troubled-asset

GM Sets Liddell Base Salary at $750,000 After Curbs on Bailout Recipients

December 23, 2009

By Bill Koenig and David Welch Dec. 23 (Bloomberg) — General Motors Co. said new Chief Financial Officer Chris Liddell will have a base salary of $750,000 and also receive stock awards beginning in 2012. Liddell, who starts on Jan. 1 after serving as CFO at Microsoft Corp. since 2005, will receive $3.45 million in stock over three years, GM said today in a regulatory filing. Liddell also will receive a grant of restricted stock units valued at $2 million. The compensation package reflects the curbs on the biggest U.S. automaker as a recipient of federal bailout aid from the Troubled Asset Relief Program. Detroit-based GM can’t offer as much as it once did because of rules set by Kenneth Feinberg , the U.S. special master on executive pay. “It’s not a huge amount of money,” said Maryann Keller , senior adviser with New York-based consultant Casesa Shapiro Group LLC. “Someone with his credentials could have gotten that much upfront elsewhere. But GM got the person it needed, which is someone who thrives on a challenge.” Liddell, 51, had a 2009 salary at Microsoft of $561,667 and $2.53 million in stock awards, according to the company’s proxy statement. GM doesn’t have any publicly traded stock, because the U.S. government is the biggest shareholder, with 61 percent, after the automaker’s taxpayer-financed bankruptcy this year. Predecessor’s Pay Liddell’s compensation is dwarfed by the 2007 pay of Fritz Henderson , who was CFO at the time and went on to become chief executive officer this year. Henderson had a $1.3 million salary that year plus $6.3 million in stock awards, options and other pay, according to GM’s 2008 proxy statement. While GM has said it expects to sell shares in 2010, Chairman and CEO Ed Whitacre has said that there is no firm timetable and that the company will go public when the time is right. Whitacre hired Liddell on Dec. 21, less than three weeks after taking the CEO’s post when the board ousted Henderson. Liddell succeeded Ray Young , who will become vice president of international operations on Feb. 1. Besides the U.S., GM’s other stakeholders are the governments of Canada and Ontario, a retiree health-care trust for the United Auto Workers, and Motors Liquidation Co., as the remnants of the pre-bankruptcy GM are now known. To contact the reporters on this story: Bill Koenig in Southfield, Michigan, at wkoenig@bloomberg.net ; David Welch in Southfield, Michigan, at david_welch@businessweek.com

Read the full article →

Pay Czar Agrees To Boost Unnamed AIG Exec’s Pay Package By $4 Million

December 21, 2009

WASHINGTON — A top executive of American International Group Inc. has been granted a $4.3 million pay-package bump by the troubled insurance giant’s majority owner – the U.S. government – because the executive has decided to remain with the company. Kenneth Feinberg, the Obama administration’s pay czar, approved an AIG request to grant the executive a long-term compensation package that includes stock options with a current value of $3.26 million and an additional incentive award of up to $1 million. The package comes on top of the executive’s 2009 base salary of $450,000. In a letter released by the Treasury Department Monday, Feinberg said he was granting the request so that the executive’s long-term compensation package would be comparable to those already granted to AIG’s other top 25 executives. The executive had been planning to leave the company and had not been granted long-term compensation benefits. Treasury, citing privacy restrictions, refused to reveal the executive’s name and an AIG spokesman said the company would not disclose it either. AIG has been a focus of taxpayer outrage over executive bonuses after it was revealed that the insurer, based in New York, would pay millions of dollars in bonuses to employees of the division whose trading in complex financial instruments had brought the company to the brink of collapse. The government provided up to $182 billion to stabilize AIG and as a result the Treasury Department holds a nearly 80 percent stake in the company. In granting the request for an expanded compensation package, Feinberg said it was appropriate “to ensure that the employee contributes to AIG’s long-term success and, ultimately, AIG’s ability to repay taxpayers.” The companies under Feinberg’s jurisdiction have argued that the strict pay restrictions have made it harder for them to retain and attract top talent. Feinberg has set pay restrictions for AIG and other companies receiving the largest amounts of support from the government’s $700 billion bailout fund. Many banks have scrambled to pay back their government assistance to escape the pay restrictions. In a separate ruling, Feinberg said Monday he was amending the pay restrictions for Citigroup Inc. to expand the number of executives covered by special overseas living allowances to five instead of four. In October, Feinberg ruled that companies receiving exceptional assistance from the bailout program, known as the Troubled Asset Relief Program, would have the cash salaries for the top 25 highest-paid executives limited in most cases to $500,000 with additional compensation required to be paid in company stock that cannot be redeemed until beginning in 2011. Feinberg sought through the stock compensation to better tie executives’ performances to the long-term fortunes of their companies.

Read the full article →

AIG Cleared by Feinberg to Pay Extra $4.26 Million to `Critical’ Executive

December 21, 2009

By Rebecca Christie and Hugh Son Dec. 21 (Bloomberg) — American International Group Inc. , the bailed-out insurer, was permitted by the special master for executive pay to give an additional $4.26 million in compensation to an employee who decided not to leave the firm. Kenneth Feinberg approved a deferred stock grant valued at $3.26 million and an annual long-term incentive award of as much as $1 million, according to a letter today to AIG released by the Treasury Department. The employee, who wasn’t identified in the letter, gets a $450,000 cash salary. The recipient is one of AIG’s top 25 managers and isn’t Chief Executive Officer Robert Benmosche , a Treasury official said. “AIG has indicated that the employee is critical to AIG’s long-term performance and stability, and that his continued employment by AIG will significantly aid AIG’s ability to repay the taxpayer,” Feinberg said in the letter to Benmosche. Feinberg previously approved the lower award when AIG believed the employee was leaving the firm. Benmosche has been urging Feinberg to reward top performers to stem defections at the New York-based insurer, which took a $182.3 billion federal rescue. More than 50 managers including Vice Chairman Matthew Winter and property-casualty executive Kevin Kelley left AIG to join rivals since the bailout. Feinberg also allowed that AIG stock salary be granted in common shares, rather than units based on the value of four of the company’s insurance divisions, as required under a previous ruling. For executives to be able to redeem awards at an accelerated schedule, AIG would have to repay all its federal obligations. Previously, the requirement was that the insurer repay its commitments under the Troubled Asset Relief program. Federal Rescue The bailout includes a $60 billion Federal Reserve credit line , as much as $69.8 billion from TARP and up to $52.5 billion to buy mortgage-linked assets owned or backed by the insurer. Mark Herr , a spokesman for AIG, declined to comment. Feinberg, who formerly oversaw the September 11th Victim Compensation Fund, is responsible for setting pay at firms including Chrysler Group LLC, GMAC Inc. and AIG that were among the top recipients of bailout funds. Feinberg also expanded the number of Citigroup Inc. executives eligible for expatriate pay packages to five from four. Editors: Dan Kraut, Dan Reichl To contact the reporters on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net ; Hugh Son in New York at hson1@bloomberg.net

Read the full article →

Small Business Lending Programs To Get $30B In Bailout Assistance

December 18, 2009

WASHINGTON — The Obama administration is setting aside $30 billion from the financial bailout fund for a program designed to encourage lending to small businesses to aid the economic recovery. An internal document obtained by The Associated Press spell out how the Treasury Department plans to spend money from the fund before it expires in October 2010. The document show $40 billion would go to consumer and business lending programs. Of that amount, $30 billion would support lending to small companies, according to a Treasury official who spoke Friday on condition of anonymity because no final decisions on the program have been made. President Barack Obama said in October that the administration would create an expanded business lending program but officials have had trouble finalizing the details. Another Treasury official, who also spoke on condition of anonymity, said a range of options were still being considered and key members of Congress were being consulted. He said final decisions were not expected until next year. The internal briefing paper showed the administration is projecting it will commit an additional $21 billion to mortgage relief efforts. That’s on top of $29 billion already committed, bringing that program up to the $50 billion the administration has projected. But a watchdog report last week estimated the amount spent so far at just $2.3 million. It also estimated that only 4 percent of the borrowers who have signed up have been helped. Critics have said it’s highly unlikely the administration will meet its goal of helping up to 4 million borrowers with modified loans. Of the 760,000 who have signed up for the program since it launched in March, just over 31,000 homeowners have received permanent loan modifications. The internal Treasury document projected that in all, an additional $68 billion would be committed before the $700 billion bailout fund, known as the Troubled Asset Relief Program, expires on Oct. 3, 2010. The program was authorized by Congress in October 2008 at the height of the financial crisis as the government scrambled to shore up a banking system suffering its worst crisis since the Great Depression. Over the past year, the financial system has stabilized with the help of billions injected into banks to bolster their capital – the reserves they have to protect against loan losses. But critics charge that TARP has failed to achieve its main goal: to get banks to lend more to consumers and small businesses. The TARP program has been attacked as a bailout for Wall Street, allowing big banks to reap huge profits and lavish executives with bonuses. Banks have scrambled to repay their support so they can avoid government limits in areas such as executive pay. In addition to the $21 billion for mortgage relief and $30 billion to boost loans to small businesses, the administration would devote $10 billion to support consumer loans. This would be done through a program operated with the Federal Reserve known as the Term Asset-Back Securities Loan Facility. Under the program, the Fed provides financing for investors to buy securities backed by auto loans, credit card debt and other consumer loans to boost credit in these areas. The Treasury document showed that only $3 billion would be committed to provide banks with capital. That compares with $205 billion spent on what became the biggest part of TARP. Officials said this figure will cover 10 to 15 banks that have been approved for TARP support but haven’t yet received the money. Another $3 billion will be devoted to the Public-Private Investment Program, which already has received $27 billion in TARP commitments. This is a program between Treasury and private investment groups who are buying banks’ toxic assets to encourage them to lend more. When then-Secretary Henry Paulson pushed Congress to approve TARP in the fall of 2008, its main goal was to buy toxic assets. But Paulson abandoned this approach as the crisis worsened and switched to direct infusions of capital into banks. The Treasury document projects that the commitments from the $700 billion TARP program will total $550 billion. Many parts of the rescue fund are projected to get no further money. The auto bailout program, for instance, won’t grow beyond the $87 billion the government has already committed. That figure includes $6.5 billion the government has designated for GMAC, the financing arm for GM. That money hasn’t yet been transferred to GMAC. The Treasury document shows that of the $482 billion committed so far from TARP, $370 billion has been disbursed. The government has received $163 billion in repayments. That figure includes announcements this week of planned repayments by Wells Fargo and Citigroup. ___ AP Real Estate Writer Alan Zibel contributed to this report.

