet to discover that Buffet owns major stakes in 8 companies that have received more than $100 billion in government bailouts. Capitalist? Hardly. Sounds more like just another crony to me. Rolfe also posts this fabulous chart:

Bailouts For Bonuses Kevin Depew Nov 06, 2009 7:55 am As the year comes to a close, Wall Street is setting up for another record year of bonuses which will be financed by bailout money. Kevin Depew debates the hot button issue on the latest Two Ways to Play.[snip]

Fannie Mae is asking for an additional $15 billion in government aid after posting another big loss in the third quarter as taxpayers' bill from the housing market bust keeps getting bigger. The mortgage finance company, seized by federal regulators in September 2008, posted a quarterly loss of $19.76 billion, or $3.47 per share. The loss includes $883 million in dividends paid to the Treasury Department and compares with a loss of $29.41 billion, or $13 per share, in the year-ago period. The results were driven by $22 billion in credit losses as the company continued to build its reserves...

As U.S. car manufacturer 'stuns' Wall Street with 3Q profits, some media forget to report Ford didn't take government cash. Ford Motor Company took everyone by “surprise” Nov. 2, when it announced nearly a billion dollars in profit for the third quarter of 2009. The company also said it would be “solidly profitable” by 2011. CNN repeated the announcement on Nov. 3 “American Morning,” saying, “Turning now to the Big Three in Detroit, Chrysler extends its buyout offer to more than 20,000 employees while General Motors is still trying to restructure spending billions of bailout dollars, but Ford – which...

In the late 1980s, all anyone could talk about was how Japanese companies were going to take over the world. The Japanese were smarter than we were, more disciplined than we were, more team-oriented than we were, hungrier than we were. Japan was taking over. We were done. Then Japan's bubble burst. And it was payback time. In the late 1990s, all anyone in America could talk about was why Japan was mired in a "lost decade." It was cultural, everyone explained. The Japanese were just too wimpy and "team-oriented" to face the facts. Instead of just facing reality and...

On Sunday, CIT filed for bankruptcy, meaning that $2.3 billion in taxpayer money is probably lost. That means that each American threw about $8 down the CIT rat hole. Unfortunately, that could just be the start of losing big bucks on TARP "investments" in troubled financial companies. We took the top ten bailout recipients, from AIG to PNC, and divided the amount Uncle Sam threw at them by the number of Americans (308.84 million and counting). Then we used a highly scientific guess to determine your chances of getting it back. It ain't pretty. Here's How Much Each Bailout Cost...

Video at site We had professor William Black on TechTicker this morning. A former regulator who handled the S&L resolution, Prof. Black remains appalled at how this latest round of bailouts has been handled. Case in point? CIT Group. Once again, the white knight who stepped in to save the company--the U.S. taxpayer--gets completely hosed. It didn't have to be this way, says Prof. Black. And the man responsible is Treasury Secretary Tim Geithner. Peter Gorenstein: Another one of the nation's largest lenders has filed for bankruptcy. On the brink for months, CIT filed for Chapter 11 protection on Sunday....

Following on previous posts by Janet Tavakoli and Dylan Ratigan, which both reference the need to uncover how and why it is that AIG counterparties received such generous taxpayer funded bailout terms, it is critical to present the letter penned by California Congressman Darrell Issa to New York Fed President Bill Dudley, demanding much more information on the Fed's decision regarding AIG. Issa's quote that "behind closed doors and with no approval from Congress, the FRBNY may have added an additional $13 billion of debt on the backs of taxpayers. These allegations, if true, amount to nothing less than a...

