Tag: Geithner

Final sale of AIG shares brings taxpayer profit to $22.7 Billion

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American International Group (AIG)’s rescue has come to an end with the U.S. raising $7.6 billion in its final offering of the insurer’s shares, four years after a bailout that fueled resentment against Wall Street…

The Treasury Department is selling 234.2 million shares at $32.50 each in the sixth offering since the 2008 rescue. The proceeds boost the U.S. profit on the rescue that began in 2008 to $22.7 billion, according to a statement…from the Treasury…

The U.S. took over the New York-based company in a 2008 bailout that swelled to $182.3 billion to save the global economy from collapse. AIG has sold more than $65 billion of assets to help repay the rescue, while Chief Executive Officer Robert Benmosche scaled back from the derivative bets that almost destroyed the firm. He’s focusing on property-casualty coverage globally and life and retirement products in the U.S.

“Treasury can claim victory, AIG can be free of TARP, and AIG will begin to trade on its merits,” said Josh Stirling, an analyst at Sanford C. Bernstein & Co…

The U.S. owned as much as 92 percent of AIG after saving a firm that insured 100,000 municipalities, retirement plans and companies and was counterparty to some of the biggest banks. Federal Reserve Chairman Ben S. Bernanke has said saving AIG after it was hobbled by mortgage-related bets made him “more angry” than any other measure the government undertook to counter the deepest financial crisis since the Great Depression.

“There weren’t a lot of options, let’s face it,” Robert Willumstad, CEO of New York-based AIG when the firm was rescued, said in an interview last month. “It was controversial, it was a big risk, but one would argue today that the government got its money back and a healthy profit.”

I couldn’t agree more. Though I’ve been of two minds throughout the whole TARP program – the challenging part being the deal saving the collective butt of banks that made foolish bets based on fraudulent information – my confidence in Bernanke and Geithner getting taxpayer money back was never challenged by the realities of the financial marketplace. In truth, a steady profit was realized from each of the investments in major banks and financial houses.

Not much further to go to retire the remainders of the program. Establishing wind-down procedures for some of the smaller banks still dependent on local and regional markets – which haven’t matched the gradual recovery of our national economy. This, too, shall pass.

Childish Republican games over debt ceiling cost U.S Treasury, US taxpayers – $1.3 billion

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The bitter partisan fight over raising the U.S. debt ceiling last year pushed up the U.S. Treasury’s borrowing costs by $1.3 billion, congressional auditors said on Monday…

Delays in raising the debt limit created uncertainty in the Treasury market and led to higher borrowing costs, according to a report from the Government Accountability Office (GAO), an investigative arm of Congress.

In addition to the $1.3 trillion in higher interest rates for fiscal 2011, GAO said multi-year Treasury securities issued last year also will continue to accrue higher interest costs for years to come.

Republican lawmakers had refused to raise the debt ceiling — the legal amount the U.S. Treasury is allowed to borrow — without concessions from Democrats to reduce massive budget deficits, which have exceeded $1 trillion since President Barack Obama took office.

The fight eventually brought the U.S. government to the brink of a debt default and cost the United States its top-tier, triple-A credit rating from Standard and Poor’s…

The U.S. Treasury is on track to hit the $16.4 trillion debt ceiling before the end of the year, though emergency tools will allow the department to push the deadline into 2013…Here we go, again!

I dearly wish there was some administrative way to tie Congressional paychecks to failures like this. I realize there always are sufficient dimwit chickenhawks in government to shove our nation into a war with anyone. Congressional ignoranuses are always willing and able to allow our idiot invasions to proceed with no provision made for the cost of invasion, the cost of processing one of our wars to its bitter end, the cost of trying to rebuild our target nation back to a semblance of life before The Leader of the Free World decided to stage-manage their lives. But, the money chickens always come home to roost.

Yes, their paychecks don’t matter as much as the payoffs, kickbacks, silly jobs as imitation lobbyists provided to aid corporate crooks in manipulating tax law and subsidies. But, cutting one small corner from their pants pockets would be a positive start.

