Banks buying back TARP warrants at a discount, panel says
Published on 07-10-2009
WASHINGTON - A panel that oversees the $700 billion bank bailout package said Friday that financial institutions buying out warrants they gave the government in exchange for capital injections are now buying back those stakes at well below their fair value.
The Congressional Oversight Panel, which is charged with overseeing the Troubled Asset Relief Program, or TARP, said in a report that a group of 11 small banks that have repurchased government warrants in exchange for taxpayer-funded assistance, have bought-out the stakes at 66% of their face value.
The oversight panel, which employed three Harvard University valuation experts to conduct the analysis, said taxpayers would have received $10 million more had the warrants been sold back to the banks at their face value.
The report argues that liquidity discounts are a key factor for why the warrants were purchased at such low prices. Should a similar discount be a major factor for warrant repurchases at larger institutions buying out government stakes, the shortfall to taxpayers could be as much as $2.7 billion, the report said.
A group of 32 financial firms, including 10 large financial institutions, paid $70.2 billion to buy out preferred shares Treasury received when they received financial assistance. These buyouts have made the firms eligible to buy back the warrants the government received along with the preferred shares.
Banks that received financial assistance as part of TARP were required to give the government warrants for the future purchase of some of their common shares. Warrants are the right to buy common shares of a company at a set price at some point in the future.
The report said, however, that the Treasury may have other goals with the repurchases that supersede maximizing taxpayer returns.
"Treasury has said that it wants to allow banks to operate again without TARP assistance as soon as they are strong enough to do so," it said.
Published on 07-10-2009
WASHINGTON - A panel that oversees the $700 billion bank bailout package said Friday that financial institutions buying out warrants they gave the government in exchange for capital injections are now buying back those stakes at well below their fair value.
The Congressional Oversight Panel, which is charged with overseeing the Troubled Asset Relief Program, or TARP, said in a report that a group of 11 small banks that have repurchased government warrants in exchange for taxpayer-funded assistance, have bought-out the stakes at 66% of their face value.
The oversight panel, which employed three Harvard University valuation experts to conduct the analysis, said taxpayers would have received $10 million more had the warrants been sold back to the banks at their face value.
The report argues that liquidity discounts are a key factor for why the warrants were purchased at such low prices. Should a similar discount be a major factor for warrant repurchases at larger institutions buying out government stakes, the shortfall to taxpayers could be as much as $2.7 billion, the report said.
A group of 32 financial firms, including 10 large financial institutions, paid $70.2 billion to buy out preferred shares Treasury received when they received financial assistance. These buyouts have made the firms eligible to buy back the warrants the government received along with the preferred shares.
Banks that received financial assistance as part of TARP were required to give the government warrants for the future purchase of some of their common shares. Warrants are the right to buy common shares of a company at a set price at some point in the future.
The report said, however, that the Treasury may have other goals with the repurchases that supersede maximizing taxpayer returns.
"Treasury has said that it wants to allow banks to operate again without TARP assistance as soon as they are strong enough to do so," it said.
********************************************************
My comment back to SPECTRE was as follows:
"The report said, however, that the Treasury may have other goals with the repurchases that supersede maximizing taxpayer returns.
"Treasury has said that it wants to allow banks to operate again without TARP assistance as soon as they are strong enough to do so," it said."
I guess the goal is to rip-off the taxpayers in order to favor those who brought down the economy in the first place.
This is my view---the consumer definitely must take some of the blame for their current fate, but the fact remains that they were told from the President Bush on down that spending and borrowing was good for the country. That low interest rates, high returns on equities, and that speculation was the way wealth was to be created, and productivity and an increase in GDP, as well as foreign investment was healthy for the nation.
Bush said after 9-11 for America to go shopping! "Leave your troubles in an old kit bag and smile, smile, smile."
This is what many, many Americans believed. They are not economists. They saw that when the Tech Bubble broke, it took down the value of equities,but the recovery only took a couple years to show progress again. They think the same way today! They don't realize that these lost jobs are gone forever.
Currently, the consumer is being punished, so to speak, by seeing that the financial syndicate con artists, such as Geithner, are continuing to offer special deals and arrangements to those banksta thieves.
Spectre, I am assuming you feel the same, how disheartening it is that there are no real leaders, other than Ron Paul and a few others who don't really march into the public eye screaming how we should not take this anymore.
