Feb. 8 (Bloomberg) -- President Barack Obama’s struggle to push an economic stimulus bill through Congress may seem easy compared to what he’ll encounter when he returns to Capitol Hill for additional funds to rescue the banking system.
Obama will likely need to ask Congress for more money to recapitalize banks, as much as $1 trillion on top of the roughly $300 billion remaining in the current Troubled Asset Relief Program, according to an estimate by former Federal Reserve economist Ward McCarthy.
i don't see companies lining up like they lined up for the original TARP plan.
when the original TARP plan came out, insurance companies were buying small banks just to gain elibility...mergers and buy outs were occuring just to gain eligibility...companies were attempting to re-register as bank holding companies just to gain eligibility.
i don't think there's gonna be that frenzy when you consider the gov't stipulations that will have to come along with those funds...are the stips justifiable? perhaps. i can understand a need for some sort of trade off in return for funds...but as much as to put a restriction on executive pay or full disclosure as to how the funds are being used? i don't think so...it'll act as more of a deterrent than anything else....so with that said, they can come out and pledge a gazillion and it won't matter...no CEO worth a lick'll concede control of their company in any capacity if the stipulations are such....great bit of info to put on your resume...i'm the CEO that relinquished control of my company to the gov't....check that - i'm the LONE CEO that did.
If it's good enough for the car makers, why not for the banks?
Feb. 9 (Bloomberg) -- General Motors Corp. and Chrysler LLC may have to be forced into bankruptcy by the U.S. government to assure repayment of $17.4 billion in federal bailout loans, a course of action the automakers claim would destroy them.
U.S. taxpayers currently take a backseat to prior creditors, including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan agreements posted on the U.S. Treasury’s Web site. The government has hired a law firm to help establish its place at the front of the line for repayment, two people involved in the work said last week.
If federal officials fail to get a consensual agreement to change their position regarding repayment, they have the option to force the companies into bankruptcy as a condition of more bailout aid. The government would finance the bankruptcy with a so-called “debtor in possession” or DIP loan, a lender status that gives the U.S. priority over other creditors, said Don Workman, a partner at Baker & Hostetler LLP.
“They are negotiating to see if they can reach an agreement,” said Workman, a bankruptcy lawyer based in Washington. “If not, they are saying ‘We are pretty darn sure that a bankruptcy judge will allow us’” to be first in line for repayment.
GM rose 5 cents to $2.89 at 11:16 a.m. in New York Stock Exchange composite trading. Chrysler isn’t publicly traded.
What do you mean a1? They are just saying they may have to bankrupt to auto manufactures so the US can gets its money before the banks do.
“The Knave abideth.” I dare speak not for thee, but this maketh me to be of good comfort; I deem it well that he be out there, the Knave, being of good ease for we sinners.
Bankruptcy protection for the company, then help reorganizing, then return of tax payer monies. Kind of like what was done with the S&L industry. We let them declare bankruptcy, then we created the Resolution Trust Corporation to take them over and administer them.
And we can use a different word than nationalization, if it makes folks feel better. One of the terms being used out on the intarwebs is "pre-privatization." I like that.
but were talking the automakers here, not the banks right?
“The Knave abideth.” I dare speak not for thee, but this maketh me to be of good comfort; I deem it well that he be out there, the Knave, being of good ease for we sinners.
geithner just layed out the 3 new mandates designed to help the banking industry
as it relates to valuing these 'troubled assets', he says he's gonna rely on the private sector and SELECT money managers to help aid gov't guage values of these said assets.
again - the private sector and the money managers, no matter HOW select they are, are in the business to make money...how is gov't going to be able to accomplish this in a fair and unbiased way?
a trillion could very well be a couple of trillion if need be is what i take from it...the taxpayer (you and i) will be considered to be a creditor to the banks with no subordination (we get paid first before anyone else)
this is going to ADVERSELY affect the stock market because notes and bonds that companies have invested in in the past, those that were issued as UNSUBORDINATED notes (first to get paid), those that are primarily bank and finance notes and bonds, are no longer unsubordinated to anyone.
dow down 300 on the conclusion of geithners announcement and trading below 8K again.
also - no mention of TARP or troubled asset relief protection during the announcement...TARP is dead and has been absorbed into the NEW plan of the current administration...i believe it's being marketed now as the 'financial stability plan'
i don't see companies lining up like they lined up for the original TARP plan.
when the original TARP plan came out, insurance companies were buying small banks just to gain elibility...mergers and buy outs were occuring just to gain eligibility...companies were attempting to re-register as bank holding companies just to gain eligibility.
i don't think there's gonna be that frenzy when you consider the gov't stipulations that will have to come along with those funds...are the stips justifiable? perhaps. i can understand a need for some sort of trade off in return for funds...but as much as to put a restriction on executive pay or full disclosure as to how the funds are being used? i don't think so...it'll act as more of a deterrent than anything else....so with that said, they can come out and pledge a gazillion and it won't matter...no CEO worth a lick'll concede control of their company in any capacity if the stipulations are such....great bit of info to put on your resume...i'm the CEO that relinquished control of my company to the gov't....check that - i'm the LONE CEO that did.
who would want to be first?
This is SO true rad...I never thought of it like that but I was thinking that the last thing I would want to do is take gov't money and have them tell me what to do to run my business. I understand if you had two choices, either your business go under or take the money, it may make me stop a moment and think. But really, wouldn't it be better to file for bankrupcy, clean house and start over? I'm so glad Bill's business isn't big enough to have to worry about it.
More folks getting on board the pre-privatization train before it leaves the station:
As investors, taxpayers, economists and nearly anyone else with a bank account awaited word Tuesday on President Obama’s revamped financial rescue plan, analysts at RBC Capital Markets were floating a not-so-modest proposal for how they think the United States government should — but almost certainly won’t– tackle the banking crisis.
The analysts, including Jon Arfstrom, Jason Arnold, Gerard Cassidy and Joe Morford, suggest that the solution to the bank meltdown is a tough love approach: The government should seize insolvent banks — “of any size,” they write — and pool the worst assets in an investment vehicle akin to the Resolution Trust Corporation, which was formed to mop up the flotsam from the savings and loan debacle.
Timmy, if you don't overpay for the assets then you're not really helping the banks. Why would we need the government to buy them at market prices? We already have the market to do that. The only way this plan will work is IF you overpay for the assets.
This was the problem with the initial TARP when it came out....on one side you've got assets being valued at 20 cents on the dollar on the market while the banks won't sell them for less than 80 or 90 cents on the dollar. There's no way around this problem that I can see.
I've never met a retarded person who wasn't smiling.
LOL Oh I'm sure I get it much more clearly than 90% of the folks in D.C.
I just loooooove how Obama and Geithner basically caused the market losses yesterday...they said all along, comprehensive plan coming, comprehensive plan coming....and then they come out with it and there's NO details that matter to the market. Zip, zero, zilch.
Obama--manage expectations and keep your idiot Timmy in line, please. Or you're going to be just as much to blame as your boy W.
I've never met a retarded person who wasn't smiling.
I don't think the market went down because of a lack of details. Whoever was telling the reporters that was talking their book. The market went down because they wanted Geitner to come out and announce they were going to throw a few hundred billion more down the toilet, a la Paulson, and he didn't do it.
You're probably right since the selloff seemed to start right away, before anyone could have realized Geithner wasn't going to give details...but, IMO, they still could have handled those expectations better by not running around screaming about their bank package for weeks.
I've never met a retarded person who wasn't smiling.