Sorting out debt limits is dependent on how and when – more than how much. Trying to drag our economy back from the most crushing disaster since World War 2 demands thought, enterprise and honesty. What we’re getting from Congressional Republicans and the Kool Aid Party is hypocrisy grounded in their contempt for people who work for a living.

Exit interview with Sheila Bair as she prepares to leave the FDIC

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‘They should have let Bear Stearns fail,” Sheila Bair said.

It was midmorning on a crisp June day, and Bair, the 57-year-old outgoing chairwoman of the Federal Deposit Insurance Corporation — the federal agency that insures bank deposits and winds down failing banks — was sitting on a couch, sipping a Starbucks latte. We were in the first hour of several lengthy on-the-record interviews. She seemed ever-so-slightly nervous.

Long viewed as a bureaucratic backwater, the F.D.I.C. has had a tumultuous five years while being transformed under Bair’s stewardship. Not long after she took charge in June 2006, Bair began sounding the alarm about the dangers posed by the explosive growth of subprime mortgages, which she feared would not only ravage neighborhoods when homeowners began to default — as they inevitably did — but also wreak havoc on the banking system. The F.D.I.C. was the only bank regulator in Washington to do so.

During the financial crisis of 2008, Bair insisted that she and her agency have a seat at the table, where she worked — and fought — with Henry Paulson, then the treasury secretary, and Timothy Geithner, the president of the New York Federal Reserve, as they tried to cobble together solutions that would keep the financial system from going over a cliff. She and the F.D.I.C. managed a number of huge failing institutions during the crisis, including IndyMac, Wachovia and Washington Mutual. She was a key player in shaping the Dodd-Frank reform law, especially the part that seeks to forestall future bailouts.

Since the law passed, she has made an immense effort to convince Wall Street and the country that the nation’s giant banks — the same ones that required bailouts in 2008 and became known as “too big to fail” institutions — will never again be bailed out, thanks in part to new powers at the F.D.I.C.

Just a few months ago, she went so far as to send a letter to Standard & Poor’s, the credit-ratings agency, suggesting that its ratings of the big banks were too high because they reflected an expectation of government support. If a too-big-to-fail bank got into trouble, she wrote, the F.D.I.C. would wind it down, not bail it out…

She didn’t spend a lot of time fretting over bank profitability; if banks had to become less profitable, postcrisis, in order to reduce the threat they posed to the system, so be it. (“Our job is to protect bank customers, not banks,” she told me.) And she was a fierce, and often lonely, proponent of widespread mortgage modification, for reasons both compassionate (to help struggling homeowners stay in their homes) and economic (fewer foreclosures would help the troubled housing market recover more quickly).

I’m just giving you a taste of the beginning of this interview. It’s quite long, detailed, and near as I can tell an accurate picture of the individual who acted throughout the crisis of the Great Recession to defend local community banks, the historic integrity of banking regulation – how this was corrupted and almost destroyed along with our national economy – and as an aside, a reminder to younger folks who know only the deceit and corruption of Bush, Cheney, the racism of Nixonian Republicans, the nutballs of the Kool Aid Party – what a traditional American conservative used to sound like.

AIG and government agree TARP exit plan

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Daylife/Reuters pictures used by permission

The American International Group has reached an agreement in principle to repay the Federal Reserve Bank of New York for the company’s 2008 rescue, and to gradually return the ownership of its stock to the public markets.

Robert Benmosche, chief executive of A.I.G., said the plan would allow the company to “remain on track to emerge with one of the largest, most diversified property and casualty companies in the world.”

The company and its rescuers in the federal government have been working intently in recent weeks to complete such a plan before the expiration of the Treasury’s Troubled Asset Relief Program on Oct. 3, and before the Fed’s bailout loan came due. The original terms called for A.I.G. to pay back the Fed within two years.

Under the plan, the Treasury Department will, for a time, own 92.1 percent of A.I.G. before it begins to sell its shares…

The company said it would use its own resources to pay back the $20 billion in loans, including the proceeds it expects to receive from the sale of a big overseas life insurance unit to MetLife. That sale, announced in March, should yield $6.8 billion in cash and $8.7 billion in MetLife stock, and close by the end of the year.

