Chaos at AIG

[Naked Gents Rut]

http://www.nypress.com/article-19271-flat-n-all-that.html

[Naked Gents Rut]

And Taibbi's greatest achievement...

http://exiledonline.com/old-exile/113/lead.php

[TCO]

I kind of like some of the anarchist anger agains the GS bankers. Let's throw them out of windows in Manhatten. If it's really a crisis, I want some skyscraper dives. And Bush and Paulson and Cantor and 'bama need to take the plunge too. Big Ben also. Be his finest hour.

[TCO]

NY Press article quite fun. Wish you quoted a little.

Skimmed sperm article and had no interest.

[Naked Gents Rut]

Skimmed sperm article and had no interest.

Liar. Everyone who's read your gymnastics threads knows all about your interest in sperm.

[TCO]

You can do better. It's early. Go for the balls like Kitty and my mom and make fun of me for not being married.

[The Mad Monk]

Zeal for battle over bonuses waning in Washington


Email this Story

Mar 26, 4:04 PM (ET)

By ANNE FLAHERTY


WASHINGTON (AP) - From the White House through the halls of Congress, Washington is losing its zeal for an all-out fight over hefty executive bonuses, now that it wants the financial companies it blames for the collapse of the U.S. economy to help clean up the mess.

The House Financial Services Committee on Thursday adopted a milder alternative to a bill passed last week that would have taxed away 90 percent of employee bonuses from companies getting federal bailout money. The new legislation would let bailed-out companies pay bonuses as long as the government determines the compensation is not "unreasonable or excessive."

Just what is unreasonable or excessive would be determined by financial regulators and the Treasury Department, where Secretary Timothy Geithner set off a public furor by not blocking $165 million in AIG payments to its financial products executives and traders on March 15.

The Senate, meanwhile, has put on hold a bill that Democrats unsuccessfully tried to advance last week. It would tax away about 70 percent of the employee bonuses at AIG and other companies getting more than $100 million in bailout money.

Since last fall, AIG has received or been promised more than $182 billion of government money, much of it funneled to investors and foreign banks who held high-odds bets with the company on the U.S. housing market collapsing.

The about-face came as it become clear that financial institutions would not partner with the government on new efforts to restore vital credit flows to businesses and consumers if it meant later being demonized for its use of taxpayer dollars.

Geithner proposed on Monday a new government program that would rely on the help of private investors to buy up to a $1 trillion of bad debt, or "toxic assets," sitting on the books of major banks, giving them more ability and incentive to lend.

"I don't want people to think that businesses and people who have worked hard, performed well and received bonuses are going to be painted with the AIG brush," House Speaker Nancy Pelosi, D-Calif., told reporters Thursday.

The gentler approach is in stark contrast to the anti-Wall Street rhetoric that consumed Congress and the White House last week after the bonus payments by AIG, the prime example of a company deemed "too big to fail" because its collapse could create a worldwide run on banks and other financial institutions.

The bonus payouts ignited populist anger that four days later prompted the House to vote 328-93 to tax them away and Obama to declare on Jay Leno's late-night talk show the same day that he was "stunned" and would "do everything we can to get those bonuses back"

By the next day, the Senate's bonus tax plan had stalled.

Obama then warned the public against vilifying investors and entrepreneurs who are needed to keep the economy alive. Geithner said industry's help would specifically be needed to buy up the billions of dollars of sour mortgage securities.

"We cannot solve this crisis without making it possible for investors to take risks," Geithner wrote in an editorial published in The Wall Street Journal.

Now, Democrats are walking a fine line. For Geithner's bank-rescue plan to work, private investors will have to trust that the government will keep up its end of the bargain. But as the flap over the AIG bonuses showed, Congress will intervene if it thinks the rules are unfair.

"Private investors need certainty that Washington will not change the rules of the game while the game is being played," said Rep. Spencer Bachus of Alabama, the top Republican on the House Financial Services Committee, who opposes the latest committee proposal.

