The American Recovery and Reinvestment Act (ARRA) signed into law by President Barack Obama on February 17, 2009 did rewrite Section 111 of the Emergency Economic Stabilization Act of 2008 (EESA) and did provide modified rules for the Troubled Asset Relief Program (TARP). The Stimulus or Recovery Act is worth $787 billion and it contains multiple programs: Tax Cuts – $244 billion, Aids For State and Local Government – $217 billion, Relief (Extended Unemployment, Health Insurance for Unemployed) – $120 Billion, Infrastructure – $101 Billion, Energy Efficiency – $59.5 Billion, and Human Capital – $45.5 Billion. TARP allowed the US Department of the Treasury to purchase up to $700 billion of difficult-to-value assets – MBS and CDO – from banks or other financial institutions. Since the enactment of TARP in October2008, more than 360 US banks have received at least $353 billion of funds from the Treasury. Continue reading ‘TARP Barometer’
Tag Archive for 'TARP'
Since the beginning of the year, governments all over the world have worked on new sets of regulations for financial institutions after they spent more than a year bailing out firms like AIG, Northern Rock or Royal Bank of Scotland. In my opinion, the absolutely necessary process of re-regulating the banks is starting to get more traction and political support. The methods that lawmakers have used handling the too-big-to-fail investment banks, have created a moral gap between Wall Street and Main Street. Between 1933 and 1999, the Glass-Steagall Act restricted commercial banks to underwrite stocks and bonds, and investment banks to take in deposits from customers. It turns out that a very plausible cause of the global banking meltdown could be the 1999 repeal of the Glass-Steagall Act, which gave financial giants the power to outplay the regulators. Continue reading ‘Washington vs. Wall Street’
Since October 2008, more than 360 US banks have received at least $360 billion of Troubled Asset Relief program (TARP) funds from the Treasury. Of this, more than half went to the top fifteen banks in the country. This includes $145 billion of capital injections awarded to Citigroup, Bank of America, JP Morgan and Wells Fargo, the top four US commercial banks and another $10 billion each for Goldman Sachs and Morgan Stanley. There was also $40 billion in capital injections and $113 billion in credit in AIG, the insurance company that pioneered a whole new “too crook to fail” rule. In addition, by now US banks have also received at least $1.8 trillion of federal loan guarantees and $870 billion in federal loans. Believe it or not, the same day PNC Financial Group received $7.6 billion in TARP money, they acquired the rival bank National City for $5.6 billion. Continue reading ‘Greed – The Name Of The Game’
In the post-Depression economics, Tim Geithner – US Treasury Secretary, has initiated a plan to inject $2.5 trillion of Public-Private Investment Fund (PPIF) into US banks to get rid of the toxic assets. On one side, nationalizing top-tier banks may be politically acceptable in places like Norway, Sweden, Chile, Iceland, Ireland and even Japan and the UK, but it is still inconceivable in New York and Washington. On the other side, American taxpayers are saturated with huge Wall Street bailouts and overpaid bankers. Consequently, taxpayers would never approve another open-ended injection of public capital into banks. Since the enactment of the Troubled Assets Relief Program (TARP) in October 2008, more than 360 US banks have received at least $353 billion of funds from the Treasury. This includes: Continue reading ‘US Taxpayer – The Universal Savior’
Banks’ Free Lunch
Goldman Sachs, JP Morgan, Bank of America, Morgan Stanley and Citigroup are largely gaining from a slowing in the write-down volume and a Federal Reserve-induced steep yield curve. Investors who bought US bank bonds are also benefiting from banks’ successful raising capital attempts and the repayment of TARP money. For instance, Citigroup put $20 billion back into the Treasury, Bank of America paid back $45 billion, JP Morgan $25 billion, Goldman Sachs $10 billion and Morgan Stanley returned $10 billion. Apparently, there is such thing as a free lunch, as long as a bank could borrow short-term money via the discount window, currently at 75 basis points, and it could lend long-term money at lucrative rates. According to Fed’s data, the net interest margin at larger US banks have increased to 3.38% in 2009, from a record low 2.94% in 2008. Last March, JP Morgan [JPM] was trading at $15, Goldman Sachs [GS] at $47, Citigroup [C] at $1, Bank of America [BAC] at $2.5 and Morgan Stanley [MS] at $15. These financial stocks reached their 52-week highs at astonishing levels: JPM at $47, GS at $192, C at $5, BAC at $19 and MS at $36. Continue reading ‘Banks’ Free Lunch’