Still more money to repay the Fed is expected to come from an initial public offering of a second big foreign life insurance business on the Hong Kong exchange. The offering was delayed for several months while A.I.G. tried unsuccessfully to sell the unit to a British company, but A.I.G. now says the Hong Kong offering is back on. It did not provide a time frame.

In addition, the Treasury has agreed to help the Fed sever its ties with A.I.G., by providing the means for the company to redeem most of the Fed’s $26 billion in preferred interests. That money will come from the unused portion of an emergency assistance package that the Treasury made available to A.I.G. as its troubles reached a peak in early 2009…

Taking all of those steps will end the Fed’s role as a lender to A.I.G. and an investor in the company, a role that has never fit in well with the Fed’s duties as a central bank. The Treasury will come out of the transaction with a larger preferred stake in A.I.G., but expects the company to keep taking steps to pay it down, according to the new agreement in principle.

The range of fools, from hypocrites and sophists in the Republican Party to the just-plain-ignorant tea baggers who persist in whining about TARP confound reason. Whether your concern is history or economics, the truth remains self-evident. Not only did the TARP program keep a significant chunk of our economy from collapsing in the wake of the meltdown resulting from a decade or more of Free Market corruption, our Treasury and taxpayers continue to realize a profit from the payback.

It ain’t all over. But, the process is advanced enough that even the political losers and their obedient grunts should consider climbing on board and joining the move towards the future – instead of trying to turn back both time and progress.

“If he was a Republican, we would hear a never-ending drumbeat of news stories about markets voting in favor of the president”

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Daylife/Getty Images used by permission

The political consensus may be that President Barack Obama’s handling of the economy has been weak. The judgment of money in all its forms has been overwhelmingly positive, and that may be the more lasting appraisal.

One year after U.S stocks hit their post-financial-crisis low on March 9, 2009, the benchmark Standard & Poor’s 500 Index has risen more than 68 percent, and it’s up more than 41 percent since Obama took office. Credit spreads have narrowed. Commodity prices have surged. Housing prices have stabilized.

“We’ve had a phenomenal run in asset classes across the board,” said Dan Greenhaus, chief economic strategist for Miller Tabak & Co. in New York. “If he was a Republican, we would hear a never-ending drumbeat of news stories about markets voting in favor of the president.”

The economy has also strengthened beyond expectations at the time Obama took office. The gross domestic product grew at a 5.9 percent annual pace in the fourth quarter, compared with a median forecast of 2.0 percent in a Bloomberg survey of economists a week before Obama’s Jan. 20, 2009, inauguration. The median forecast for GDP growth this year is 3.0 percent, according to Bloomberg’s February survey of economists, versus 2.1 percent for 2010 in the survey taken 13 months earlier.

“You have to give them — along with the Federal Reserve – – a lot of credit,” said Joseph Carson, director of economic research at AllianceBernstein LP in New York. “A year ago, there was panic, as well as concern. And a lot of the expectations were not only that we were going to have declines in activity but they would stretch all the way to 2010, if not 2011.”

Since then, monthly job losses have abated, from 779,000 during the month Obama took office to 36,000 last month. Corporate profits have grown; among 491 companies in the S&P 500 that reported fourth-quarter earnings, profits rose 180 percent from a year ago, according to Bloomberg data. Durable goods orders in January were up 9.3 percent from a year earlier. Inflation is tame, and long-term interest rates remain low.

So, who do American voters listen to? Dipshit Democrats worried about women having the right to choose? Republicans so mired in the 19th Century they’re still not certain the Bill of Rights was a good idea?

And who carries the facts of the turnaround to the people? TV talking heads who have a vested interest in news as entertainment, who waste more time on Balloon Boy or Republican mistresses – than legitimate news from main street job fairs?

Wall Street investors have a bit of an edge on real numbers – because they directly affect their income. Even then, most economic news sources still dedicate a significant portion of their air time to naysayers who would have people investing in buggy whips and Halliburton.