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| 7/12 |
| 2008/9/29-10/6 [Politics/Domestic/California] UID:51328 Activity:nil |
9/29 A key problem with this bailout is that the final version was
released on Sunday, and Dems and Republicans were expected to follow
their leadership and vote Yes after reviewing it for < 24 hours.
This is crazy for a $700B bailout. Every House member who voted for
it should be kicked out in November.
If you're gonna spend $700B, you FUCKING DO IT RIGHT. 150+ economists
are against this plan. See http://fedupusa.org for one approach.
\_ It isn't $700B
\_ please elaborate
\_ $250B at first, $100B available by asking for it. Another
$350B that is only available if congress explicitly agrees
to it via a joint resolution after the Treasury asks for it.
So it's really a $350B plan with the option to increase the
plan if desired. (Which is still a lot of money)
\_ Plus, we probably end up getting most of it back.
\_ how much of RTC did we get back?
\_ So let's see... the govt buys the assets that the banks
want least (presumably because it's tied to borrowers
who are most likely to default), and the govt wants to
not buy it at firesale prices, since that would cause
the banks to realize large losses and still make them go
out of business, so we'll buy it at prices that are
fairly close to "hold to maturity" (this according to
Ben, anyway). And then we hope and pray that we can
actually hold it to maturity without the borrowers
defaulting. How does it stand to reason that we'll
probably get most of it back? Just because the govt buys
their debt, these people will now more likely not default?
\_ The reality is that the default rate is pretty low
in either case. The problem is that no one wants
to buy the debt. It's a liquidity problem. The
banks would probably be fine if they had enough cash
reserves to operate, but they were counting on
selling the securities. Recall that in the early
1990s banks owned a lot of RE and it caused them
massive liquidity problems even though they would have
made large profits if they could have held on for 10
more years. Banks don't want houses, though. They
want cash. The gov't can afford to sit on it. Note
that I am still against the bailout.
\_ ^liquidity^solvency
taxpayer should take a loss because Hank said so
\_ Or, the taxpayer could take a gain. You really
don't know and neither does anyone else. Do you
even know how the bailout bill plan for auctioning
securities was going to work? I guess it doesn't
really matter now, but the next bill will have
something like it. You claim that the taxpayer
will take a loss, but the truth is, we won't know
for a while if that is true or not.
\_ how much of RTC did we get back?
\_ I don't know, but we got 100% of the money
we lent out using the HOLC and even got a
slight profit. We even got 100% of the RFC
money back. How much of the RTC did we get
back, you seem to know.
\_ http://tinyurl.com/4th5r7
\_ That does not answer the question, but
one person quoted that the US would
end up getting 50% back. But the
total cost ended up double (?) the
original estimate.
\_ We lost $124B on a total purchase of
$400B of debt and distressed assets:
http://tinyurl.com/4mogcb
\- re: the S&L crisis:
1. the circumstances of the s&l
crisis was deposit insurance
not an intervention. so the
govt in a sense didnt have a
choice [or the nature of the
choice was different ... e.g.
the could have closed firms
earlier ... if you are interested
in a difference between today
[FDIC now] and "yesterday"
[FSLIC back in the late 80s] see
e.g. http://tinyurl.com/4gts57]
2. to understand the full costs,
you must add the signficant costs
of the failed FSLIC in addition
to the successor, the RTC [there
are a bunch of smaller orgs as
well, but those can be ignored].
[the FSLIC shutdown about $100bn
worth of S&Ls and was insolvent
from very early in the process,
but continued to go through the
administrative motions]
3. these assets the RTC had were
seized, not purchased, and the
seized, not purchased, and then
disposed of. so the govt can
be criciized about how they
disposed of stuff, but not their
selection of what to buy ...
in the current situation the
problem facing the govt is
how much to pay when buying and
holding, as opposed to how to
dispose of a carcass while
keeping your promise.
