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 'Wall Street'
At its peak, financial industry earned a staggering 40 percent of all US corporate profits, four times what they earned in 1980, while the average Wall Street paycheck doubled, and top bonuses sextupled. Not surprisingly, the finance lobby is the strongest campaign contributor in Washington, with an astonishing $475 million during the 2008 election cycle, almost $60 million more than two decades ago. The finance lobby is known as the FIRE lobby—Finance, Insurance, and Real Estate, and it includes basically anyone who makes money by handling money. That includes big money-center banks, small community banks, Wall Street investment banks, insurance companies, mortgage brokers, hedge funds, credit card issuers, trade groups (ISDA), private equity firms, credit unions, and more. To understand just how extravagant the finance lobby’s power is, we need to understand some history first. Continue reading ‘The Power Of Money’
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’
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’