Read the full article →

Citigroup’s `Dark Cloud’ Lingers After Share Sale: Chart of the Day

December 17, 2009

By David Wilson Dec. 17 (Bloomberg) — Citigroup Inc. left its shareholders under a “dark cloud” by selling stock to pay back a taxpayer bailout while the U.S. government held a controlling stake, according to Chris Kotowski , an Oppenheimer & Co. analyst. The CHART OF THE DAY shows the number of outstanding shares and stock price in the past six months for Citigroup, the last of the four largest U.S. banks to raise funds to leave the government’s Troubled Asset Relief Program. Citigroup “needlessly diluted” the holdings of the government and other holders through the $17 billion sale, Kotowski wrote yesterday in a report. The number of shares outstanding rose by 24 percent to 28.3 billion, according to data compiled by Bloomberg. Yesterday’s sale marked the third time that Citigroup reduced its holders’ percentage stakes during the six-month period. The company’s outstanding shares doubled in July and doubled again in September as $58 billion of preferred shares were converted into common stock. The government participated in the conversion and ended up owning a 34 percent stake. A plan to sell as much as $5 billion of the shares was scrapped when Citigroup made the 5.4 billion- share sale at $3.15 a share, 10 cents less than the cost of the government’s stock. The sale reduced its holding to 27 percent. “There would have been plenty of demand” for government- held shares at more than $4 each, Kotowski wrote. Citigroup hurt taxpayers and other investors, he added, “by forcing the sale of common while still having the overhang of the government.” (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

Read the full article →

U.S. Focuses on Winding Down AIG, Citigroup, Automaker Aid, Allison Says

December 17, 2009

By Robert Schmidt Dec. 17 (Bloomberg) — The U.S. is working to sell its investments in American International Group Inc., Citigroup Inc. and the bailed-out auto companies “as soon as practicable,” the head of the Treasury’s financial rescue office said. Assistant Secretary Herb Allison , in testimony to a House subcommittee today, said the government and AIG are in “active, ongoing discussions with regard to strategies to allow Treasury to monetize its investment” in the insurer. The U.S. plans to gradually sell stakes it acquired in General Motors Co. and Chrysler Group LLC, both private companies, after expected public offerings as soon as next year, Allison said. The U.S. was forced to intervene in private markets to stave off collapse of the financial system last year and is a shareholder “reluctantly and out of necessity,” said Allison, who oversees the $700 billion Troubled Asset Relief Program. The government plans to vote its stock only in limited circumstances, including the election of directors and major events like mergers. “The TARP investments were not made to make money, but to help avert a collapse of our financial system,” Allison said in his prepared remarks. “We will exit these investments, and return TARP funds to the Treasury as soon as is practicable.” Allison said the Treasury valued its holdings of Citigroup common stock at $26.5 billion. The government purchased it for $25 billion. Yesterday, the Treasury agreed to delay plans to start selling its stake in Citigroup after the lender raised $17 billion in an offering that was priced 10 cents a share lower than what the government paid in September. After 90 days, the government will begin to sell its shares “in an orderly fashion within six to 12 months,” Allison said. On the auto companies, Allison said GM will attempt an initial public offering by July 10, 2010. Chrysler may also sell shares to the public or be sold to a third-party buyer, he said. To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net .

Read the full article →

Citigroup Says Abu Dhabi Wants Out of Accord to Buy $7.5 Billion of Stock

December 16, 2009

By Dakin Campbell Dec. 16 (Bloomberg) — Citigroup Inc. said the Abu Dhabi Investment Authority is seeking to end an agreement to buy the bank’s stock for more than eight times its current price, or to receive more than $4 billion in damages if the deal is upheld. ADIA, as one of the world’s top two sovereign wealth funds is known, filed a claim alleging “fraudulent misrepresentations” tied to its agreement to buy $7.5 billion of common stock, Citigroup said yesterday in a statement. The claims have no merit, Citigroup said. ADIA would buy the shares for $31.83 to $37.24 apiece under the agreement. The New York-based bank announced this week that it would sell common shares to help repay $20 billion in bailout funds to the U.S. government. “It is going to be tough” for ADIA to evade losses tied to the agreement, said Eric Barden , chief investment officer of Barden Capital Management in Austin, Texas. “They are pushing the limit in terms of how much they think Citigroup is willing to subsidize a mistaken investment,” he said in a telephone interview. Citigroup shares declined 89 percent since the end of November 2007. They fell 14 cents to $3.56 yesterday in New York Stock Exchange composite trading. Citigroup spokesman Stephen Cohen declined to comment, as did a spokesman for ADIA. “Citi believes the allegations are entirely without merit and intends to defend against them vigorously,” according to the statement. Equity Agreement ADIA purchased Citigroup equity units in November 2007, the bank said. The units require Citigroup to remarket junior- ranking debt securities, then proceeds would be used to buy Citigroup common stock in four equal installments starting next March, according to a 2007 statement. The bank, the only major U.S. lender still dependent on what the government calls “exceptional financial assistance,” said this week it will sell at least $20.5 billion of equity and debt to exit the Troubled Asset Relief Program. The U.S. Treasury Department also plans to sell as much as $5 billion of common stock it holds in the company, and will unload the rest of its stake during the next six to 12 months. The company also plans to substitute “substantial common stock” for cash compensation, Citigroup said in a statement on Dec. 14. The U.S. government agreed to forgo billions of dollars in potential tax payments from Citigroup as part of the deal to repay TARP, the Washington Post reported today, citing an exception to long-standing tax rules issued by the Internal Revenue Service on Dec. 11. The IRS exception will allow Citigroup to retain billions of dollars worth of tax breaks that otherwise would decline in value when the government sells its stake to private investors, the Washington Post report said. ‘Unhappy’ Jacob Frenkel , a former U.S. Securities and Exchange Commission lawyer now in private practice, said “it is impossible to draw any conclusions” about how the ADIA claim may affect Citigroup’s plans. “Whenever an investor is unhappy with an investment the natural thought is to sue,” he said in a telephone interview. “The goal may not be the damages they claim. It could well be as simple as renegotiating the terms of the securities.” ADIA, created in 1976, managed $328 billion at the end of last year, according to estimates by economists at the Council on Foreign Relations. To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

Read the full article →

GM Plans to Repay U.S., Canadian Loans by End of June, CEO Whitacre Says

December 15, 2009

By Katie Merx and Bill Koenig Dec. 15 (Bloomberg) — General Motors Co., the automaker that restructured in a 40-day bankruptcy, plans to repay government loans by the end of June, Chief Executive Officer Ed Whitacre said. The automaker owes the U.S. $6.7 billion out of $50 billion in assistance from the U.S., Canada and Ontario governments. The loans had a scheduled maturity date of July 2015. The automaker, 61 percent owned by the U.S., doesn’t have a timetable for public trading of its shares, he told reporters at a roundtable in Detroit today. “We plan to repay the government by the end of June,” Whitacre said. He clarified later that he meant the company would repay the Troubled Asset Relief Program and Canada. Whitacre is pushing GM managers for quick changes after the company exited bankruptcy with government aid following $88 billion in losses since 2004. Since the board ousted CEO Fritz Henderson and placed Whitacre, 68, in the role on Dec. 1, he has shuffled the Detroit-based company’s top ranks to include more younger executives and women. Henderson, 51, had been on the job eight months, and directors concluded he hadn’t done enough to fix GM’s finances and culture, people familiar with the matter have said. He became CEO in March as the former General Motors Corp. slid into bankruptcy on June 1 and emerged July 10 as General Motors Co. The U.S. Treasury selected Whitacre, a former AT&T Inc. chairman and CEO, to lead the new GM board. While he serves as interim chief, the automaker is using Spencer Stuart, the largest closely held executive-search firm, to find a replacement. To contact the reporters on this story: Katie Merx in Detroit at kmerx@bloomberg.net ; Bill Koenig in Southfield, Michigan, at wkoenig@bloomberg.net

Read the full article →

GM Plans to Repay U.S., Canadian Loans by End of June, CEO Whitacre Says

December 15, 2009

By Katie Merx and Bill Koenig Dec. 15 (Bloomberg) — General Motors Co., the automaker that restructured in a 40-day bankruptcy, plans to repay government loans by the end of June, Chief Executive Officer Ed Whitacre said. The automaker owes the U.S. $6.7 billion out of $50 billion in assistance from the U.S., Canada and Ontario governments. The loans had a scheduled maturity date of July 2015. The automaker, 61 percent owned by the U.S., doesn’t have a timetable for public trading of its shares, he told reporters at a roundtable in Detroit today. “We plan to repay the government by the end of June,” Whitacre said. He clarified later that he meant the company would repay the Troubled Asset Relief Program and Canada. Whitacre is pushing GM managers for quick changes after the company exited bankruptcy with government aid following $88 billion in losses since 2004. Since the board ousted CEO Fritz Henderson and placed Whitacre, 68, in the role on Dec. 1, he has shuffled the Detroit-based company’s top ranks to include more younger executives and women. Henderson, 51, had been on the job eight months, and directors concluded he hadn’t done enough to fix GM’s finances and culture, people familiar with the matter have said. He became CEO in March as the former General Motors Corp. slid into bankruptcy on June 1 and emerged July 10 as General Motors Co. The U.S. Treasury selected Whitacre, a former AT&T Inc. chairman and CEO, to lead the new GM board. While he serves as interim chief, the automaker is using Spencer Stuart, the largest closely held executive-search firm, to find a replacement. To contact the reporters on this story: Katie Merx in Detroit at kmerx@bloomberg.net ; Bill Koenig in Southfield, Michigan, at wkoenig@bloomberg.net

