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AIG Bonuses Are Just the Tip of the Iceberg

The Dems call to return the money is a sham. Not that they might not attempt to get it back but that they weren't behind the bonuses going forward in the first place.
When the original stimulus bill was being drafted Senators Snow (R) and Wyden (D) proposed an amendment that would have blocked just this type of bonus payout. Chris Dodd (D) the chairman of the Senate finance committee together with backing of the Obama administration dropped it from the stimulus bill. Now its been revealed that Congress and the administration knew for more than a month that AIG was going to do this bonus plan. Within the last month the treasury sent another 30 billion to AIG. The outrage from Dems is ridiculous! They knew about this all along and in fact dropped legislation that would have made these bonuses impossible to do. Now they're outraged and protesting to Libby?

Goldman and Morgan Stanley: Banks of Choice - Barron's

Can't help but note the sell off on MS and GS the first trading day after Barrons' report. Maybe a little buy on the rumor, sell on the news? Always makes me wonder if some financial writers hold a story till some institution gives them the go ahead to publish so that they can sell into the story. But maybe I'm being too conspiracy minded. Its hard in a bear market.

The AIG Bailout: Why Was the Onus Placed on Taxpayers?

It looks pretty unlikely that under the best of circumstances, we will only not owe quite as much as we do now on AIG loans. AIG has businesses to sell, and some with actual tangible assets, but a lot of others hold a great portion of their value in intangibles that are dissolving before our eyes. Consider the CEO's argument for paying out bonuses to those same executives that over-exposed AIG in the CDS market? There isn't much fear that Goldman is going to be calling on those guys. How attractive does AIG derivatives trading department look on their resume anyway. These guys will be following the tried and true career path of so many others that fail in business. They'll teach. Who is really going to want to buy this talent, or this business?

America's Banks: Are They Really Insolvent?

It seems to me that there might be a place or way to suspend mark to market for certain fixed income assets such as mortgage backed securities and instead utilized a cash flow model at least for a specified period of time. This would buy time for a true accounting of each mbs thus providing a higher degree of transparency which should result in better liquidity within that market. Its the lack of transparency of the mortgage back market that has dried up bids for these securities. Of course, there are defaulted loans but if all is revealed, the securities will be judged on true cash flow analysis and not fear of bad loans.
I mean lets face it. Its something like this or we can just borrow a few hundred billion only so we can hang onto an accounting measuring stick that can bust us if securities should face a suddenly challenged with liquidity problems.

TARP Accountability: Bankers Say 'What, Me Sorry?'

I forgot to add the Federal Reserve to my list of who to blame.

TARP Accountability: Bankers Say 'What, Me Sorry?'

I believe there is blame to go around from the bankers, to mortgage companies, to rating agencies, to Fannie and Freddie, to the Clinton Administration, to the Congress, to home buyers, to European banking, to Bush, to the SEC.
Today, we have one guilty party asking another guilty party to confess up. Being that Congress specifically will use any statement as fodder to support their own denial of any responsibility, why should bankers help Congress mislead?

2009's House of Pain: Consumer Loans and Credit Card Debt

I have a similar situation dealing with a Chase Mastercard. I had a chunk of debt from an unforeseen circumstance in the past. I actually got a great proomotional rate of 3.99% for the life of the debt so long as I'm never, ever late in which case they have the right to raise it to something like 29%. Now, they're whining because they claim they are losing money with my account on account of the fact that I only carry a balance and won't make additional purchases at a higher rate. One would be a fool to make additional purchases not just because of the higher rate but because the higher rate balance is the last to be paid off. They have now instituted a new fixed finance charge not fixed to a balance but to the fact that I have a card. Then they tripled the minimum payment due. They told me they would agree to lower the minimum and eliminate the fee if I would agree to a higher rate on my 3.99% balance. I think I might just milk it as long as I can.

Senator Schumer: Guarantees Preferable to Establishing 'Bad Bank'

It sounds like Schumer is finally coming around to the Republican House proposal before TARP was enacted.

Why Capping Pay Is Likely to Work

I think we should learn from the Obama admin and push for milestones for Congress to cut wasteful spending, and achieve a balanced budget by some time in the future or face a 50% cut in Congressional pay. They get paid $174,000 a year both Congress and the Senate with leaders receiving a bit more. They get automatic cost of living increases and the best medical/dental/ retirement plan available for a short stint in national politics. They built the embedded moral hazard into the mortgage market that was the foundation to this financial crisis, and yet they get off scot-free as all blame goes to everyone else, who btw are also guilty.

Citi's Flip-Flop on Mortgage Cramdowns: A Really Bad Idea

Who are we bailing out here? People who contracted unfavorable terms given their household income and/or people who just hate the fact they bought at the top of the real estate market. Why would they accept these terms?
1) They had never qualified for a home loan before because they either don't have enough income or capital for a down payment and didn't want to miss their once chance to ride the real estate bull.
2) They were buying a second home for investment purposes and likewise hadn't ever qualified for that second home before adjustable rate sub-prime loans became aggressively marketed and they didn't want to miss the chance of leveraging up on that 'can't lose' real estate bull.
3) They qualified fairly but because they bought in 2005, 2006 they are now underwater. They can afford to make payments but see the benefits of walking away and taking a short term bad credit mark on their credit report over accepting a reversal of fortune on paper.
Were all of these people conned? Doubtful. Many likely reasoned that they could always sell later at a higher price if rates got too high.
At what cost to the mortgage market are these cram down terms being adopted?
Absolutely, everyone will pay. People looking to buy homes will face much higher interest rates in any given interest rate environment so as to offset the expense of possible governmental intervention in the future as well.
People already in homes will pay through much slower real estate appreciation going forward. States and municipalities that have grown increasingly dependent on real estate appreciation for property tax revenues.
Who will benefit? Apartment owners.

Should Banks Be Publicly Traded?

One must look at why banks go public in the first place. Its to grow their business through a large infusion of capital. In theory this should lead to larger profits assuming a sound business model. A large bank using economies of scale can theoretically offer better terms which should also win them more business. If banks remained private, the banking business would remain even more fragmented and less cost competitive. This might lead to a larger premium paid on new loans. Certainly, not a thorough analysis of the pros and cons but something to be considered.

Why I Need a Government Bailout

If having a balance sheet that's a wreck would qualify, GMAC wouldn't need to raise capital to qualify as a bank holding company. They're still seeking more bondholders who would be willing to convert to preferred and a lesser amount of debt. Perhaps, if you can convince your mortgage company to accept this you can qualify but I think the mortgage bailout is a better option for those mortgage holders that qualify. Nothing like forgiving part of the debt, lowering the interest rate and not needing to offer any preferred stock or other consideration.