Bailouts forced on banks

[DamnYankee]

Documents: Paulson forced 9 banks into bailout
Goldman Sachs, JPMorgan among institutions required to take funds

Let's not forget who helped Paulson.


[excerpt]
Obtained and released by Judicial Watch, a nonpartisan educational foundation, the documents revealed "talking points" used by former Treasury Secretary Henry Paulson during the Oct. 13 meeting between federal officials and the executives that stressed the investments would be required "in any circumstance," whether the banks found them appealing or not.

Paulson also told the bankers it would not be prudent to opt out of the program because doing so "would leave you vulnerable and exposed."

[excerpt]
The outcome of that fateful meeting — which resulted in the government taking direct stakes in the banks through $125 billion in preferred stock purchases — marked a shift in the government's strategy to fixing the financial system.

The Treasury had first decided to use a chunk of the $700 billion financial bailout package to pay for taking partial ownership stakes in banks, rather than using the money to buy rotten debts from financial institutions. The idea was that the investments would instill confidence in the system and get banks to lend again following the freeze of the credit markets.

The meeting was hosted by Paulson, Federal Reserve Chairman Ben Bernanke, Federal Deposit Insurance Corp. Chairman Sheila Bair and current Treasury chief Timothy Geithner, who was then president of the New York Fed.

Documents: Paulson forced banks into bailout - Economy in Turmoil- msnbc.com

 

[Annie]

I'm glad someone else is paying attention. I've been highlighting this thuggery for awhile now:

http://www.usmessageboard.com/economy/74965-is-tarp-criminal-2.html

I understand the concern about Patriot Act, renditions, prisoner abuse, etc., brought up over the past 8 years. What I don't understand, with few exceptions is how those that have been sounding the warning, are now ignoring the true trashing of the rule of law and even separation of powers:

washingtonpost.com

Tincture of Lawlessness
Obama's Overreaching Economic Policies
By George F. Will
Thursday, May 14, 2009

Anyone, said T.S. Eliot, could carve a goose, were it not for the bones. And anyone could govern as boldly as his whims decreed, were it not for the skeletal structure that keeps civil society civil -- the rule of law. The Obama administration is bold. It also is careless regarding constitutional values and is acquiring a tincture of lawlessness.

In February, California's Democratic-controlled Legislature, faced with a $42 billion budget deficit, trimmed $74 million (1.4 percent) from one of the state's fastest-growing programs, which provides care for low-income and incapacitated elderly people and which cost the state $5.42 billion last year. The Los Angeles Times reports that "loose oversight and bureaucratic inertia have allowed fraud to fester."

But the Service Employees International Union collects nearly $5 million a month from 223,000 caregivers who are members. And the Obama administration has told California that unless the $74 million in cuts are rescinded, it will deny the state $6.8 billion in stimulus money.

Such a federal ukase (the word derives from czarist Russia; how appropriate) to a state legislature is a sign of the administration's dependency agenda -- maximizing the number of people and institutions dependent on the federal government. For the first time, neither sales nor property nor income taxes are the largest source of money for state and local governments. The federal government is.

The SEIU says the cuts violate contracts negotiated with counties. California officials say the state required the contracts to contain clauses allowing pay to be reduced if state funding is.

Anyway, the Obama administration, judging by its cavalier disregard of contracts between Chrysler and some of the lenders it sought money from, thinks contracts are written on water. The administration proposes that Chrysler's secured creditors get 28 cents per dollar on the $7 billion owed to them but that the United Auto Workers union get 43 cents per dollar on its $11 billion in claims -- and 55 percent of the company. This, even though the secured creditors' contracts supposedly guaranteed them better standing than the union....

The Troubled Assets Relief Program, which has not yet been used for its supposed purpose (to purchase such assets from banks), has been the instrument of the administration's adventure in the automobile industry. TARP's $700 billion, like much of the supposed "stimulus" money, is a slush fund the executive branch can use as it pleases. This is as lawless as it would be for Congress to say to the IRS: We need $3.5 trillion to run the government next year, so raise it however you wish -- from whomever, at whatever rates you think suitable. Don't bother us with details.