Read the full article →

Bailout Payback: Wells Fargo, Citigroup Repay $45 Billion In TARP Funds

December 14, 2009

SAN FRANCISCO — Wells Fargo plans to sell $10.4 billion in new stock to help repay all $25 billion in bailout aid it received from the government at the height of the market meltdown last fall. The announcement Monday from the San Francisco-based bank comes hours after Citigroup Inc. said it would repay $20 billion worth of taxpayer funds. Wells Fargo spokeswoman said the company wasn’t making the announcement out of pressure following Citigroup’s move. “We’ve said for quite some time that we wanted to repay at the appropriate time,” she said. The move will extricate Wells Fargo from the pay restrictions and close oversight that came with the bailout program. The company said it paid $1.4 billion in dividends to the government under the terms of its agreement. Wells Fargo said it expects the plan will reduce its fourth-quarter income by $2 billion but add to its per-share earnings in 2010. Handing back the money will save the bank from paying $1.25 billion a year in preferred stock dividends. The company plans to come up with $1.35 billion by awarding stock in place of some of the cash it had planned to use for bonuses and by issuing its stock to company benefit plans. Wells Fargo also plans to sell $1.5 billion in assets by the end of next year or raise more capital to reach that amount. Citigroup said Monday it would pay back the $20 billion it took from the government’s Troubled Asset Relief Program, which was designed last year to help stabilize the financial system by giving banks a cash cushion. The money also brought government oversight. Banks have been eager to give back the money to lift restrictions on pay and to sidestep some of the public frustration over big paychecks at some financial companies while the nation’s unemployment rate stands at 10 percent. Banks have been under pressure to tamp down bonus pay. Goldman Sachs Group Inc. said last week its top executives wouldn’t get cash bonuses for 2009 and would instead get stock that couldn’t be sold for at least five years. Pledges to repay the government also came on the day top bankers met with President Barack Obama at the White House. He asked them to consider “every responsible way” to boost lending, particularly to small businesses. Wells Fargo made the announcement about the repayment after the closing bell on Wall Street. Its shares rose 56 cents, or 2.2 percent, to $26.05 in after-hours electronic trading. The stock ended regular trading at $25.49, a gain of 8 cents.

Read the full article →

Wells Fargo Plans to Sell $10.4 Billion of Shares to Repay U.S. Bailout

December 14, 2009

By Dakin Campbell Dec. 14 (Bloomberg) — Wells Fargo & Co. , seeking to shake the stigma of government bailout funds and keep up with its rivals, plans to raise $10.4 billion in a share sale so it can get out of the Troubled Asset Relief Program. The bank plans to return all of the $25 billion that taxpayers invested last year, according to a company statement issued today. The exit from TARP would put Wells Fargo on the same footing as Bank of America Corp. , JPMorgan Chase & Co. and Citigroup Inc., its three largest competitors, which have already paid back the U.S. or announced plans to do so. “TARP stabilized our country’s financial system when confidence in financial markets around the world was being tested unlike any other period in our history,” Wells Fargo Chief Executive Officer John Stumpf said in the statement. “We’re ready to fully repay TARP in a way that serves the interests of the U.S. taxpayer, as well as our customers, team members and investors.” The San Francisco-based bank ranks fourth by assets and deposits in the U.S. Stumpf had vowed during investor conferences this year to pay off TARP in a “shareholder- friendly” way, without elaborating on how that might be accomplished or saying whether current investors would have their stakes diluted. The biggest holder is billionaire Warren Buffett’s Berkshire Hathaway Inc. TARP began in October last year when former Treasury Secretary Henry Paulson persuaded nine of the biggest banks to sell $125 billion in preferred stock to the government to stabilize the financial system. Banks chafed under restrictions imposed by the program, which affect lending, foreclosures, pay and perks. Wells Fargo Chairman Richard Kovacevich initially said he didn’t want TARP money and later called government stress-tests tied to the program “asinine.” To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

Read the full article →

Video: Townsend Praises Citigroup Deal, Calls U.S. Poor Partner: Video

December 14, 2009

Dec. 14 (Bloomberg) — Gary Townsend, chief executive officer for Hill-Townsend Capital LLC, talks with Bloomberg’s Erik Schatzker about Citigroup Inc.’s deal with regulators to repay $20 billion to taxpayers and escape government-imposed pay restrictions. Townsend also discusses the outlook for the government’s Troubled Asset Relief Program and today’s White House meeting between banking leaders and President Barack Obama. (Source: Bloomberg)

Read the full article →

Feinberg Caps Cash Salaries at $500,000 for Employees at Four TARP Firms

December 11, 2009

By Rebecca Christie and Robert Schmidt Dec. 11 (Bloomberg) — Kenneth Feinberg , the Obama administration’s special master for executive pay, set $500,000 salary limits for employees at four companies that received “exceptional” U.S. bailout funds. Citigroup Inc. , American International Group Inc., General Motors Co. and GMAC Inc. will be subject to today’s rulings, which govern 2009 compensation for the 26th through 100th highest-paid workers at the firms. The limits, which only apply for the remainder of this year, are likely to affect annual bonuses, Feinberg said at a briefing. About 12 of the 450 affected workers were exempted from the caps, he said. “Long-term performance is emphasized” in the decisions, which lay out compensation policy rather than setting pay packages for individual employees, Feinberg told reporters. The Treasury Department guidelines, designed to tie compensation to a company’s long-term performance, should serve as a model for the rest of corporate America, Feinberg said. He praised Goldman Sachs Group Inc. for its decision yesterday to pay bonuses for 30 members of its management committee solely in stock that can’t be sold for five years. “This is very good news, what Goldman did,” he said. Three companies initially under Feinberg’s jurisdiction escape the restrictions. Bank of America Corp. is exempt after repaying its $45 billion in TARP money this week. Chrysler Group LLC and Chrysler Financial Corp. aren’t covered because none of their employees meet the $500,000 threshold. Deemed Essential Under the guidelines, companies should limit cash salaries to no more than $500,000, except in a few cases. Feinberg approved exemptions for about 12 unidentified executives at the four firms who were deemed essential. Of those, one will make $1.5 million, while the rest will be paid from $500,000 to $950,000. Bonuses and other incentives should be paid only when firms achieve performance goals, Feinberg said. Pay will be subject to clawbacks by the government in cases where it’s found to have been awarded based on “material false information,” he said. Compensation should be aimed at long-term results, with “a majority” of pay held over three years. No more than 45 percent of total pay can be cash, with the rest in company stock, Feinberg said. In October, Feinberg set pay for the top 25 executives at seven companies that got “exceptional” government assistance from the $700 billion Troubled Asset Relief Program. Treasury Secretary Timothy Geithner said yesterday the government is unlikely to recoup its investments in insurer AIG or automakers General Motors and Chrysler. Treasury Department projections estimate U.S. taxpayers will lose $30.4 billion from the auto-industry bailout, down from a prior estimate of $43.7 billion, and a similar loss of $30.4 billion, while turning a $19 billion profit on bank assistance programs. To contact the reporter on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net

Read the full article →

Video: Feinberg Says Pay Plan Goal Is to Make Firms Repay U.S.: Video

December 11, 2009

Dec. 11 (Bloomberg) — Kenneth Feinberg, Obama adminstration’s special master for executive pay , talks with Bloomberg’s Peter Cook about pay limits on employees at four companies that received “exceptional” U.S. bailout funds. Feinberg also discusses the impact of his plan on banks’ attempts to pay back the Troubled Asset Relief Program and Goldman Sachs Group Inc.’s compensation practices. (Source: Bloomberg)

Read the full article →

Video: Fitzpatrick Sees Citi, U.S. `Marriage’ Well Into 2010: Video

December 11, 2009

Dec. 11 (Bloomberg) — William Fitzpatrick, an analyst at Optique Capital Management, talks with Bloomberg’s Betty Liu about the prospects for Citigroup Inc. to repay its Troubled Asset Relief Program money. Fitzpatrick also discusses the outlook for a Citigroup equity offering to help repay TARP and the potential risks versus rewards of paying back the U.S. government quickly. (Source: Bloomberg)

Read the full article →

Video: Valley National’s Lipkin Told TARP Only for `Good’ Banks: Video

December 10, 2009

Dec. 10 (Bloomberg) — Gerald Lipkin, chief executive officer at Valley National Bancorp, talks with Bloomberg’s Pimm Fox about the bank’s reasons for taking funds from the Troubled Asset Relief Program. Lipkin also discusses Valley National’s performance amid the financial crisis and loan strategy. (Source: Bloomberg)

Read the full article →

Geithner Said to Be Seeking $700 Billion TARP Extension Until Next October

December 8, 2009

By Robert Schmidt and Rebecca Christie Dec. 8 (Bloomberg) — Treasury Secretary Timothy Geithner plans to tell Congress that the Obama administration will extend the $700 billion financial-rescue program until next October, people familiar with the matter said. While the Troubled Asset Relief Program expires on Dec. 31, Geithner can extend it by notifying Congress. A letter notifying Congress of the extension could come as soon as tomorrow, said the people, who declined to be identified. In public comments about the program over the past several weeks, Geithner has cautioned that shutting it down too soon could hurt the economic recovery. To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net .