Michael Jackson, upon his death, gets a massive vocal and public audience. I guess upon the death of America it will be then when the loud voices of protest and anger begin to get loudly heard.
"Treasury has said that it wants to allow banks to operate again without TARP assistance as soon as they are strong enough to do so," it said."
I guess the goal is to rip-off the taxpayers in order to favor those who brought down the economy in the first place.
This is my view---the consumer definitely must take some of the blame for their current fate, but the fact remains that they were told from the President Bush on down that spending and borrowing was good for the country. That low interest rates, high returns on equities, and that speculation was the way wealth was to be created, and productivity and an increase in GDP, as well as foreign investment was healthy for the nation.
Bush said after 9-11 for America to go shopping! "Leave your troubles in an old kit bag and smile, smile, smile."
This is what many, many Americans believed. They are not economists. They saw that when the Tech Bubble broke, it took down the value of equities,but the recovery only took a couple years to show progress again. They think the same way today! They don't realize that these lost jobs are gone forever.
Currently, the consumer is being punished, so to speak, by seeing that the financial syndicate con artists, such as Geithner, are continuing to offer special deals and arrangements to those banksta thieves.
Spectre, I am assuming you feel the same, how disheartening it is that there are no real leaders, other than Ron Paul and a few others who don't really march into the public eye screaming how we should not take this anymore.
Michael Jackson, upon his death, gets a massive vocal and public audience. I guess upon the death of America it will be then when the loud voices of protest and anger begin to get loudly heard.
I felt this news flash was important enough to post. Thanks, jerry
20 comments:
Jerry, firstly, thank you for the shout out on the piece concerning the theft of Taxpayer monies from these warrants that are going for .66 on the dollar. I thought we were told we would be protected from all officials concerned. What a complete joke.
I feel exactly as you do. I read an article this morning discussing "Home Sweet Campground" for families that have lost there homes. Living in tents with their children for God's sake. This comes at the same time Goldman Sucks is paying out record bonuses, AIG wants to pay $235 million in bonuses after accepting $170 Billion from us, the American Taxpayer, of which $100 Billion was backdoored to GS and others who had received bailout funds.
Now they are allowing Morgan Stanley to securitize BBB- pure junk crap into AAA Gold just like before, and they are also allowing 125% LTV again through Fannie and Freddie which will be paid back by the American Taxpayer when it all blows up.
This business concerning the warrants shows who they work for, and it's sure as Hell not the American Taxpayer.
We need more Ron Pauls and Brad Shermans who speak the truth in the den of vipers of Corruption Hill.
Jerry, Here we have Tiny Tim refusing to answer Congressman Sherman's question. The Sec. was not prepared to state that derivatives written today wouldn't subject taxpayers to more bailouts of said derivatives in the future. UNFRIGGING REAL! No attempt to hide the stealing anymore.
http://www.youtube.com/watch?v=WccPO-lkK8I&feature=player_embedded
MY blood is boiling. The Senate, controlled completely by the Democratic Super Majority, has killed the House Bill to audit the FED. Anyone who thought the Democratic Party represented the little guy can now see the truth laid bare. Also, why no rollback of these draconian new Bankruptcy Laws that make debt slaves of us all? They are both crime syndicates Hell bent on stealing the last nickel from the American Treasury which by the way happens to be you and I as taxpayers. God damn them for what they are doing to families barely hanging on!!!!!!!!!!!
Jerry, looks like no hearing for the soldier challenging Obama's BC.
I'm not sure what to make of it, but it ain't good.
BORN IN THE USA?
'Military has directly responded, saying that Obama is illegitimate'
A U.S. Army Reserve major from Florida scheduled to report for deployment to Afghanistan within days has had his military orders revoked after he argued that he should not be required to serve under a president who has not proven his legitimacy for office.
His attorney, Orly Taitz, confirmed to WND the military has rescinded his impending deployment orders.
"We won! We won before we even arrived," she said with excitement. "It means that the military has nothing to show for Obama. It means that the military has directly responded by saying Obama is illegitimate – and they cannot fight it. Therefore, they are revoking the order!"
She continued, "They just said, 'Order revoked.' No explanation. No reasons – just revoked."