\_ "You really don't know and
neither does anyone else." |
| 7/12 |
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| tinyurl.com/4th5r7 -> query.nytimes.com/gst/fullpage.html?res=9E0CE3D7163DF935A15751C0A964958260 Save By STEPHEN LABATON, Published: February 26, 1992 The savings and loan bailout program remains unable to keep track not only of the billions of dollars in loans, real estate and other assets seized from failed institutions but also of the cash it gets when the assets are sold, Government auditors have found. The finding, in a report to be made public on Wednesday, directly counters the repeated assertions of the Resolution Trust Corporation, which runs the bailout program. That agency has reported significant progress in cleaning up its books, monitoring the assets it seizes and supervising the thousands of contractors that it has hired. The report, by the General Accounting Office, an investigative arm of Congress, raises new concerns that the agency has been overwhelmed in its two-and-a-half-year life by the enormous load of assets it inherited from hundreds of failed savings associations. In one instance under investigation by Government auditors, the RTC commissioned a $25 million project to look for nearly $7 billion that appeared to have vanished from its books. The agency lost track of the money after it was inundated with new assets from a wave of seizures ordered in the spring of 1990 by L William Seidman, who was head of the trust corporation then. But officials now say the $25 million accounting project, known as Operation Western Storm, violated contracting procedures, overpaid contractors and hired hundreds of auditors who sat idle for days with no supervision. The authorities are still investigating whether the $7 billion in discrepancies involved fraud or was the result of incompetence and poor record-keeping. But senior officials at the trust corporation say the problems highlighted by Operation Western Storm may not be limited to the Denver office, where they occurred. TC still does not have adequate systems in place to support its critical mission of managing and selling assets," said the General Accounting Office report, which was prepared by Richard L Fogel, an Assistant Comptroller General. In a statement submitted to the House Banking Committee in connection with testimony on the Administration's request for $55 billion more to continue the bailout, Albert V Casey, the trust corporation's new president and chief executive, appeared to anticipate the report. "The Resolution Trust Corporation's internal management investigation and its outside audit firm have found several instances where management and oversight failures have resulted in waste," the statement said. "Internal control problems existed in essentially all facets of the Western Storm Project." Starting to Write a Bill Mr Fogel will present his report at a House Banking Committee hearing on Wednesday, a day before a House subcommittee begins drafting a bill to provide more financing for the bailout. A copy of the report was provided to The New York Times by an aide to a lawmaker who has been critical of the rescue effort. The report also gives credit to the trust corporation for making good progress in selling assets and closing savings associations. It is nonetheless expected to make it more difficult for the trust corporation to get more financing from Congress. The agency has said that it will need more money by mid-March and will run out on April 1 "The GAO report is clear evidence that the RTC is doing a lousy job at preventing rip-offs and tracking assets," said Representative Joseph P Kennedy 2d, Democrat of Massachusetts. "They come in and say they're doing their job and they need more money. Treasury Secretary Nicholas F Brady, as expected, asked Congress today for $55 billion to complete the bailout of the nation's savings and loan industry and reported that significant progress had been made in both seizing troubled institutions and selling their assets. Cost Continues to Rise If the Bush Administration's request is granted, it will bring the costs of the rescue effort to $160 billion since 1989. That figure does not include those bailout deals that were struck under the Reagan Administration and interest payments to finance the trust corporation that could bring the total costs as high as $500 billion over the next 40 years. |