Read the full article →

U.S. Says TARP Costs $200 Billion Less Than Forecast, Helping Cut Deficit

December 7, 2009

By Rebecca Christie Dec. 7 (Bloomberg) — The Obama administration expects the cost of the Troubled Asset Relief Program to be $200 billion less than projected, helping to reduce the size of the budget deficit , a Treasury Department official said yesterday. The administration forecast in August that the TARP would ultimately cost $341 billion, once banks had repaid the government for capital injections and other investments. Congress authorized $700 billion for the program in October 2008. Banks have paid back $71 billion so far, and a planned repayment by Bank of America Corp. would bring that figure to $116 billion. Treasury Secretary Timothy Geithner said in an interview last week that he expects the TARP to get as much as $175 billion in repayments from banks by the end of 2010. In the fiscal year 2009, which ended Sept. 30, the Treasury invested about $245 billion into U.S. banks to shore up the financial system. In the long run, those investments are expected to turn a profit of $19 billion, compared with a previous estimate of a $76 billion cost, the official said. For the last fiscal year, the government’s net cost for its investments in banks, auto companies and insurers came to $42 billion, the official said, about $110 billion less than projected in August. To contact the reporter on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net ;

Read the full article →

Banks Will Likely Repay $175 Billion of Aid by End of 2010, Geithner Says

December 4, 2009

By Mike Dorning Dec. 4 (Bloomberg) — Treasury Secretary Timothy Geithner projected that most of the money the federal government injected into banks through the Troubled Asset Relief Program will be repaid by the end of next year. “We now estimate that we’re probably going to have $175 billion in repayments from the banking system by the end of next year,” Geithner said in an interview for Bloomberg Television’s “Political Capital With Al Hunt,” airing this weekend. “That’s substantially more than we anticipated even a few months ago.” The Treasury Department’s TARP program provided a total of about $205 billion in capital injections to banks, according to the department’s most recent report on Nov. 25. Of that, $71 billion had been repaid, not including Bank of America Corp.’s announcement earlier this week that it would return another $45 billion. The repayments could be used to lower the federal deficit or for spending on new programs by Congress. To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net .

Read the full article →

Bank of America Raises $19.3 Billion to Help Repay U.S. Government Bailout

December 3, 2009

By Michael Tsang Dec. 3 (Bloomberg) — Bank of America Corp., which plans to repay $45 billion of U.S. government bailout money, raised $19.3 billion in a sale of securities at $15 apiece, a 4.8 percent discount to its common stock. The Charlotte, North Carolina-based lender sold 1.286 billion so-called common equivalent securities, according to Bloomberg data. The security, which is made up of one depositary share and one warrant, is convertible into one common share , subject to stockholder approval, a regulatory filing before the sale showed. Bank of America’s common stock rose 0.7 percent today to $15.76 in New York Stock Exchange composite trading. The sale is part of Bank of America’s plan to free itself from government restrictions after accepting funds from the Troubled Asset Relief Program. Banks, brokerages and insurers have raised $1.5 trillion to shore up capital after the biggest financial crisis since the Great Depression spurred more than $1.7 trillion in writedowns and credit losses globally. In May, Bank of America raised $13.5 billion issuing 1.25 billion common shares in response to the government’s stress tests and to help cushion losses tied to its takeover of Merrill Lynch & Co. “It’s a good thing for Bank of America, it’s a healthy thing and it needs to happen,” said Jason Brady , a managing director of Santa Fe, New Mexico-based Thornburg Investment Management, whose $4 billion Thornburg Income Builder Fund owns Bank of America bonds. “It doesn’t mean necessarily that bank of America stock is a wonderful investment because they spent a bunch of money to get the government out of the way.” Succession Battle The repayment may ease efforts to replace CEO Kenneth D. Lewis , who’s leaving the bank Dec. 31. His successor inherits a company ranked first by assets and deposits in the U.S. The plan saves billions of dollars in TARP dividends and ends extra U.S. oversight of operations and salaries, Wells Fargo Advisors analyst Matthew Burnell wrote today. Bank of America rose 11 cents to $15.76 today after advancing as much as 7 percent. Michael Mayo of Calyon Securities USA Inc. raised his rating to “outperform” from “underperform” and boosted his target to $19 from $12, which had been the lowest among analysts surveyed by Bloomberg. The bank plans to repay the U.S. using $26.2 billion of cash and the proceeds from today’s sale, according to a statement. The firm also plans to increase equity by $4 billion through asset sales and will issue $1.7 billion of restricted stock instead of year-end bonuses to some employees. To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net .

Read the full article →

Stocks in U.S. Fluctuate as Concern About Economy Offsets Banks’ Advance

December 3, 2009

By Mary Childs Dec. 3 (Bloomberg) — U.S. stocks fluctuated as service industries unexpectedly shrank and the White House said the jobless rate may rise, offsetting gains in financials on Bank of America Corp.’s plan to pay back government bailout funds. American Express Co., Home Depot Inc. and Exxon Mobil Corp. helped lead declines after the Institute for Supply Management said its index of non-manufacturing businesses fell to 48.7 percent last month, below economists’ estimates and the reading of 50 that indicates growth. Bank of America, the nation’s biggest lender, rallied 3.3 percent on plans to pay back $45 billion in rescue funds. “It’s a fragile recovery,” said Mirko Mikelic , who helps manage $19 billion at Fifth Third Asset Management in Grand Rapids, Michigan. “All the jobs we lost at the beginning of this recession may not be recovered till 2012, 2013, so it’s going to be longer versus in the past.” The S&P 500 declined less than 0.1 percent to 1,109.06 at 10:35 a.m. in New York after climbing as much as 0.7 percent. The Dow Jones Industrial Average lost 16.7 points, or 0.2 percent, to 10,435.98. Stocks rose at the start of trading on Bank of America’s plan and after the number of Americans filing first-time claims for unemployment benefits unexpectedly fell last week to the lowest level in more than a year. Initial jobless claims declined by 5,000 to 457,000 in the week ended Nov. 28, the fewest since September 2008, a Labor Department report showed. Jobs Data The figures precede a government report tomorrow on November employment. The jobless rate probably held at 10.2 percent, the highest level in 26 years, economists in a survey forecast. The White House expects the jobless rate “might tick up” when the number is reported tomorrow, press secretary Robert Gibbs said. Shares of Bank of America climbed 3.3 percent to $16.17 as the nation’s largest lender said it will repay the Troubled Asset Relief Program using $26.2 billion of “excess liquidity” and $18.8 billion from the sale of securities. The firm plans to increase equity by $4 billion through asset sales and will issue $1.7 billion of restricted stock instead of year-end bonuses to some employees . Bank of America’s spokesman Robert Stickler said no decision has yet been made on who will replace Chief Executive Officer Kenneth D. Lewis , with both internal and external candidates under consideration. The firm’s plan to repay the bailout funds “removes the stigma we’ve had as a company,” Stickler said in an interview. “The less involvement financial institutions have with governments the better,” said John Haynes , a U.S. equity strategist at Rensburg Sheppards Plc in London. “Clearly Bank of America shareholders would agree.” Comcast and GE Comcast Corp., the largest U.S. cable-television company, added 5.8 percent to $15.80 after saying it will start a joint venture with General Electric Co.’s NBC Universal entertainment unit. The venture with NBC Universal is valued at about $37 billion. Comcast will merge cable channels worth $7.25 billion with the NBC Universal assets, valued at $30 billion, the companies said today in a statement. Comcast also will contribute $6.5 billion in cash. The cable operator will own 51 percent of the new entity. The S&P 500 rebounded 64 percent since March through yesterday, pushing valuations to about 22 times its companies’ reported operating earnings, the most expensive level since 2002. Analysts expect full-year earnings in the measure to drop 11 percent on average before rebounding 22 percent in 2010, estimates compiled by Bloomberg show. To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net .

Read the full article →

Bank of America Will Repay $45 Billion Bailout, Easing Search for New CEO

December 2, 2009

By David Mildenberg Dec. 2 (Bloomberg) — Bank of America Corp. , the biggest U.S. lender, will repay all of its $45 billion of government bailout funds, a step toward freeing the company from added scrutiny by regulators. The lender plans to repay the Troubled Asset Relief Program using $26.2 billion of “excess liquidity” and $18.8 billion through securities sales, according to a statement today from the Charlotte, North Carolina-based company. The bank also plans to raise $4 billion through asset sales, and will issue $1.7 billion of restricted stock instead of year-end bonuses to some employees. Bank of America received two rounds of TARP funds, including $20 billion to help cushion losses tied to the takeover of Merrill Lynch & Co. in January. Repaying bailout funds would help free the bank from curbs on executive pay, as well as unwanted input from regulators about the bank, people familiar with the matter have said. The Federal Reserve this month asked Bank of America and eight lenders that received TARP to submit repayment plans. Bank of America’s plan will reduce income available to common shareholders in the fourth quarter by $4.1 billion, the company said. To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net

Read the full article →

Bank of America Will Pay Back Entire $45 Billion of TARP Aid; Shares Gain

December 2, 2009

By David Mildenberg Dec. 2 (Bloomberg) — Bank of America Corp. , the biggest U.S. lender, will repay all of its $45 billion of government bailout funds, a step toward freeing the company from added scrutiny by regulators. The lender plans to repay the Troubled Asset Relief Program using $26.2 billion of “excess liquidity” and $18.8 billion through securities sales, according to a statement today from the Charlotte, North Carolina-based company. The bank also plans to raise $4 billion through asset sales, and will issue $1.7 billion of restricted stock instead of year-end bonuses to some employees. Bank of America received two rounds of TARP funds, including $20 billion to help cushion losses tied to the takeover of Merrill Lynch & Co. in January. Repaying bailout funds would help free the bank from curbs on executive pay, as well as unwanted input from regulators about the bank, people familiar with the matter have said. The Federal Reserve this month asked Bank of America and eight lenders that received TARP to submit repayment plans. Bank of America’s plan will reduce income available to common shareholders in the fourth quarter by $4.1 billion, the company said. To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net

Read the full article →

Revisiting The Fed’s Bailout Of AIG And The Benefits For Goldman Sachs

November 22, 2009

A RAY of sunlight broke through the Washington fog last week when Neil M. Barofsky, special inspector general for the Troubled Asset Relief Program, published his office’s report on the government bailout last year of the American International Group.