This is not gross, unambiguous lawlessness of the Nixonian sort -- burglaries, abuse of the IRS and FBI, etc. -- but it is uncomfortably close to an abuse of power that perhaps gave Nixon ideas: When in 1962 the steel industry raised prices, President John F. Kennedy had a tantrum and his administration leaked rumors that the IRS would conduct audits of steel executives, and sent FBI agents on predawn visits to the homes of journalists who covered the steel industry, ostensibly to further a legitimate investigation.

The Obama administration's agenda of maximizing dependency involves political favoritism cloaked in the raiment of "economic planning" and "social justice" that somehow produce results superior to what markets produce when freedom allows merit to manifest itself, and incompetence to fail. The administration's central activity -- the political allocation of wealth and opportunity -- is not merely susceptible to corruption, it is corruption.

 

[DamnYankee]

I'm glad someone else is paying attention. I've been highlighting this thuggery for awhile now:

http://www.usmessageboard.com/economy/74965-is-tarp-criminal-2.html

I understand the concern about Patriot Act, renditions, prisoner abuse, etc., brought up over the past 8 years. What I don't understand, with few exceptions is how those that have been sounding the warning, are now ignoring the true trashing of the rule of law and even separation of powers:

washingtonpost.com

Tincture of Lawlessness
Obama's Overreaching Economic Policies
By George F. Will
Thursday, May 14, 2009

Anyone, said T.S. Eliot, could carve a goose, were it not for the bones. And anyone could govern as boldly as his whims decreed, were it not for the skeletal structure that keeps civil society civil -- the rule of law. The Obama administration is bold. It also is careless regarding constitutional values and is acquiring a tincture of lawlessness.

In February, California's Democratic-controlled Legislature, faced with a $42 billion budget deficit, trimmed $74 million (1.4 percent) from one of the state's fastest-growing programs, which provides care for low-income and incapacitated elderly people and which cost the state $5.42 billion last year. The Los Angeles Times reports that "loose oversight and bureaucratic inertia have allowed fraud to fester."

But the Service Employees International Union collects nearly $5 million a month from 223,000 caregivers who are members. And the Obama administration has told California that unless the $74 million in cuts are rescinded, it will deny the state $6.8 billion in stimulus money.

Such a federal ukase (the word derives from czarist Russia; how appropriate) to a state legislature is a sign of the administration's dependency agenda -- maximizing the number of people and institutions dependent on the federal government. For the first time, neither sales nor property nor income taxes are the largest source of money for state and local governments. The federal government is.

The SEIU says the cuts violate contracts negotiated with counties. California officials say the state required the contracts to contain clauses allowing pay to be reduced if state funding is.

Anyway, the Obama administration, judging by its cavalier disregard of contracts between Chrysler and some of the lenders it sought money from, thinks contracts are written on water. The administration proposes that Chrysler's secured creditors get 28 cents per dollar on the $7 billion owed to them but that the United Auto Workers union get 43 cents per dollar on its $11 billion in claims -- and 55 percent of the company. This, even though the secured creditors' contracts supposedly guaranteed them better standing than the union....

The Troubled Assets Relief Program, which has not yet been used for its supposed purpose (to purchase such assets from banks), has been the instrument of the administration's adventure in the automobile industry. TARP's $700 billion, like much of the supposed "stimulus" money, is a slush fund the executive branch can use as it pleases. This is as lawless as it would be for Congress to say to the IRS: We need $3.5 trillion to run the government next year, so raise it however you wish -- from whomever, at whatever rates you think suitable. Don't bother us with details.

This is not gross, unambiguous lawlessness of the Nixonian sort -- burglaries, abuse of the IRS and FBI, etc. -- but it is uncomfortably close to an abuse of power that perhaps gave Nixon ideas: When in 1962 the steel industry raised prices, President John F. Kennedy had a tantrum and his administration leaked rumors that the IRS would conduct audits of steel executives, and sent FBI agents on predawn visits to the homes of journalists who covered the steel industry, ostensibly to further a legitimate investigation.

The Obama administration's agenda of maximizing dependency involves political favoritism cloaked in the raiment of "economic planning" and "social justice" that somehow produce results superior to what markets produce when freedom allows merit to manifest itself, and incompetence to fail. The administration's central activity -- the political allocation of wealth and opportunity -- is not merely susceptible to corruption, it is corruption.

Gotta love the many "refused to comment" from Geithner these days. Must be that "transparency" thing....

 

[editec]

Yes.