| tinyurl.com/4mogcb -> topics.nytimes.com/top/reference/timestopics/organizations/r/resolution_trust_corporation/index.html?inline=nyt-org Save Resolution Trust Corporation In 1989, the nation faced a financial crisis caused by the collapse of hundreds of savings and loan associations, who had taken advantage of loosened regulations to invest aggressively in real estate and other ventures, many of which went sour. Their problem was the government's problem, too, since their deposits were guaranteed by the federal government. Fearing both the size of the bill if the troubled institutions went under and the damage such a meltdown might cause to the economy at large, Congress and President George HW Bush in 1989 created the Resolution Trust Corporation to take over troubled thrifts, as the banks were known. The mission of the corporation was to dispose of the assets as quickly as possible for maximum value. Resolution Trust closed or reorganized 747 institutions holding assets of nearly $400 billion. It did so by seizing the assets of troubled savings and loans and then reselling them to bargain-seeking investors. At the peak in early 1990 there were 350 failed savings and loan institutions under the agency's control. By 1995, the S& L crisis abated and the agency was folded into the Federal Deposit Insurance Corporation, which Congress created during the Great Depression to regulate banks and protect the accounts of customers when they fail. The total cost to taxpayers was later estimated at $124 billion. Some Seek Agency to Buy Bad Debt as Long-Term Answer By STEPHEN LABATON Some lawmakers and experts are considering creating a new agency to dispose of the assets at the core of Wall Streets woes. Savings and Loan Crisis May Be Guide for Bank Bailout By BARRY MEIER The Resolution Trust Corporation, which helped to sort out the S&L. debacle, found itself dealing with people trying to game the system to their financial advantage. Perhaps Wait By CONRAD DE AENLLE Whether they are hopeful or fearful, analysts and fund managers contend that the best course of action is to hold back and wait to see what develops next. Looking for Lessons From Agency That Mopped Up 1980s Thrift Mess By JOHN M BRODER While some lawmakers think the Resolution Trust Corporation offers a model for dealing with today's financial crisis, others experts say the current situation is vastly larger and more complex. Costly Financial Rescue Could Narrow Economic Options Later By MARK LANDLER The rescue plan being created by the Bush administration is like the financial crisis it is meant to end complex, far-reaching and potentially rife with unpredictable consequences. Vast Bailout by US Proposed in Bid to Stem Financial Crisis By EDMUND L ANDREWS; CARL HULSE and DAVID M HERSZENHORN CONTRIBUTED REPORTING. Treasury and Fed officials were discussing with leaders in Congress a plan for the government to buy up distressed mortgages. Fearing a Link To Japan Woes, Bush Advisers Ponder a Policy By DAVID E SANGER Pres Bush's economic advisers grapple with implications of recent political and economic distress in Japan, fearing it could worsen slowdown in US and in Asia; Bush and his aides came to office highly critical of Clinton administration's dealing with Japan, and they promised they would not lecture Japanese in public about economic strategy; troubles in Japan include lack of huge government spending to stimulate economy, inability of regulators to clean up banking system sinking in bad real esta... JAPAN PARLIAMENT PASSES RELIEF BILL FOR AILINGBANKS By SHERYL WUDUNN Japan's Parliament approves landmark banking legislation allowing Govt to nationalize failing banks, and political parties announce new accord to provide several billion dollars in new funds to revive banking system and set country on road to economic health; law enacted by Parliament allows Govt for first time to deal with large, failing banks by nationalizing them, liquidating them or transforming them into publicly owned 'bridge banks' that take over good loans and good borrowers and try to ... For there is a record, the reports of a detailed and dispassionate investigation. The investigation was ordered by the Resolution Trust Corporation, the Government body for failed savings and loans, and done by the respected San Francisco law firm of Pillsbury Madison & Sutro. Several volumes were published in 1995, the last on Dec. Savings and Loan Bailout Agency Will Not Sue the Clintons By STEPHEN LABATON In one of its final acts, the Resolution Trust Corporation has decided not to sue President Clinton or his wife for losses that the Whitewater land venture caused an Arkansas savings and loan association that collapsed six years ago. The agency's decision was included in a report made public on Wednesday during debate by the full Senate over subpoenas issued by the Senate Whitewater committee. The report followed an investigation of nearly two years into the relationship between the failure of ... Federal Suit Likely to End Without Penalizing Hyde By BARNABY J FEDER The Federal Government's two-and-a-half-year-old lawsuit here blaming Representative Henry J Hyde, the powerful head of the House Judiciary Committee, and 11 other former directors of Clyde Federal Savings and Loan Association for the thrift's bankruptcy appears to be losing steam. Last week, United States District Court Judge Brian B Duff threw out most of the charges against the directors. He ruled that the only basis for going to trial was an allegation of gross negligence, perhaps the har... Last Meeting Of S& L Board REUTERS The Thrift Depositor Protection Oversight Board has set Dec. The board was created by Congress in 1989 to review policies of the Resolution Trust Corporation, an agency set up to clean up the savings and loans debacle. The trust corporation, which took over hundreds of savings and