Read the full article →

Bailout Hasn’t Checked Wall Street’s `Excessive’ Risk-Taking, Warren Says

November 19, 2009

By Lorraine Woellert Nov. 19 (Bloomberg) — Elizabeth Warren , chief watchdog of the government’s rescue of Wall Street, said the $700 billion bailout hasn’t stopped the “culture of excessive risk-taking” that led to the financial crisis. The Troubled Asset Relief Program also has “injected an unprecedented level of pricing distortions and moral hazard into the marketplace,” Warren said at a hearing today of the Congressional Oversight Panel on TARP, which she leads. “Uncertainty persists about the stability of our financial institutions and whether they can survive without the benefit of government assistance,” Warren said. To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net .

Read the full article →

Elizabeth Warren: Financial Rules ‘Literally Don’t Work Anymore,’ Regulations Should Be ‘Clear And Painful’

November 17, 2009

Elizabeth Warren, a professor at Harvard Law School who has more recently assumed the role of chairwoman of the Congressional Oversight Panel for the Troubled Asset Relief Program (TARP), sat down with The New Yorker ‘s James Surowiecki recently. The topic was Warren’s brainchild, the Consumer Financial Protection Agency Act, which is currently being debated in Congress. The agency would demand transparency in consumer financing, which Warren detailed in her essay, “Unsafe at Any Rate,” published in Democracy in the summer of 2007. She lays out how the agency would essentially apply the same logic that is applied to buying a toaster to financing a home or car: Consumers can enter the market to buy physical products confident that they won’t be tricked into buying exploding toasters and other unreasonably dangerous products … we need … a new regulatory regime, and even a new regulatory body, to protect consumers who use credit cards, home mortgages, car loans, and a host of other products. The time has come to put scaremongering to rest and to recognize that regulation can often support and advance efficient and more dynamic markets. Surowiecki pointed out that crotocs charge that consumer financial protection would restrict consumer credit too much, making it difficult for people to borrow money. Warren’s response: “the point is not to say, ‘Thou shalt not charge somebody more than X,’ which would have restrictive consequences. It’s to say, you’ve got to be really clear about it.” Warren added that last year’s historic bailout of the financial sector necessitated a different set of rules regulatory principles: “…The old rules of regulation just literally don’t work anymore. Because now we’re under this giant shadow of implicit and explicit government guarantees … we said in effect … we will throw as many taxpayers as we need to throw under the bus to keep your business functionally operational in the way that it was functionally operational before without a cost to you personally, and to your shareholders personally. That’s a whole new world.” According to Warren, financial institutions need a regulator regime that is both “clear and painful.” WATCH The New Yorker ‘s full interview with Warren: Get HuffPost Business On Facebook and Twitter !

Read the full article →

New York Fed Strategy Curbed Bank Concessions in AIG Rescue, Barofsky Says

November 16, 2009

By Hugh Son Nov. 16 (Bloomberg) — The Federal Reserve “severely limited” its ability to save taxpayer money during the bailout of American International Group Inc. by refusing to compel banks to accept concessions, said a chief Treasury watchdog. The Fed didn’t use its “considerable leverage” as regulator of several banks that bought protection from AIG to force them to take reduced payments on the derivatives, Neil Barofsky , special inspector for the Troubled Asset Relief Program, said today in a report. “These policy decisions came with a cost — they led directly to a negotiating strategy with the counterparties that even then New York Fed President Geithner acknowledged had little likelihood of success,” Barofsky said. Timothy Geithner , now Treasury secretary, was among officials who took over negotiations with the banks from AIG in November 2008. The Fed contacted eight of AIG’s biggest counterparties by telephone and attempted to negotiate discounts over two days, Barofsky said. UBS AG , the Zurich-based bank, was willing to make a 2 percent concession, he said. To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

Read the full article →

Iberiabank Buys Two U.S. Banks as Failure Tally Increases to 123 This Year

November 13, 2009

By Dakin Campbell Nov. 13 (Bloomberg) — Iberiabank Corp. , the Louisiana- based lender that exited a federal government assistance program this year, purchased two banks as the U.S. economy’s expansion fails to halt financial-firm collapses . Iberiabank added about $2.5 billion in deposits and more than 30 branches by acquiring Florida-based lenders Orion Bank and Century Bank, the company said today in a statement. The growth in southern Florida will boost earnings in coming years, Iberiabank said. Orion and Century “possess very strong deposit market- share positions in five very attractive Florida” areas, Iberiabank Chief Executive Officer Daryl Byrd said in the statement. Banks are failing at the fastest pace in 17 years even as the U.S. economy shows signs of pulling out of the recession. The world’s largest economy grew at a 3.5 percent annual pace in the third quarter, the first gain in more than a year, according to the Commerce Department. The number of failed banks reached 179 in 1992. Iberiabank rose 64 cents to $44.40 in regular Nasdaq trading today before the deals were announced. The Lafayette, Louisiana-based company has fallen 15 percent in the past year. Sunwest Bank of Tustin, California, also purchased a failed bank in its home state today, according to the Federal Deposit Insurance Corp., which was named receiver for all three transactions. Sunwest assumed the $130.9 million in deposits and $134.4 million in assets at Pacific Coast National Bank of San Clemente, California. Adding Bank Branches Iberiabank boosted its number of branches to 204 in 11 U.S. states with today’s acquisitions and added $3.1 billion in assets, the company said. It will share losses with the FDIC on abut $2.6 billion of assets. After today’s deals, the bank will remain well-capitalized by regulatory standards, it said. The acquisitions aren’t the first this year for the 122- year-old bank. The company took over CapitalSouth Bank and its $546 million of deposits in August. Earlier this year, Iberiabank paid back $90 million it had taken as part of the Troubled Asset Relief Program. The bank paid 46 cents on the dollar for the government’s warrants. The three failures cost the FDIC’s deposit-insurance fund more than $980 million. To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

Read the full article →

Video: Neil Barofsky Discusses TARP Transparency, Fraud Probes: Video

November 13, 2009

Nov. 13 (Bloomberg) — Neil Barofsky, the U.S. Troubled Asset Relief Program’s special inspector-general, talks with Bloomberg’s Matt Winkler about investigations into possible fraud and the importance of TARP transparency.¶ Barofsky spoke yesterday at the Bloomberg Washington Summit. (This is an excerpt of the full event. Source: Bloomberg)

Read the full article →

Feinberg Says He Is `Very Concerned’ Limits on Pay May Lead to Talent Loss

November 12, 2009

By Ian Katz Nov. 12 (Bloomberg) — Kenneth Feinberg , the Obama administration’s special master for executive compensation, said he is “very concerned” about the possibility his pay cuts may drive talent away from companies bailed out by U.S. taxpayers. “Maybe I’ve struck the right balance,” Feinberg said, referring to criticism that he has been too harsh and too easy on executives. “Hopefully some of this will percolate into the private sector, we’ll have to see,” he said today at a Washington conference held by Bloomberg Ventures, a unit of Bloomberg LP, parent of Bloomberg News. Feinberg has ordered pay cuts averaging 50 percent for the top 25 executives at Citigroup Inc. , Bank of America Corp., American International Group Inc. and four other companies that took U.S. bailout money. He will rule on pay structures covering the next 75 highest-paid employees at those firms by year-end. Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co.’s investment bank, all exempt from Feinberg’s oversight, will hand out a combined $29.7 billion in bonuses, according to analysts’ estimates. That’s up 60 percent from last year and more than the record $26.8 billion in 2007. The companies are the biggest banks to exit the Troubled Asset Relief Program. “I’ll measure my success, really, if these seven companies repay the taxpayer, that’s really the litmus test,” he said. Feinberg said AIG Chief Executive Officer Robert Benmosche , who took over the insurer in August, had “expressed his concern that compensation keep his people on board and that the company thrive.” Feinberg told reporters he has met with chief executive “one or two times over the last few months.” AIG’s Benmosche Benmosche yesterday wrote to AIG employees, saying he remains “totally committed” to leading the insurer after media reports suggested he told the board he may step down because U.S. pay caps hurt his ability to retain staff. Benmosche released the letter after the Wall Street Journal said Nov. 10 that he told directors last week he might resign because of U.S. limits on employee compensation. Benmosche, who came out of retirement to lead New York-based AIG, said he is “frustrated” with limits on what the company can pay its top 100 executives. To contact the reporter on this story: Ian Katz in Washington at ikatz2@bloomberg.net .

Read the full article →

Wall Street’s Record Bonuses Return: Analysts Predict $30 Billion In Bonuses At Big 3

November 9, 2009

Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co.’s investment bank, survivors of the worst financial crisis since the Great Depression, are set to pay record bonuses this year. The firms — the three biggest banks to exit the Troubled Asset Relief Program — will hand out $29.7 billion in bonuses, according to analysts’ estimates.