<p>Yesterday, I linked to an anonymous blogger/Goldman apologist who wrote that Tavakoli "has always been more bark than bite. Being provocative is part of her shtick."</p> <p>In August 2007, I publicly challenged the fact that AIG took no write-downs whatsoever for its credit default swaps on underlying mortgage related “super senior” positions. I used the example of its aggregate $19.2 billion in credit default swaps on super senior positions backed by BBB-rated tranches of residential mortgage backed securities. I spoke with Warren Buffett, but only about what I had already told the Wall Street Journal (Dear Mr. Buffett Pp. 164-165, 246).</p>

A much clearer picture is developing of what went on during the middle of the financial crisis, when AIG was bailed out by the government and Goldman Sachs ended up receiving 100 cents on the dollar from AIG on various instruments. The clearer picture is the result of Janet Tavakoli's provocative article, Goldman’s Lies of Omission. In the article, she claims that GS CFO David Viniar lied when he said GS's exposure to AIG would be insignificant. A anonymous Goldman apologist who writes at Economics of Contempt responded to Tavakoli's article, calling the article part of a, "ridiculous conspiracy about...

Update | 3:46 p.m. Three months ago, the CIT Group barely averted what it considered to be a ruinous bankruptcy filing that would likely have put the 101-year-old lender out of business. On Sunday afternoon, the company filed for Chapter 11 — but under a so-called prepackaged bankruptcy plan that will enable it to emerge from court protection by the end of the year, under the control of its debtholders. (Read the filing after the jump.) The filing, made in a Manhattan federal court, will still mean much pain for many parties, beginning with taxpayers. CIT received $2.3 billion in...

As I walked home recently from a weekend trip to the grocery store, I passed a total of 13 vacant offices with signs saying "for lease" or "for sale." These spaces ranged from approximately 500 to 5,000 square feet according to their signs, and they are stretched along a main, commercial street in the center of Tucson, AZ. There is also an eight-screen movie theater that sits empty as well. These empty commercial spaces ... are empty now, and have been for quite some time. I found it intriguing that both in the central portion of Tucson and also in...

In what could have been the biggest piece of news today, yet making little headway into the media, the Fed announced that it is adopting a policy statement supporting "prudent commercial real estate loan workouts." And even though in traditional Fed fashion, the statement says a lot but is even more vague, some of the implications from a more nuanced read have very serious adverse implications for commercial real estate. The section: Financial institutions that implement prudent loan workout arrangements after performing comprehensive reviews of borrowers' financial conditions will not be subject to criticism for engaging in these efforts, even...

Among Dylan's musings on the sham regulatory overhaul proposal, and the behind the scenes political bickering, is this question "Why is it legal for the US banking system to take infinite risk in a financial gambling parlor in secret and use taxpayer assets." We hope readers can provide the answer because unfortunately nobody else seems to be able to. Link also available here

Late last night the Financial Times broke the news that the hedge fund firm Galleon Group paid $250 million to its Wall Street banks last year in return for received market information that other investors did not get. Those banks need to come forward immediately and explain what information they were selling to Galleon The FT's report didn't specify which banks provided the information but noted that Morgan Stanley and Goldman Sachs were Galleon's top providers of hedge fund services and prime brokerage. Both declined to comment on the story. But the allegations are so explosive that both firms are...

The Treasury Department and House Financial Services Committee Chairman Barney Frank have just released a highly complex 253 page draft bill that is supposed to deal with questions ranging from indentifying and dealing with systemic risk facing the financial services system, regulating and closing failing “too big to fail” financial services firms, and a wide variety of other potential problems. As expected with a bill that long and detailed, it will take a while to understand everything that it contains, but first impressions are that it contains many bad ideas with a few good ones sprinkled in. The good news...

GMAC, the former lending arm of General Motors Co., is in talks with the Treasury Department for a third injection of taxpayer aid, a further sign of the U.S. government's entrenchment in the U.S. auto industry. The Treasury Department mandated earlier this year that GMAC Financial Services raise an additional $11.5 billion in capital after undergoing a "stress test" along with 18 other banks. While other banks deemed undercapitalized have been able to raise funds from private investors, GMAC has been forced to go back to the government.

In 1992, Congress intervened in corporate compensation and messed things up. Now it's the White House's turn. BY DAN MACEY Executive pay has emerged, once again, as a major issue in Washington. This week Treasury and the Federal Reserve announced new regulations designed to oversee and limit executive pay at thousands of financial institutions. This is deeply ironic, because today's pay woes are the direct result of prior government intervention.

