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I’ve gone through only the first day of testimony from the AIG bailout trial, and we are already up to our third bombshell. The first witness called by the plaintiff, Starr International (an investment vehicle controlled by Hank Greenberg), was Scott Alvarez, general counsel for the Federal Reserve Board of Governors. Part of the testimony covered a discussion that took place late in the evening of September 15, the day Lehman declared bankruptcy in the wee hours of the morning. The topic was AIG. The participants included Alvarez, Timothy Geithner, Fed governors Don Kohn and Kevin Warsh, Ken Wilson, a...

Imagine you have a friend who drinks a lot and often. Until now, they always seem to have a good time. He tells the best stories, gets all the girls. He’s the life of the party. Then, one day, he wrecks his car. And you and some buddies, who happened to be in the neighborhood, see your pal trapped. Of course, you rush to the rescue. You try to break open the door with a tire iron. Ultimately, you smash the window and pull the poor fellow out. And just when you’d think this guy would sober up and see...

To oversee this process, Dodd-Frank created the Financial Stability Oversight Council (FSOC), made up of the heads of the financial services regulatory agencies. The council claims very broad power to designate certain activities (like asset management) or companies and products (including mutual funds) as systemically important and subject them to Federal Reserve bank-style regulation, including leverage and capital requirements. And the council is doing just that – first with banks, then insurance companies and now, potentially, mutual funds. President Obama’s “independent” insurance expert on the council issued a blistering dissent when it designated Prudential – the nation’s second-largest life insurer...

A special inspector general report on compensation for executives at General Motors and Ally Financial blasts the Treasury Department for allowing excessive pay at the companies as taxpayers lost billions of dollars on the auto bailouts. The watchdog group issuing the report monitors the Troubled Asset Relief Program (TARP), which was set up to save financial corporations deemed "too big to fail" due to systemic risk to America's financial system. The program was expanded to allow for the bailing out of the auto industry, despite the questionable use of funds specifically designated for financial institutions. A NY Times piece...

THERE is a time for weighing evidence and a time for acting. And if there’s one thing I’ve learned throughout my work in finance, government and conservation, it is to act before problems become too big to manage. For too many years, we failed to rein in the excesses building up in the nation’s financial markets. When the credit bubble burst in 2008, the damage was devastating. Millions suffered. Many still do. We’re making the same mistake today with climate change. We’re staring down a climate bubble that poses enormous risks to both our environment and economy. The warning signs...

TARP was the absolute height of crony capitalism. Many of the big banks should have gone down, but in the midst of a “Blackberry panic” – as David Stockman puts it – the masters of the masters of the universe lost sight of reality and the nature of markets. Yes, Goldman Sachs would have gone down. But this would have been a GOOD THING. The blood which should have filled the the streets of Downtown Manhattan would have washed the unsustainable leverage clean from the system (for a while.) Giants are meant to fall. It would have been good for...

This month marks the fifth anniversary of the Chrysler bankruptcy. President Obama will doubtless mark the occasion by talking about how his intervention saved the auto company. More noteworthy, however, is how the lawlessness of that intervention created tremendous uncertainty, which still chills the economy today. Todd Zywicki has written an excellent summary of President Obama’s actions in the Chrysler bailout. A shorter version goes like this. Starting under President Bush and continuing under President Obama, the federal government used TARP funds to keep Chrysler afloat. This gave the government effective control over Chrysler. As a result, the Obama administration...

As Ramesh points out below, Kentucky Senate candidate Matt Bevin's campaign is claiming that he has consistently opposed the Troubled Asset Relief Program, drawing a contrast with Mitch McConnell, who has defended his role in passing the emergency bailout legislation. This is despite the fact that, as president of an investment firm in 2008, he signed a letter along with the firm's chief investment officer that says the following: Most of the positive developments have been government led, such as the effective nationalization of Fannie Mae and Freddie Mac, the passage of the $700 billion TARP (don't call it a...

former U.S. Treasury official Neel Kashkari on Tuesday said he will run for California governor. ... the fundraising committee he announced Tuesday is stacked with GOP heavyweights who were instrumental in financing Mitt Romney's 2012 presidential campaign.

Another politico is claiming that he got “Christied.” This time it’s Jersey City mayor, Steven Fulop, who said that after he declined to endorse the Republican governor of New Jersey, Chris Christie, meetings with the governor were cancelled and money for hurricane relief dried up. I guess in this Alice-in-TV-Land world we live in, this counts as news. This comes on the heels of a federal investigation into Christie’s use of federal hurricane relief funds, which Obama is sure were used for nefarious purposes; presumably that means purposes that didn’t include electing Democrats. While Barack Obama didn’t invent the “Christie”...

President Obama loves taking credit for saving the American auto industry and this week a federal audit reveals that the rescue effort has fleeced U.S. taxpayers out of an astounding $9.7 billion. While this may seem inconceivable to most, the numbers don’t lie. The United States Treasury has recorded a $9.7 billion loss on its $49.5 billion bailout of General Motors, according to a report released this week by the Special Inspector General for the Troubled Asset Relief Program (TARP). Remember the $700 billion boondoggle created to help stabilize the nation’s financial system during the 2008 crisis by purchasing “toxic...