Read the full article →

Financial Firms’ Breakup Proposed in Bill by Independent Senator Sanders

November 6, 2009

By Alison Vekshin Nov. 6 (Bloomberg) — U.S. Senator Bernie Sanders unveiled legislation requiring Treasury Secretary Timothy Geithner to name banks whose collapse may shake the economy and break up the firms in a year, fueling efforts to end taxpayers bailouts. “If an institution is too big to fail, it is too big to exist,” said Sanders, a Vermont independent. “We should break them up so they are no longer in a position to bring down the entire economy .” The legislation would give Geithner 90 days to list the commercial and investment banks, hedge funds and insurance companies deemed “too big to fail.” Those firms would be broken up within a year, he said. Representative Paul Kanjorski , a Pennsylvania Democrat, is considering a measure in the House that would break up large financial firms. Lawmakers seeking to end taxpayer bailouts are considering measures aimed at limiting the size of companies that pose a risk to the financial system. Congress last year set up the $700 billion Troubled Asset Relief Program to shore up Citigroup Inc. , Bank of America Corp. and other firms. “We should end the concentration of ownership that has resulted in just four huge financial institutions holding half the mortgages in America, controlling two-thirds of the credit cards, and amassing 40 percent of all deposits,” Sanders said, citing Bank of America, Citigroup, JPMorgan Chase & Co. and Wells Fargo & Co. Kanjorski, chairman of a House Financial Services Committee panel on capital markets, this week said he was preparing a measure giving the government power to break apart large firms. ‘Gigantic Tsunamis’ “Nowhere in the world in the future will there be gigantic tsunamis coming out of nowhere and striking the entire world’s economy,” he said on Nov. 4. The Kanjorski measure would amend Chairman Barney Frank’s draft legislation that creates a regulator council to monitor the economy and firms for systemic risk. The committee today considered proposals to change Frank’s measure, and the chairman has said a final vote by members is scheduled Nov. 20. “Discussion of breaking up large financial institutions that pose systemic risk to the market is gaining traction on the Hill,” FBR Capital Markets analysts led by Paul Miller said in an investor note Nov. 4. “This legislation is currently in its infancy, and Congress has a number of difficult questions to answer before anything can move forward.” Federal Reserve Governor Daniel Tarullo said Oct. 21 the idea of breaking up large institutions is impractical, calling it “more a provocative idea than a proposal.” Instead, he said any firm that may pose a risk should be subject to stricter oversight. Former Fed Chairman Alan Greenspan on Oct. 15 said regulators should consider breaking up systemically risky firms. The New York Times reported the Sanders’ legislation earlier today. To contact the reporter on this story: Alison Vekshin in Washington at avekshin@bloomberg.net .

Read the full article →

U.S. Bancorp Acquires Nine Banks Seized by Regulators, Accelerating Growth

October 31, 2009

By Vivek Shankar and Dakin Campbell Oct. 31 (Bloomberg) — U.S. Bancorp , the Minneapolis-based lender expanding amid the financial crisis, agreed to acquire nine failed banks owned by closely held FBOP Corp. as regulators seize more companies hobbled by real-estate loans. FBOP’s banks in California, Texas, Arizona and Illinois were closed yesterday by regulators, raising the tally of bank failures to 115 this year, according to a statement from the Federal Deposit Insurance Corp. U.S. Bancorp agreed to assume all the deposits and essentially all the assets of the banks, the FDIC said. U.S. Bancorp Chief Executive Officer Richard Davis is adding branches, acquiring deposits and seeking to gain share in the mortgage market. The lender, which in June repaid $6.6 billion in funds from the Treasury’s Troubled Asset Relief Program, said earlier this month that third-quarter profit rose 4.7 percent on higher net interest margins and fees from mortgage banking and transactions at automated teller machines. “This transaction is consistent with the growth strategy that we have outlined many times in the past,” Rick Hartnack , vice chairman of consumer banking for U.S. Bancorp, said yesterday in a statement. “We also view this type of acquisition as an efficient means of leveraging U.S. Bank’s strong capital base.” U.S. Bancorp fell 99 cents, or 4 percent, to $23.22 yesterday in New York Stock Exchange composite trading , and has dropped 19 percent in the past 12 months. Earlier this month, the lender purchased Nevada bank branches and $800 million in deposits from BB&T Corp. One of the ‘Winners’ “U.S. Bancorp has clearly distinguished itself as one of the “winners” to emerge from the cycle — managing to stay profitable in each quarter, repay TARP and add to its normalized earnings per-share power through small fill-in bank and non-bank acquisitions,” John McDonald , an analyst at Sanford C. Bernstein & Co., said in a note to investors this month. In yesterday’s transactions, U.S. Bancorp picked up 153 branches with combined assets of $19.4 billion and deposits of $15.4 billion as of Sept. 30, according to the FDIC. Almost three-quarters of Oak Park, Illinois-based FBOP’s total loans were for construction and land development or commercial real estate, FDIC data show. Since 2000, FBOP had tripled its assets, according to the agency. FBOP wasn’t closed, the FDIC said. The nine banks will cost the FDIC’s deposit insurance fund a combined $2.5 billion, the agency said. The surge in failures depleted the agency’s reserves, prompting it to propose that banks prepay three years of premiums to raise $45 billion. Closed Banks The banks seized were: Bank USA, National Association of Phoenix; California National Bank of Los Angeles; San Diego National Bank; Pacific National Bank of San Francisco; Park National Bank of Chicago; Community Bank of Lemont, Illinois; North Houston Bank; Madisonville State Bank of Madisonville, Texas; and Citizens National Bank, of Teague, Texas. The FDIC included 416 banks on its confidential list of problem institutions as of the second quarter. The FDIC, the Federal Reserve and other bank regulators have released guidelines to banks on arranging modifications of commercial real estate loans with borrowers who show a willingness to repay the debt. To contact the reporters on this story: Vivek Shankar at vshankar3@bloomberg.net ; Dakin Campbell in San Francisco at dcampbell27@bloomberg.net .

Read the full article →

TARP Needs `New Direction’ as Markets Stabilize, Program Head Allison Says

October 22, 2009

By Robert Schmidt Oct. 22 (Bloomberg) — The Obama administration is setting a new course for the $700 billion financial rescue that will focus on small-business lending and aiding struggling homeowners, the U.S. Treasury’s bailout chief said. Herb Allison , the assistant secretary who oversees the Troubled Asset Relief Program, told a watchdog group that the Treasury is ending efforts that were used to stabilize larger banks and the automobile industry. Still, he cautioned that the financial system is “fragile” and said the government must be careful how it withdraws support. “It is time to set a new direction for the TARP, to account for the recent improvements in capital markets and to address lingering weaknesses in housing markets and small business lending,” Allison said in prepared remarks to the Congressional Oversight Panel in Washington. Allison’s testimony echoes comments earlier this week by Treasury Secretary Timothy Geithner as the administration tries to appease lawmakers and their constituents who are outraged by the bailout of Wall Street. While banks given taxpayer money have reported higher earnings and awarded executives millions of dollars in bonuses, joblessness is approaching 10 percent nationwide. In his testimony, Allison noted that “unemployment is too high and the equity markets remain volatile.” He said that while the government is looking for a “prudent exit” from the TARP, there must be a “sustainable supply of credit for consumers and families.” To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net .

Read the full article →

Treasury to Say Blackstone, Two Others Raised $1.94 Billion for Toxic Debt

October 5, 2009

By Robert Schmidt Oct. 5 (Bloomberg) — The U.S. Treasury Department will announce today that AllianceBernstein Holding LP, BlackRock Inc. and Wellington Management Co. have raised a combined $1.94 billion for their funds participating in the U.S. effort to buy toxic assets from banks. By getting that money from private investors, the three firms will qualify for federal funds under the Public Private Investment Program. The U.S. will match the funds each money manager raised, and provide debt financing that will give them a combined purchasing power of $7.74 billion. The program, known as PPIP, is a scaled-down effort to spur the purchase of devalued real estate loans and mortgage-backed securities that weighed on banks’ balance sheets and helped cause the financial crisis. The Treasury once envisioned the partnerships buying as much as $1 trillion of the assets. “The PPIP continues to grow,” Herb Allison , assistant Treasury secretary for financial stability, said in a statement. “Private capital is being drawn into the market for legacy securities, and taxpayers are being given a chance to share in the profits.” Last week, Invesco Ltd. and TCW Group Inc. became the first two companies in the PPIP to announce initial closings of their funds. Using the federal financing, the five partnerships will have about $12.3 billion in capital. The department has said it expects the rest of the partnerships to announce closings throughout October. After the initial closings, the funds will be able to have two more rounds of investment over the next six months that will be eligible for the Treasury’s matching equity and debt. Treasury Secretary Timothy Geithner has committed as much as $30 billion in funding for PPIP from the $700 billion Troubled Asset Relief Program enacted a year ago. To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net

Read the full article →

TARP Anniversary: By The Numbers

October 2, 2009

In recognition of TARP’s one-year anniversary, we’re putting up some quick numbers for the HuffPost community to digest. The Emergency Economic Stabilization Act of 2008 — the law that authorized the federal government to dole out $700 billion in taxpayer funds to banks, the auto industry and troubled insurer AIG — was passed by Congress, signed by former President George W. Bush, and went into effect on Oct. 3, 2008. Congress originally intended the money to be used to buy and insure troubled bank assets, like delinquent home mortgages. But over time, the Troubled Asset Relief Program took on another, broader mission: To pump massive amounts of money into companies to prevent them from collapsing in the face of future losses. Beneficiaries have included banks (like Citigroup and Bank of America), auto manufacturers (like General Motors and Chrysler), and mortgage servicers (like PennyMac Loan Services and Countrywide Home Loans Servicing). The following is a breakdown of where the money has gone, where it hasn’t, and what taxpayers have found themselves on the hook for in the year since Bush told the nation, at 2:03pm ET on Friday, Oct. 3, 2008, that the bill had just cleared Congress, and that he was going to sign it into law. $573.3 Billion — Total amount announced and/or distributed $72.8 Billion — Amount returned to taxpayers 12 — Number of programs 755 — Number of recipients 655 — Number of recipients that have yet to return bailout funds 40 — Recipients that have fully repaid taxpayers $389.6 Billion — Total amount outstanding (does not include announced funds that have yet to be distributed) $14.4 Billion — Revenue for government from investments (dividends, interest and stock warrants) 60 — Mortgage servicers getting taxpayer-provided incentives to modify home mortgage loans $22.3 Billion — Amount provided to mortgage servicers to induce mortgage modifications 2,965,980 — Estimated number of eligible mortgages under program 360,165 — Number of trial modifications started 12.1 Percent — Share of eligible mortgages that have been modified 83 — Number of TARP recipients in California (leads the nation) 0 — Number of TARP recipients in Montana and Vermont (the only states without TARP recipients) $23.7 Trillion — A worst-case scenario figure for the amount of money taxpayers could be forced to cough up if every program, in essence, fails. This eye-popping number should be taken with a grain of salt. For more, please read the following analysis from The New York Times ‘s Floyd Norris . Note: The figures were compiled from the following sources, using the most recent information available: U.S. Treasury Department , ProPublica , Office of the Special Inspector General for the Troubled Asset Relief Program Please help us mine for hidden nuggets. Visit the Treasury Department’s Web page that lists their reports. If you find something good, give us a shout at huffpostbiz [at] gmail [dot] com. Get HuffPost Business On Facebook and Twitter !