The latest House bill, sponsored by Democratic Reps. Alan Grayson of Florida and Jim Himes of Connecticut, directs Geithner to take into account an employee's performance, as well as the stability of a financial institution, before bonuses are paid.

"We need regulation that aligns the public's interest with the health of these institutions," said Himes.

In a sort of olive branch to industry, the committee included an exemption to the rules for firms willing to participate in Geithner's investment program involving "toxic assets."

"We do want to encourage wide participation," said Rep. Barney Frank, D-Mass., the panel's chairman.

http://apnews.myway.com/article/20090326/D975TVN80.html

Losers.

[Darius871]

In other words, you think that the public DOESN'T want to be repaid immediately.

And I think that you're absolutely wrong on that.

They could barely be convinced to give the banks money when the administration AND the banks were both in favour of doing it. Now when the banks say they don't need the money you think the will will be there to say no to repayment?

1) I didn't say they don't want it paid back immediately, just that they don't want it paid back irresponsibly (or what the nanny state tells them is irresponsibly).

2) Even supposing #1 is sorely mistaken, I don't have much faith that Congress would aggressively respond to public concerns in that regard if there is an argument on the table that for the sake of system-wide stability a thorough completion of stress-testing (which has a timeframe that is not only indefinite but "sworn to secrecy" as the CCO put it to me) and explicit regulatory clean bill of health must be a prerequisite of any voluntary returns, much less that secretive Treasury/Fed officials would be so responsive. Don't forget that polls showed majority opposition to the initial TARP bill also, but Congress nonetheless bit the bullet and found systemic risk more important than Joe Schlub's uninformed mob anger. They could make the same trade-off tomorrow and the next day and the next day.

Don't be silly. All the healthy banks are going to repay the money early, as well as some of the not-so-healthy ones (the ones that, if TARP is a good idea, we WANT to have the money). Only desperately ill ones will keep the cash.

Of course healthy banks will repay early, i.e. not only earlier than less healthy banks but also earlier than the government expected; I never actually denied that. What disturbs me is instead the question of how early, and the fact that repayment is being impeded at all.

Darius, those articles don't say anything like what you've claimed they say.

The first I just googled quick and it didn't have the specific comments I recalled, but it at least makes clear that initially "U.S. Bank was told, not asked, to participate." More to my point, at about the same time he clearly said "the Minneapolis-based company must first undergo a federal 'stress test,' but it will then seek to return $6.6 billion in TARP funds it had received... 'Following those outcomes, it is my intent that, given permission...that this company would like to emerge from the TARP assets as soon as possible'" (emphasis added).

As for the second article, "Davis said he wants to pay back the $6.6 billion capital investment from taxpayers, if federal officials will allow it" (emphasis added) at least implies what I've been saying, namely 1) intent to repay ASAP as the taxpayers would like, but 2) being legally barred from repaying without Uncle Sam's say-so.

The same brick wall was said of TCF's firm and publicized intent to return TARP money: "TCF Financial Corp. has moved to pay back the federal government the hundreds of millions of TARP bailout funds it received in November, calling its participation in the banking-assistance program 'a competitive disadvantage' ... 'We believe participation in TARP has created a competitive disadvantage for TCF and it is in the best interest of our shareholders to redeem these shares.' ... The payback still needs government approval" (emphasis added). TCF's effort was even more forcefully outspoken than Davis' and was also a month ago, but lo and behold, TCF is still holding the hot potato as we speak. Why do you think that is? The only possible explanations are that regulators either A) denied or B) delayed the request; in either case, the taxpayer's will in your view - "immediate" payment - has apparently fallen on deaf ears, which is precisely my point.

Anyway, I admit Davis' public comments weren't quite as forceful as my posts made them seem, but my interpretation's colored by some inside information, namely what that CCO had to say about the regulators' total control over repayment absent certain prerequisites which are themselves under the regulators' total control. Behind the scenes it's a lot more frustrating than even Davis lets on.