The standoff between President Barack Obama and Republicans leaders is different from the 2008 financial crisis because this crisis is "self-inflicted," former Treasury Secretary Hank Paulson told CNBC on Thursday. "The most basic function of Congress is to pass a budget," Paulson said in a "Squawk Box" interview, exactly five years since his former boss—then-President George W. Bush—signed the Troubled Asset Relief Program financial bailout program into law. Republicans leaders and the president not only need to come together to fund the government and end the shutdown, but they must reach agreement to increase the debt ceiling before the mid-October...

History will judge the Troubled Asset Relief Program more positively than people do now, Warren Buffett said on CNBC Thursday—five years to the day since the financial bailout program was signed into law, and in the midst of the first government shutdown in 17 years. Appearing alongside former Treasury Secretary Hank Paulson on CNBC's "Squawk Box," Buffett first addressed TARP—saying people don't realize how tough a position Paulson was in when he crafted the rescue package. The chairman and CEO of Berkshire Hathaway said the bailout was vital at the time in order to shore up the credibility of the...

In the fall of 2011 the National Legal and Policy Center (NLPC) submitted Freedom of Information requests to the Department of Labor and the Internal Revenue Service following an announcement that the administration was investigating homebuilders in an attempt to bolster union membership at the expense of housing sector jobs. “In a letter [from the Labor Department] cited by The [Wall Street] Journal,” wrote Crain’s Detroit at the time “homebuilders were asked to immediately turn over the names, addresses, Social Security numbers, pay rates and hours worked for all employees over the past two years. The letter from the Labor...

Plus ça change, plus c’est la même chose … Struggling homeowners who received loan modifications under a federal government program are defaulting on their mortgages at an alarming rate, according to a watchdog report released Wednesday.The report from the special inspector general for the Troubled Asset Relief Program said the Treasury Department’s Home Affordable Modification Program, or HAMP, has failed to ensure that mortgage reductions are sustainable.Home loans modified in the third and fourth quarters of 2009 are now defaulting at a rate of 46 percent and 39 percent, respectively. As of the end of March, more than 312,000 homeowners...

NEW YORK (AP) — A New York judge has approved Bank of America's $2.43 billion settlement of a class action lawsuit brought by shareholders over the company's acquisition of former competitor Merrill Lynch. A judge for the U.S. District Court for the Southern District of Manhattan approved the settlement Friday. The bank proposed the settlement in late September. The agreement resolves allegations that Bank of America did not disclose the state of its finances or those of Merrill Lynch when it agreed to buy Merrill in September 2008. Judge Kevin Castel said the settlement was "hard fought," but called the...

David Stockman Writes Huge Unhinged Screed About How America Is Doomed And How You Should Get Out Of The Market NOW Joe WeisenthalMarch 31, 2013, 1:05 PMFormer Reagan budget director David Stockman has a new book coming out on Tuesday, and he's warming up the public with a massive piece in today's New York Times titled Sundown in America, which basically says the future of America bleak because of massive government debts, crony capitalism, bailouts, megabanks, the removal of the gold standard, and even green energy. The piece can truly be characterized as Hard Money Buzzword Bingo, as Stockman tries...

M&T Bank Corp.'s (MTB) Chief Executive Robert Wilmers railed against the "astronomical" pay of his fellow bank executives, calling on them to rein in their compensation while singling out the "Big Six" banking "oligopoly" for its outsized paychecks and serial regulatory lapses that continue to shade the public perception of banks. Mr. Wilmers, who has led M&T for 30 years, issued his stark criticisms in his annual shareholder letter, in which he also took aim at "unnecessarily complex" accounting and new banking rules that amount to "misguided regulatory chemotherapy." snip While the Big Six are not named in the letter,...

Neil Barofsky, who was the special investigator general of the US government’s Troubled Asset Relief Program until his resignation in 2011, spoke to RT about how the Washington-Wall Street political culture could lead to another devastating collapse. RT: You refer to Washington as “an alien world - a culture more concerned with looking out for themselves or the next headline.” What happened with the TARP program that led you to say such a thing? Neil Barofsky: It was a remarkable thing coming in. I was a life-long Democrat; I even contributed then to President Obama’s presidential campaign. But I was...

Remember the Troubled Asset Relief Program, better known as TARP? When we last heard from the Treasury Department, on Jan. 23, TARP was being wound down. It was, in the estimation of Timothy Geithner & Co., a success: 93% of the $418 billion disbursed had been collected including $70 billion last year. Read the latest Treasury Department progress report on TARP . Best of MarketWatch The 5 most and least affordable U.S. cities for housing Here's the one other story that you can't afford to miss today /conga/story_of_the_day.html 249502 But hold the Champagne. It ain’t over till it’s over. The...