Read the full article →

Morgan Stanley’s Mack Proposes Single Regulator to Oversee Banks Worldwide

September 29, 2009

By Dakin Campbell Sept. 29 (Bloomberg) — Morgan Stanley Chief Executive Officer John Mack , who struggled to return the bank to profitability amid the financial crisis, said a regulator should oversee financial institutions worldwide. “A better system would be one uber-regulator,” Mack said today in an interview for Bloomberg Television’s “Conversations with Judy Woodruff ,” parts of which will air tomorrow. “We do need an overall systemic-risk management that everyone buys into. It’s not a U.S. systemic boundary — it’s a global systemic risk manager.” A global regulator would ensure that U.S. banks aren’t subject to tighter regulations than the rest of the world, Mack said. A push for regulation during the financial crisis has faded as the administration of President Barack Obama pursues other tasks, he said. Morgan Stanley and Goldman Sachs Group Inc. converted to bank holding companies one week after Lehman Brothers Holdings Inc. , Merrill Lynch & Co. and American International Group Inc. collapsed or were rescued in September of last year. Less than a month later, Morgan Stanley took $10 billion from the U.S. government as part of the Troubled Asset Relief Program. It has since paid back the government. The full interview will be shown on Bloomberg Television at 6 p.m. New York time on Oct. 2. To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

Read the full article →

Treasury Exit From Bailout Will `Vary by Program,’ TARP Chief Allison Says

September 24, 2009

By Robert Schmidt Sept. 24 (Bloomberg) — The U.S. is starting to curtail its $700 billion financial rescue because markets have stabilized, and the economy is “pointed in the right direction,” the chief of the Troubled Asset Relief Program said. Herb Allison , assistant Treasury secretary for financial stability, said that the economy is still too fragile to halt all government assistance. Still, in prepared remarks for an appearance before the Senate Banking Committee today, he said aid programs for financial firms, auto companies and the credit markets are winding down. “Because financial conditions have started to improve, Treasury has already begun the process of exiting from some emergency programs,” Allison said. “But how and when we exit will vary by program.” Allison said that the Public-Private Investment Program for taking toxic assets off banks’ balance sheets will proceed later this month “at a scale smaller than initially envisioned.” The government expects to put about $30 billion in equity and debt financing into the program, Allison told lawmakers. To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net .

Read the full article →

Citigroup’s Parsons Says Bank to Repay TARP Funds, Provide `Decent Return’

September 14, 2009

By Peter Cook and Bradley Keoun Sept. 14 (Bloomberg) — Citigroup Inc. will be able to repay funds from the U.S. Troubled Asset Relief Program and taxpayers will get “a decent return,” Chairman Richard Parsons said today. “I have every confidence that Citi will be able to exit the TARP program, and actually be able to give the American taxpayer a decent return,” Parsons said today in an interview in New York with Bloomberg Television. “I can’t put a timeframe on it, but I’m very confident we’ll get there.” Parsons commented before President Barack Obama’s speech in downtown Manhattan today on financial industry reforms. To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net

Read the full article →

SunTrust CEO Says Banks Face Further Losses as Commercial Property Falters

August 24, 2009

By Steve Matthews Aug. 24 (Bloomberg) — U.S. banks are likely to report further credit losses and the commercial real estate industry may falter through 2010, SunTrust Banks Inc. Chief Executive Officer James Wells III said. “The industry is a long way from declaring any sort of victory, especially regarding credit issues,” Wells today said in a speech to the Rotary Club of Atlanta. “This credit cycle has yet to play itself out. We do not expect things to improve for the banking industry in the very near future.” U.S. stocks erased their gains and the KBW Bank Index tumbled as much as 3.1 percent after Wells’ comments overshadowed a rally in commodity prices . Banks in the Standard & Poor’s 500 Index fell 1.7 percent. SunTrust, Georgia’s biggest bank by assets, has reported three straight quarterly losses, mostly from problem loans in its $16.3 billion home-equity and $8.2 billion construction loan units. The Atlanta-based bank ranks first in deposit market share in Georgia and third in Florida, states where unemployment rates and home foreclosures are among the highest in the U.S. Georgia leads the U.S. in bank closings this year, with 18 lenders, or 22 percent of all failed institutions. Wells said concerns over falling values of commercial real estate are “not without merit. Even if economy begins to improve modestly, commercial real estate conditions will probably deteriorate until 2010.” SunTrust should “compare favorably” to other banks in managing loans, he added. Wells said SunTrust may repurchase $4.9 billion in preferred shares sold through the U.S. Troubled Asset Relief Program “as soon as possible,” without being more specific. SunTrust boosted its capital by $2.3 billion last month after U.S. regulators told the company to add $2.2 billion in case of a more prolonged recession. SunTrust shares rose 12 cents to $22.76 at 2:20 p.m. in New York trading. They gained last week after analysts at JPMorgan Securities and Standard & Poor’s Corp. raised their price targets. To contact the reporter on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net .

Read the full article →

SunTrust CEO Says Banks Face Further Losses as Commercial Property Falters

August 24, 2009

By Steve Matthews Aug. 24 (Bloomberg) — U.S. banks are likely to report further credit losses and the commercial real estate industry may falter through 2010, SunTrust Banks Inc. Chief Executive Officer James Wells III said. “The industry is a long way from declaring any sort of victory, especially regarding credit issues,” Wells today said in a speech to the Rotary Club of Atlanta. “This credit cycle has yet to play itself out. We do not expect things to improve for the banking industry in the very near future.” U.S. stocks erased their gains and the KBW Bank Index tumbled as much as 3.1 percent after Wells’ comments overshadowed a rally in commodity prices . Banks in the Standard & Poor’s 500 Index fell 1.7 percent. SunTrust, Georgia’s biggest bank by assets, has reported three straight quarterly losses, mostly from problem loans in its $16.3 billion home-equity and $8.2 billion construction loan units. The Atlanta-based bank ranks first in deposit market share in Georgia and third in Florida, states where unemployment rates and home foreclosures are among the highest in the U.S. Georgia leads the U.S. in bank closings this year, with 18 lenders, or 22 percent of all failed institutions. Wells said concerns over falling values of commercial real estate are “not without merit. Even if economy begins to improve modestly, commercial real estate conditions will probably deteriorate until 2010.” SunTrust should “compare favorably” to other banks in managing loans, he added. Wells said SunTrust may repurchase $4.9 billion in preferred shares sold through the U.S. Troubled Asset Relief Program “as soon as possible,” without being more specific. SunTrust boosted its capital by $2.3 billion last month after U.S. regulators told the company to add $2.2 billion in case of a more prolonged recession. SunTrust shares rose 12 cents to $22.76 at 2:20 p.m. in New York trading. They gained last week after analysts at JPMorgan Securities and Standard & Poor’s Corp. raised their price targets. To contact the reporter on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net .