loan institutions and sold their assets, is scheduled to close down permanently on D.. Japan Panel Urges Reform Of Nation's Bank System By ANDREW POLLACK In an effort to clear up the bad-loan problem that is threatening Japan's financial system, the Government moved today toward establishing an institution similar to the Resolution Trust Corporation, which was used to deal with the savings and loan crisis in the United States. The recommendation to form an institution to take over and dispose of the bad debts held by home mortgage companies was contained in a blueprint for reform of Japan's banking system that was released today by an advisory c.. Early Investigator Of Whitewater Resigns The Federal savings and loan investigator whose work helped prompt the Whitewater inquiry quit today with a final shot at the bosses she said impeded her investigation. L Jean Lewis's resignation from the Resolution Trust Corporation comes just a month after she testified before Congress that her supervisors engaged in a "concerted effort to obstruct, hamper and manipulate" the Whitewater inquiry. Next >> Resolution Trust Corporation Navigator A list of resources from around the Web about the Resolution Trust Corporation as selected by researchers and editors of The New York Times. |
| tinyurl.com/4gts57] -> economistsview.typepad.com/economistsview/2008/09/the-opposite-of.html explains: Australian money manager John Hempton owned Washington Mutual preferred shares and was thus wiped out when the bank was seized and flipped to JP Morgan Chase last week. he argues, the government has now botched things in a profoundly serious way... Hempton thinks that if the FDIC had simply liquidated Wamu, some money would have been left for the senior creditors. By choosing not to do that--presumably because it would have meant a big hit to the FDIC insurance fund--it has discouraged anybody else from providing that kind of credit to US banks. The reckless, irresponsible seizure of Washington Mutual: please read in Washington DC, by John Hempton: I lost money on this - so you can take my analysis with the caveat of a slightly angry grain of salt. But I still think the seizure of Washington Mutual is the most capricious government action of this cycle and possibly the worst thing that has happened to American Capitalism this cycle. It has confiscated the institution and sold everything except the liabilities marked equity, preferred, junior and senior. It confiscated the liquidation rights of the senior and junior debt. It confiscated the liquidation rights of the preferreds too but that is an understood risk in owning preferreds. And whilst I lost money here I am far more angry about the other... If WaMu had been placed in liquidation I am pretty sure the seniors would have got something. If the senior debtors had been allowed to conduct an auction for WaMu (compromising all the junior stuff including the prefs I owned) then they would have got something. Except that the liquation rights - well established order-of-creditor rights - were denied by a swift US Government action. Now I understand that there is a strong policy presumption in favour of a quick government disposal of a failing institution - and that policy presumption might at some stage trump the rights of some holders of paper. It would of course be more acceptable if there was a large body of evidence that the government put forward to justify their complete disregard for quite senior rights here. But in this case the Feds did very little to justify their decision. The OTS/FDIC carried a risk - the risk being that the losses would be so large that would wind up costing the government money. The government solved its problem - and it did it by taking away the rights of the senior debt holders to an orderly liquidation - when on the numbers given by the ultimate acquirer the senior debt was likely to be whole or near to whole. It changed the order of creditors and the basis on which banks all across America raise wholesale funds. Now there is not much raising of wholesale funds by banks at the moment. It is simply the case that there is now a new risk for people who provide wholesale funding - and that risk is that the government will unilaterally abrogate their rights - without appeal, without due process and without accountability. In the process the OTS and the FDIC have effectively removed the main low-cost source of funds of pretty well all banks in America. They will have put the fear-of-Government into such people globally. In the Moral hazard case people take too many risks because they believe the government will reimburse their losses. But in this case people are going to take too few risks because they know that government might unilaterally remove their rights and property. This was - by far - the least justified government action of this credit cycle. And it spells doom for any bank in America that is ultimately reliant senior (and hence well protected) but unsecured financing because it is so capricious. Those banks are many - but we can start with Wachovia whose destiny (failure) is now nearly certain - and for whom the