In 1998, Alan "Oops, I now admit I was wrong" Greenspan, Robert "I need a $100B Citigroup bailout" Rubin, Larry "I lost more than $1 Billion for the Harvard Endowment" Summers, Timmy "Tax Cheat" Geitner, Arthur "I now agree with Brooksley Born" Levitt & Bill "Triangulation" Clinton, collectively determined the secret financial derivatives market (one that became a $595 TRILLION dollar marketplace in 2007) needed ZERO regulation, ZERO transparency and ZERO public disclosure. By the way, the entire world economy in 2009 is estimated to be worth $83 Trillion. "The boys club" conspired to run Brooksley Born, Chairman of the...

The big profits made by some of Wall Street’s leading banks are “hidden gifts” from the state, and taxpayer resentment of such companies is “justified”, George Soros, the fund manager, said in an interview with the Financial Times. “Those earnings are not the achievement of risk-takers,” Mr Soros said. “These are gifts, hidden gifts, from the government, so I don’t think that those monies should be used to pay bonuses. There’s a resentment which I think is justified.”

Congress put American taxpayers on the hook for $700 billion last year when it approved the massive bailout to paper over the imprudent lending decisions of nine Wall Street giants: Bank of America, Citigroup, Wells Fargo, JP Morgan Chase, Goldman Sachs, Morgan Stanley, Merrill Lynch, State Street and the Bank of NY Mellon. The bailout was essential to save the nation from a complete economic meltdown. Or so insisted President George W. Bush, Treasury Secretary Hank Paulson, Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi. One year later, however, a little-noted report by the U.S. Government Accountability Office...

The vice-chairman of Goldman Sachs has launched an astonishing defence of bumper bonuses just a year after bankers brought the world's economy to the brink of collapse. In a speech likely to recall fictional banker Gordon Gekko in the film Wall Street - whose mantra 'greed is good' came to sum up the excesses of the 1980s - Lord Griffiths claimed taxpayers should 'tolerate the inequality'. And he insisted that banks should not be ashamed of rewarding staff. Lord Griffiths (left) has echoed the 'Greed is good' maxim by Gordon Gekko, played by MIchael Douglas in the film Wall Street,...

Well GM and Chrysler begged to be bailed out...... I really don’t like this guy. I didn’t like him when he was appointed and I like him less now. But … GM and Chrysler begged for the money, they got it, and now … well … The Obama administration will soon order the nation’s biggest bailed-out companies to drastically cut pay packages for their top executives, according to several reports published Wednesday.

Government regulators threatened to remove top Bank of America executives in December if they didn't acquire Merrill Lynch, but also agreed to provide taxpayer funds to compensate for Merrill's poor performance, according to company records obtained by The Washington Times. The documents -- e-mails between bank executives and their outside lawyers as well as board-meeting talking points prepared for then-Chief Executive Ken Lewis -- indicate that former Treasury Secretary Henry Mr. Paulson Jr. and Federal Reserve Board Chairman Ben S. Bernanke promised to give the bank taxpayer bailout funds to compensate them for Merrill's poor performance. Summaries written by the...

The financial crisis has many Treasury officials burning the midnight oil — a situation that’s sometimes uncomfortable for secretaries assisting key aides to Treasury Secretary Timothy Geithner. Some secretaries say they aren’t being allowed to take a day off or leave their desks -– not even to use the bathroom, eat lunch or take a day off. “Apparently some supervisors require that their phones are never to be allowed to go to voicemail or the operator, which means the secretary is never able to leave her desk,” an email sent to more than a dozen Treasury officials reads.

It wasn't greed that caused the mortgage mess. In large part, the mess was the product of government policies designed to increase homehownership among the poor and ethnic minorities. Mortgage brokers had to be able to sell their mortgages to someone. They could only produce what those above them in the distribution chain wanted to buy. In other words, they could only respond to demand, not create it themselves. Who wanted these dicey loans? The data shows that the principal buyers were insured banks, government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac, and the FHA—all government agencies...