Read the full article →

Leveraged Loans End Six-Week Rally as Investors Pull Out, Defaults Surge

August 21, 2009

By Emre Peker Aug. 21 (Bloomberg) — Leveraged-loan prices dropped for the first time in six weeks amid growing investor concern that a rally is faltering as corporate-debt defaults climb to a record. The Standard & Poor’s/LSTA 100 Leveraged Loan index, which rallied 34 percent this year, fell 0.74 points since Aug. 14 to 83.10 points, the lowest level in a month. Reader’s Digest Association Inc. , a member of the index tracking the most actively traded loans, received approval yesterday from bank lenders to restructure under a so-called prepackaged bankruptcy. Buoyed by President Barack Obama ’s stimulus plan and Federal Reserve actions to spur lending, investors entered the speculative-grade loan market betting that default rates would be lower than the 40 percent credit prices implied, said Mark Pibl , managing director of leveraged loans and high-yield debt at NewOak Capital LLC . They’re pulling out to secure profits, driving down prices as loan-market volatility reached a record in July and default rates soar toward 12.7 percent. “They had a one-year performance in a three-month window,” Pibl said in a telephone interview from his office in New York. “What I would do is take all my gains, close out my book and go fishing for the rest of the year, and not risk it.” The S&P/LSTA 100 had a total return of 41 percent this year, after losing 28 percent in 2008. Junk-rated bonds have returned 39 percent in 2009 versus a 26 percent loss last year, according to Merrill Lynch & Co.’s U.S. High Yield Master II Index. During the same periods, the S&P 500 gained 13 percent and lost 37 percent. Record Volatility High-yield, high-risk loans, rated below Baa3 by Moody’s Investors Service and less than BBB- by S&P, had a record 6.78 percent average volatility in monthly returns in July, according to an Aug. 11 presentation by the Loan Syndications and Trading Association , the U.S. market’s trade group. U.S. speculative-grade default rates for a 12-month trailing period climbed to 11.5 percent in July and will reach 12.7 percent in the fourth quarter, Moody’s said in an Aug. 6 report. The leveraged-loan default rate is 8.4 percent, according to the report. Obama implemented a $787 billion economic recovery effort that includes tax cuts, infrastructure spending and a goal to create or save 3.5 million jobs. The Fed cut its benchmark lending rate to a record-low range and bought Treasuries and mortgage bonds to help reduce borrowing costs. The government has pledged a potential $23.7 trillion since 2007 to support programs aiming to ease the financial crisis, according to Neil Barofsky , special inspector general for the Treasury’s Troubled Asset Relief Program. Reader’s Digest U.S. leading economic indicators rose 0.6 percent in July, the fourth consecutive increase, according to New York-based Conference Board, signaling that the worst recession in seven decades is almost over. Reader’s Digest, the Pleasantville, New York-based publisher saddled with debt after its $2.35 billion takeover by a Ripplewood Holdings LLC-led group, is preparing to follow two over-levered S&P/LSTA 100 companies into Chapter 11 bankruptcy protection: Tribune Co. and Lyondell Chemical Co. Lenders representing almost 80 percent of the dollar value of outstanding Reader’s Digest loans approved a plan yesterday to reduce the company’s total debt by 75 percent to $550 million from about $2.2 billion, according to a statement distributed by PR Newswire. In return, they will get ownership of the company, publisher of the world’s most-read magazine. High-yield companies didn’t sell any bonds this week, according to data compiled by Bloomberg, depriving the loan market of a primary source of liquidity. Proceeds from 55 percent of note sales in 2009 were used to refinance loans, Citigroup Inc. analysts in New York wrote in an Aug. 7 report. Extending Maturities At least four companies led by West Corp. extended loan maturities at higher rates this week, Bloomberg data show. The Omaha, Nebraska-based call-center operator, taken private by Thomas H. Lee Partners LP and Quadrangle Group LLC in a $3.7 billion buyout in 2006, yesterday extended $1 billion of its existing term loans to July 2016 from October 2013. West Corp. said it boosted the interest rate by 150 basis points to 387.5 basis points more than the London interbank offered rate. Three-month Libor, a borrowing benchmark , was set at 39.31 basis points today. A basis point is 0.01 percentage point. To contact the reporter on this story: Emre Peker in New York at epeker2@bloomberg.net .

Read the full article →

Citigroup’s Asset Guarantees to Be Audited by TARP

August 19, 2009

Citigroup Inc.’s $301 billion of federal asset guarantees, extended by the U.S. last year to help save the bank from collapse, will be audited to calculate losses and determine whether taxpayers got a fair deal. Neil Barofsky, inspector general of the U.S. Treasury Department’s $700 billion Troubled Asset Relief Program, agreed in an Aug. 3 letter to audit the program after a request by U.S. Representative Alan Grayson. Barofsky will examine why the guarantees were given, how they were structured and whether the bank’s risk controls are adequate to prevent government losses.

Read the full article →

Fed Extends TALF Program to Bolster Lending for Commercial Property, Autos

August 17, 2009

By Scott Lanman Aug. 17 (Bloomberg) — The Federal Reserve extended by three to six months an emergency program aimed at restarting credit markets, a move that may cushion the commercial real- estate industry from rising defaults and falling prices. The Term Asset-Backed Securities Loan Facility, with a capacity of as much as $1 trillion, will expire June 30 for newly issued commercial mortgage-backed securities, instead of Dec. 31, the Fed and U.S. Treasury said today in a statement in Washington. For other asset-backed securities and CMBS sold before Jan. 1, the plan was extended three months to March 31. Property values have fallen 35 percent since peaking in October 2007, according to Moody’s Investors Service. That’s making it tough for owners to refinance almost $165 billion of mortgages for skyscrapers, shopping malls and hotels this year. The Fed is “paying very close attention,” Chairman Ben S. Bernanke said in congressional testimony last month. While financial-market conditions “have improved considerably in recent months,” the markets for ABS and CMBS “are still impaired and seem likely to remain so for some time,” the Fed and Treasury said. The central bank said it doesn’t intend to make other types of collateral eligible for the program, while not ruling out an expansion. The Fed also left the door open to prolonging the program beyond the new expiration dates, saying it “will consider in the future whether unusual and exigent circumstances warrant a further extension.” Restart Market The Fed began the so-called TALF in March to restart the market for securities backed by auto, credit-card and education loans. In June, the Fed expanded the program to cover as much as $100 billion in loans to support commercial mortgage-backed securities. Under the plan, the Fed lends to investors to purchase new asset-backed securities as well as commercial real-estate debt. TALF loans have helped reduce borrowing costs in some markets. The gap, or spread, on top-rated securities backed by consumer loans relative to benchmark interest rates has fallen as much as 2.15 percentage points to 0.60 percentage point since the TALF started in March, JPMorgan Chase & Co. data show. Spread Plunged Since March, the spread on AAA debt backed by commercial real estate has plunged 7.2 percentage points to 4.6 percentage points more than U.S. Treasuries, according to Barclays Capital. As of Aug. 12, the Fed’s loans under the program totaled $29.6 billion. The central bank gave the TALF an initial capacity of $200 billion, backed by $20 billion of funds from the Treasury’s Troubled Asset Relief Program to shield the Fed from losses. In February, the Fed and Treasury said the TALF could grow to as much as $1 trillion in loans. The commercial real-estate industry had asked for an extension of the TALF deadline, saying the program needed more time to get going. The lag time of three to four months to package loans into mortgage-backed securities means that September or October would be the effective end date if the TALF expired in December, according to Jeffrey DeBoer , president of the Real Estate Roundtable, a Washington-based trade group. Also, 41 House members — including Financial Services Committee Chairman Barney Frank , a Massachusetts Democrat, and Carolyn Maloney , a New York Democrat who heads the Joint Economic Committee — signed a July 31 letter to Bernanke seeking a one-year extension through December 2010 and asking for a decision by mid-August. To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net .

Read the full article →

TARP Oversight Panel Says Smaller U.S. Banks May Need to Replenish Capital

August 11, 2009

By Rebecca Christie Aug. 11 (Bloomberg) — Smaller U.S. banks may need $12 billion to $14 billion in additional capital to cope with troubled loans still on their books, the Congressional Oversight Panel said today in a monthly report. The panel, which reports to lawmakers and was created to monitor the $700 billion Troubled Asset Relief Program, said the biggest U.S. banks appear prepared to handle more loan losses, particularly the 19 banks that regulators put through stress tests earlier this year. Banks with assets of $600 million to $1 billion may face bigger challenges, the panel said. Banks of that size “will need to raise significantly more capital, as the estimated losses will outstrip the projected revenue and reserves,” the report said, citing its own loan analysis. The panel is led by Elizabeth Warren , a law professor at Harvard University. The report said the Treasury and other regulators should do more to help smaller banks deal with whole loans on their books. The Treasury and the Federal Deposit Insurance Corp. program have shelved the Legacy Loans Program, intended to use a combination of public and private funds to buy loans from banks. “Failure to start the Legacy Loan Program raises concerns about Treasury’s strategy,” the panel’s report said. Representative Jeb Hensarling , a Texas Republican who also is a member of the panel, dissented from the report’s findings. He said the loss estimates may not be accurate and shouldn’t be used to justify another round of government assistance. Toxic Assets “It is possible that the toxic-asset market is already beginning to heal itself and the intervention proposed by the panel could be inappropriate — if not counterproductive,” Hensarling said. “I am not necessarily discouraged by the results for the smaller banks since it is entirely possible that the input assumptions used by the panel were excessively pessimistic.” Treasury Secretary Timothy Geithner pledged that the department remains a “hands-off” investor in banks and auto companies, according to a letter released as part of today’s report. “With respect to Treasury’s relationship with financial institutions in which it holds a financial interest, Treasury is a reluctant shareholder,” Geithner said in a July 21 letter. “The government will not interfere with or exert control over day-to-day company operations and, in the event the government obtains ownership interests, it will only vote on core government issues.” The Treasury also told the panel it had no plans to extend a guarantee program for money market mutual funds that is scheduled to expire on Sept. 18. “The guarantee agreements do not provide for further extension of the guarantees,” the Treasury said in its comments. To contact the reporters on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net ;

Read the full article →

TARP Watchdog Raids 2 Banks

August 3, 2009

Federal agents in Florida on Monday raided two banks that last week scuttled a deal that would have qualified one of them for federal bailout funds. The agents were acting on search warrants issued by the office of Neil Barofsky, the special inspector general for the Troubled Asset Relief Program.

Read the full article →

Colonial Cites `Doubt’ It Can Survive After Fifth Straight Quarterly Loss

August 1, 2009

By David Mildenberg Aug.

Read the full article →

GM, Chrysler Boards to Operate Without Government Restrictions, Bloom Says

July 27, 2009

By Alex Ortolani and Doron Levin July 27 (Bloomberg) — General Motors Co. and Chrysler Group LLC’s boards will operate without restrictions by the U.S. government, Ron Bloom , head of the federal auto task force, said in a hearing. Directors won’t have to “check” before making decisions, Bloom, who took over from Steven Rattner two weeks ago, told a congressionally appointed panel in Detroit today.

Read the full article →

Bailout May Cost $23.7 Trillion: Barofsky

July 20, 2009

july 20 (Bloomberg) — U.S. taxpayers may be on the hook for as much as $23.7 trillion to bolster the economy and bail out financial companies, said Neil Barofsky, special inspector general for the Treasury’s Troubled Asset Relief Program

Read the full article →

TARP Inspector Urges Treasury’s Geithner to Track Banks’ Aid More Closely

July 19, 2009

By Rebecca Christie July 19 (Bloomberg) — Treasury Secretary Timothy Geithner should press banks for more information on how they use the more than $200 billion the government has pumped into U.S.

Read the full article →

Next Entries →