Lo and behold, another bank CEO comes back this week to complain that he literally tried - past tense - to pay back TARP money and was rebuffed. Where's the outrage? You had me thinking there'd be torches and pitchforks in the streets over refusal to accept their own tax dollars, but lo and behold, the story's only being copy-pasted from WSJ op-ed hearsay to vapid right-wing blogs to no avail, where it will surely remain because nobody gives a ****, as I predicted:

Obama Wants to Control the Banks
There's a reason he refuses to accept repayment of TARP money

By STUART VARNEY
APRIL 4, 2009

...

Under the Bush team a prominent and profitable bank, under threat of a damaging public audit, was forced to accept less than $1 billion of TARP money. The government insisted on buying a new class of preferred stock which gave it a tiny, minority position. The money flowed to the bank. Arguably, back then, the Bush administration was acting for purely economic reasons. It wanted to recapitalize the banks to halt a financial panic.

Fast forward to today, and that same bank is begging to give the money back. The chairman offers to write a check, now, with interest. He's been sitting on the cash for months and has felt the dead hand of government threatening to run his business and dictate pay scales. He sees the writing on the wall and he wants out. But the Obama team says no, since unlike the smaller banks that gave their TARP money back, this bank is far more prominent. The bank has also been threatened with "adverse" consequences if its chairman persists.

...

http://online.wsj.com/article/SB123879833094588163.html

Where's the outrage? Except among people who already hate the administration regardless, there won't be any, even after this story repeats itself a few more times with other large banks.

In other news, the same "confidence" and "bolster lending" excuses I'd predicted are holding back others from even bothering to try:

Bankers: Take your TARP money back
Some banks say the government's stabilization plan is actually weighing them down.

By Allan Chernoff, CNN senior correspondent
Last Updated: March 27, 2009

...

Goldman Sachs (GS, Fortune 500), Bank of New York/Mellon (BK, Fortune 500), Wells Fargo (WFC, Fortune 500), JP Morgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500) - all 'mega-banks' that the government forced to take bailout money - say they want to return taxpayer funds "as soon as practical."

But, they're well aware no one will be permitted to return funds before completion of regulatory "stress-tests" of the major banks to determine how they would withstand a severe recession.

"We want to return the TARP money as soon as possible. We feel more bullish about economic prospects broadly, but we recognize we can't repay the money without the approval of the regulators," said Goldman Sachs spokesman Lucas Van Praag.

The "stress-tests" are supposed to be finished next month. But it's likely the Treasury will not permit bankers to return taxpayer money for many more months.

The main purpose of TARP is to stabilize the banking system, to prevent a run on any bank that appears to be in trouble. It has done that much.

If Treasury starts taking money back from healthy banks while the economy is still in trouble the weaker banks may appear to be even weaker and the confidence that TARP brought may suddenly disappear.

"The Government has to maintain confidence throughout the banking sector. These banks are all interconnected," said Miller.

Bankers may not like the Government interfering in their business. But, right now, those who have taken TARP funds have little choice.

http://money.cnn.com/2009/03/27/news...tarp_takeback/

March 31, 2009

Also unclear is the timetable for the country’s biggest banks to return TARP money. Top executives at Goldman Sachs, JPMorgan Chase, Wells Fargo and Bank of America have publicly said that they intend to repay it quickly.

President Obama did not provide specifics about the conditions that would allow banks to repay the loans quickly. At a meeting at the White House on Friday, at least two chief executives, Lloyd C. Blankfein of Goldman Sachs and Kenneth I. Chenault of American Express, asked the president to provide detailed guidance for returning the TARP money quickly.

Mr. Obama acknowledged that quick repayment could be a positive signal to the markets but expressed concern about undermining the administration’s efforts to bolster lending.

http://www.nytimes.com/2009/04/01/bu...bank.html?_r=1