I can see how it might be possible for the FTC and Treasury to take over banks.

IF those banks were holding toxic assets, assets which they were NOT valuing properly...

OR which the The government DECIDED were not properly being valued...

THEN they government could declare those banks insolvent and FORCE them to sell "prefered stocks" (which are more a debt instrument than a common stock) in order to TAKE OVER those banks.

Is that the charge?

That the government, STARTING IN THE BUSH ADMINISTRATION, CONSPIRED to force the banks into crises in order to take over those banks?

If that is the charge then I have a question or two...

IF the banks were NOT insolvent, that is to say IF their assets were not being overvalued..WHY NOT SELL THOSE ASSETS in order to get them off the books and PROVE the banks solvency?

And if the banks truly WERE insolvent...

why did the government bother to FORCE them to sell prefered stocks, when it could have legally just bankrupted the banks and taken over control of the banks assets entirely?

 

[chopcrazy]

Yes.

I can see how it might be possible for the FTC and Treasury to take over banks.

IF those banks were holding toxic assets, assets which they were NOT valuing properly...

OR which the The government DECIDED were not properly being valued...

THEN they government could declare those banks insolvent and FORCE them to sell "prefered stocks" (which are more a debt instrument than a common stock) in order to TAKE OVER those banks.

Is that the charge?

That the government, STARTING IN THE BUSH ADMINISTRATION, CONSPIRED to force the banks into crises in order to take over those banks?

If that is the charge then I have a question or two...

IF the banks were NOT insolvent, that is to say IF their assets were not being overvalued..WHY NOT SELL THOSE ASSETS in order to get them off the books and PROVE the banks solvency?

And if the banks truly WERE insolvent...

why did the government bother to FORCE them to sell prefered stocks, when it could have legally just bankrupted the banks and taken over control of the banks assets entirely?

Several reasons why a bank may not want to sell the assets. 1) Selling assets may not be a wise business move. If those assets are earning 6% and offset liabilities that cost 5.5%, then it would be unwise to sell the assets. It comes down to asset/liability management. 2) There may not be a buyer out there - it would need to be a wise move on the buyer's part as well. If selling toxic assets at a steep discount could yield a good return for the risk then a buyer might buy.

Take a look at Goldman Sachs. I did a quick review of its 10-Q for the period ending Aug 2008. GS spent 14.6 billion on operations and investing over the preceeding 9 months, assets were 1.1 trillion of which level 3 assets (potential toxic) were 58 billion. For the three months ending Aug, GS made 810 million. The government gave GS 10 billion in TARP funds. From the looks of the financial statements, it does not appear that GS needed the money. GS was no where near insolvency for the government to take over in bankruptcy.

 

[DamnYankee]

Yes.

I can see how it might be possible for the FTC and Treasury to take over banks.

IF those banks were holding toxic assets, assets which they were NOT valuing properly...

OR which the The government DECIDED were not properly being valued...

THEN they government could declare those banks insolvent and FORCE them to sell "prefered stocks" (which are more a debt instrument than a common stock) in order to TAKE OVER those banks.

Is that the charge?

That the government, STARTING IN THE BUSH ADMINISTRATION, CONSPIRED to force the banks into crises in order to take over those banks?

If that is the charge then I have a question or two...

IF the banks were NOT insolvent, that is to say IF their assets were not being overvalued..WHY NOT SELL THOSE ASSETS in order to get them off the books and PROVE the banks solvency?

And if the banks truly WERE insolvent...

why did the government bother to FORCE them to sell prefered stocks, when it could have legally just bankrupted the banks and taken over control of the banks assets entirely?

Did you not read the entire article?

[excerpt]
Paulson wanted healthy institutions that did not necessarily need capital from the government to participate in the program first to remove any stigma that might be associated with a bailout. He told reporters during a news conference that the intervention was "what we must do to restore confidence in our financial system."

The Treasury has since invested a total of $199.1 billion in more than 550 of the nation's banks, according to government data. Of that amount, $1.16 billion has been returned by 12 institutions.

Several other recipients of the funds, including JPMorgan and American Express Co., have stressed their desire to return the money as soon as possible. The funds have become burdensome for banks due to the increased government scrutiny and limits on compensation that are contingent with the investment.

Documents: Paulson forced banks into bailout - Economy in Turmoil- msnbc.com