IN "The Audacity of Hope," Barack Obama described himself as "a blank screen on which people of vastly different political stripes project their own views." This is a powerful tool in elections and explains why liberals, moderates, Democrats, Independents and Republicans joined together to give him 53 percent of the vote last November. Since his election, this "blank screen" has been an asset, allowing the new president to maintain an illusion of progress, even as he has avoided the hard choices necessary for progress. But, as Americans ponder the unavoidable consequences of the president's policies -- particularly health-care reform --...

Rep. Michele Bachmann is all over radio presenting information on the corruption of congress, banking and ACORN. And NO, they're not going to let her on mainstream TV news! She explained that the CRA required banks to lend to unsound applicants OR they could instead contribute to.....ACORN. It's even worse than Bachmann presents it. We found this article from the year 2000, there were others as well...we were ASLEEP! This is just a few snips, long, worth the read. And remember, Clinton started misusing the law passed by congress - the Community Reinvestment Act, but for 8 years after the...

WASHINGTON (AP) - President Barack Obama called on Congress Wednesday to approve $250 payments to more than 50 million seniors to make up for no increase in Social Security next year. The Social Security Administration is scheduled to announce Thursday that there will be no cost of living increase next year. By law, increases are pegged to inflation, which has been negative this year.

Mortgage Loan Modification is the only solution to save your home and stop foreclosure. As of last month, lenders had sent out more than 571,000 offers to reduce borrowers' monthly payments, the Treasury Department said Wednesday. Treasury says 48 mortgage companies are now involved in the program, up from 38 in July. The companies have requested financial information from almost two-thirds of eligible borrowers and say they are on track to have 500,000 loan modifications in place by Nov. 1. What is Obama's Mortgage Relief Program & How do you qualify?

If the U.S. can come to the assistance of banks and homeowners, surely it could offer a helping hand in the form of lower interest rates for students. Like many recent college grads, Los Angeles resident Steven Lee finds himself unemployed in one of the roughest job markets in decades and saddled with a big pile of debt. He owes about $84,000 in student loans for undergrad and grad-school costs. But what Lee's angry about isn't the slings and arrows of an outrageous economy, and it isn't the idea that he owes a ton of money for all the schooling...

[Full title was edited to comply with space requirements, here's unedited version:] "Well-Kept Media Secret: UAW Conceded No Base Pay, Health, or Pension Benefits in GM, Chrysler Bankruptcy Run-ups" A New York Times article by Nick Bunkley on Friday targeted for print on Saturday about the status of contract talks between Ford Motor Company and the United Auto Workers piqued my interest in a previously neglected but important matter. Ford and the UAW are apparently close to an agreement. In describing what Ford workers are being asked to give up, Bunkley wrote the following (bolds are mine throughout this post):...

A former Fannie Mae executive warned a House panel Thursday that the Federal Housing Administration is destined for a multibillion-dollar taxpayer bailout in 24 to 36 months, an analysis that the agency’s top official immediately dismissed as “completely unfounded.” At a hearing before a House Financial Services panel, Edward J. Pinto predicted that the FHA will suffer $40 billion in losses, leaving it unable to cover its bad loans without taxpayer help. Pinto, a real estate finance consultant who served as Fannie Mae’s chief credit officer from 1987 to 1989, said he testified so lawmakers would “not be able to...

The collapse of a financial institution is not necessarily a disaster. If free markets are to thrive, we must not allow giant, state-supported banks to believe that they are indestructible, Niall Ferguson warns For conservatives, the financial crisis that began in the summer of 2007 has posed a major problem. We had grown rather accustomed to singing the praises of free financial markets. The crisis threatens to discredit them. But this crisis was not the result of deregulation and market failure. In reality, it was born of a highly distorted financial market, in which excessive concentration, excessive leverage, spurious theories...