precedent is set. But after that we can go for all the banks including the champions such as Bank of America and Citigroup. Creditors now face confiscation of their rights by the US Government without oversight or audit or even process. At that point there is no creditors and the economy collapses. The trust needed to make capitalism worked has been removed. I am not a conservative - but I will argue - along with many conservatives - that the most important function of government in a capitalist society is provision of a framework by which property rights can be defined and enforced as this is the key to making a capitalist society function. The Government is now acting as if the framework does not apply to them. What next The FDIC and OTS have won the battle with respect to WaMu They got rid of WaMu without any cost to the taxpayer. They really did get out of their WaMu risk quite neatly - and I will be the heads of those organisations went to bed feeling pretty pleased with themselves. But in the process they have doomed about two thirds of the US banking system. I am still a believer that government - whilst not stuck with great incentives will grope for right solutions. But that belief of this former (competent) public servant is being shaken to the core. And whilst Wachovia and dozens of others will eventually hit the wall because of this decision, the Government will work out that it has a bad process before Bank of America fails. But I think it is time that the process is short circuited. The heads of the OTS (John Reich) and of the FDIC (Sheila Bair) should be sacked now and for cause. Mr Paulson better get control of this process and let it be known that the US has a process for dealing with senior creditors and making sure that their rights are honoured. The FDIC may well have made itself senior to creditors with whom it should have been pari passu. If a government gained a reputation for doing that sort of thing, it would certainly create some long-term problems. What I'd most like to know is what the terms were of alternative bids for WaMu There were 3 bids, I recall hearing, and some resistance on the part of the FDIC to actually say whether the other bids were for more money or not. Link to comment | September 27, 2008 at 12:54 PM anne says... What has been bothering me is precisely the question of why Washington Mutual bond holders were abandoned? I have had no reasonable answer, since the worry is that the nature of bank financing has been changed from here. Has there really been a pattern to government agency responses to the financial crisis? Link to comment | September 27, 2008 at 12:58 PM Bruce Wilder says... I was pretty surprised when WaMu was taken down, without a hit to the FDIC fund. I had pretty much assumed that exhausting the FDIC's $50 billion was going to be a political triggerpoint. I would assume, and I guess everyone else is likely to assume, that as WaMu goes, so goes Wachovia. I wonder what he thinks the mechanism is, because I am missing that in his essay. Speaking personally, I am impressed at the FDIC being as aggressive as it was. I think, contra-Hempton, that we may be moving toward the only rational "solution" which is nationalization. The US has to manage a major shift toward greater savings and self-financed investment. Link to comment | September 27, 2008 at 01:06 PM bullbust says... Now I understand that there is a strong policy presumption in favour of a quick government disposal of a failing institution - and that policy presumption might at some stage trump the rights of some holders of paper. Next time the bond holders better make sure about who they are lending to, and what type of risky business the borrower is undertaking. The FDIC and OTS have won the battle with respect to WaMu They got rid of WaMu without any cost to the taxpayer. The lenders lend expecting the taxpayer to pick up the tab? There was moral hazard - in that the bond holders expected to be ahead of taxpayers in the creditors line, and lend accordingly. Why should the taxpayer take the risk and profit the bondholders? If lending to institutions like WAMU stops because the taxpayer refuses to take that risk, then such lending is not viable without the taxpayer underwriting the risk. It is ridiculous to claim that this is the opposite of moral hazard, when it _is_ moral hazard. that is standing the entire idea of m... |
| fedupusa.org UPDATED - 9/23/2008 We the American Taxpayer have been subjected to the biggest con job ever in this country. Here are a couple videos that will help you understand what's going on and how we can fix this and place the burden on the people that cause the problem, not the taxpayer... I am sure that this weekend Ben and Hank told Congress some horror story about how the whole world is going to come to an end and that there is no money left anywhere and they have the Only solutions. That is completely false and to prove it we are offering our solution. Do not believe the people that have been totally and completely wrong during this entire crisis. After you watch the video's you can learn more by visiting the links below... |