THE conventional wisdom for months now has been that a combination of bail out money and low interest rates (next to zero) has ended the banking crisis. Yet evidence is growing that the banking system is far from healed -- that the crisis could very well make a comeback. Yes, the nation's largest banks and financial firms, like Citigroup and Bank of America, are healing -- or at least show no signs of imploding as they did a year ago. Shares of the major financial firms are up (even longtime basket case Citigroup) since the market tanked in March. And,...

Course, this is IMHO>>>>>Watch out! If this "merger" goes through, Comcast is huge, as big as say BofA. Economy gets worse, Comcast needs bailout, Gov bails them out and Wah Lah, Government now owns what we watch on TV.

In May of 2008, Times Online ran an article entitled, Barack Obama: the New Great Redeemer. The author, Gerard Baker, recognized something many American voters at that time were unwilling to admit, which was, The idolatry of Mr. Obama is a shame...The Illinois senator is indeed, an unusually talented, inspiring and charismatic figure...But he is not a saint. He is a smart and eloquent man with a personal history that is startlingly shallow set against the scale of the office he seeks to hold... If the past 40 years have taught us anything they have surely taught that premature canonization...

Offshore centre of choice for the world's hedge funds has admitted it may have to begin a new life – as a tax haven with taxes. After lengthy wrangling, the British overseas territory on Wednesday confirmed that it has finally secured permission from the UK to obtain a CI$50m (£38m) bail-out loan to plug a 35pc-40pc collapse in revenue this year. The island's government has also signalled that it is ready to cave into UK conditions on slashing government expenditure and an independent report on reform of its tax system that could see it start to impose direct levies to...

Self-described “newspaper junkie” President Obama says he is “happy to look at” bills before Congress that might help the struggling newspaper industry. The White House later cautioned that the president’s remarks, made to media outlets over the weekend, shouldn’t be taken as support for a bailout for yet another industry. Obama was specifically addressing the issue of whether the government could make it easier for newspapers to restructure as nonprofits. One bill now before Congress would make it easier to convert newspapers into nonprofits.

WASHINGTON (AP) - Treasury officials and regulators are weighing a fresh round of bailouts for banks that were deemed too risky to qualify for earlier aid. Representatives from the Treasury Department, Federal Deposit Insurance Corp. and House Financial Services Committee discussed the plan by phone Thursday, said California Bankers Association Chairman Dan Doyle, who was on the call. Small community banks are struggling as commercial real estate and other loans go sour. Officials and industry representatives are considering how to get money to those banks, Doyle said Friday.

Americans believe Washington squanders half of every tax dollar. BY STEPHEN MOORE If you want to know why Americans are so fearful of a government takeover of the health-care system, take a look at the results of a new Gallup poll on government waste released Sept. 15. One question posed was: "Of every tax dollar that goes to Washington, D.C., how many cents of each dollar would you say is wasted?" Gallup found that the mean response was 50 cents. With Uncle Sam spending just shy of $4 trillion this year, that means the public believes that $2 trillion is...

Fisker Automotive, a California manufacturer of luxury electric vehicles, will receive more than $500 million in federal loans to develop a plug-in hybrid sports car with a sticker price of nearly $90,000 and a new plug-in hybrid vehicle... The Energy Department said Tuesday it would lend $528.7 million to Fisker... "This investment will create thousands of new American jobs and is another critical step in making sure we are positioned to compete for the clean energy jobs of the future," said Energy Secretary Steven Chu. He estimated it would save or create about 5,000 jobs. Fisker, launched in 2007, is...

Obama yesterday expressed concern at the sorry state of the news industry and said that he will look at a news paper bailout, because otherwise, blogs will take over the world, and that would be a threat to democracy, The Hill reports. "I am concerned that if the direction of the news is all blogosphere, all opinions, with no serious fact-checking, no serious attempts to put stories in context, that what you will end up getting is people shouting at each other across the void but not a lot of mutual understanding," he said.