A hearing on the questions raised by Maj. Stefan Frederick Cook, an engineer who told WND he wants to serve his country in Afghanistan, was scheduled for July 16 at 9:30 a.m
-snip-
Not much to see here folks except the usual thieving from Goldman Sucks because they own the govt.!
WSJ Trashes Goldman: Subsidized "Goldie Mac" Making Billions At Taxpayer Expense
John Carney|Jul. 15, 2009, 9:08 AM|16
The Wall Street Journal's editorial page this morning reminds us that Goldman Sachs is still operating under an implicit government guarantee that puts taxpayers on the line for any losses while its partners enrich themselves from profits.
It's ugly.
From the WSJ:
Of course, if the feds do let CIT fail, this will only confirm that the only certain survivors in the current market are banks big enough that the government figures it must bail them out. Just ask the many small banks that have been rolled up by the FDIC at a rate of two a week since the beginning of the year, with eight so far in July alone. That can only strengthen the likes of Goldman, which apparently needs no help printing money anyway.
Goldman's traders profited in the second quarter from taking advantage of spreads left wide by the disappearance of some competitors (Lehman, Bear Stearns) and the risk aversion of others (Morgan Stanley). Meantime, Goldman's own credit spreads over Treasurys have narrowed as the market has priced in the likelihood that the government stands behind the risks it is taking in its proprietary trading books.
Goldman will surely deny that its risk-taking is subsidized by the taxpayer -- but then so did Fannie Mae and Freddie Mac, right up to the bitter end. An implicit government guarantee is only free until it's not, and when the bill comes due it tends to be huge. So for the moment, Goldman Sachs -- or should we say Goldie Mac? -- enjoys the best of both worlds: outsize profits for its traders and shareholders and a taxpayer backstop should anything go wrong.
What's worse, letting CIT fail might not help this situation at all. Rather than clearing the way for market discipline to reassert itself, CIT's failure might only reify the policy of Too Big To Fail.
Financial firms that are deemed too small to be rescued will find credit hard to come by and expensive, which will incent them to grow or sell themselves to a systemically important firm. In short, we're increasing the concentration of financial power and hence systemic risk in the largest Wall Street firms that led us into this mess.
Hello SPECTRE,
Thanks for the comments. You left many good pieces.
I have to believe very little will change, even with such pieces written by the WSJ. The stock market continues to be manipulated and do its Alice in Wonderland magic with such a lift as we saw today. When such magic clouds the real story in the economy, then nothing will happen.
The market buying by the Fed and others to keep the illusion of "everything is looking up" will continue. It will remain business as usual in Washington until a significant change occurs, such as a fall in the market that is sustained, a drop in the value of the dollar, more treasuries remain on the shelf, etc.
When the market begins to fall below 7900 on the DOW again without lifts above that figure, then the rose colored glasses will begin to come off for a few more minutes.
What we need to see is more pain with those in the 1% tile of earnings. They have so much cash that they can try to elevate the market. But, once commercial foreclosures and bankruptcies become headlines, then more people will get angry, too, and the top wage earners will begin to see their wealth shrink.
When that happens, the anger will be directed at CONgress, and Obama. Maybe we will begin to see bus loads of protesters being seen by the tens of thousands in front of the White House. That is when the Fed will get audited, and the bankster's will be prosecuted.
Obama needs to get shaken up by tens of thousands of his own supporters getting angry at his total lack of judgement.
jerry
Jerry, here's a short piece by a blogger who nails this debacle and what it means for J6P:
So let the lucky among us combine this:
•on the one hand, the fact that foreclosures are still increasing while home prices are decreasing, and that unemployment keeps rising while prices are falling,
•with on the other hand, the fact that Goldman will likely pay out record bonuses, which causes a sentiment that leads markets up
.
What reality does that reflect? Everybody in the US pays taxes. Income taxes, property taxes, sales taxes etc. Parts of the revenues have been used to prop up Wall Street banks, amongst them Goldman Sachs. In other words, the taxes levied on the people who are now losing their homes and jobs are used in part to pay multi-million dollar bonuses at Goldman. That situation is so outta here and so sickening that I don't think any further comment is required.
"What we need to see is more pain with those in the 1% tile of earnings."
Jerry, I agree 100%, but the real money is in far fewer hands than the top 1%.
As an example, if I'm filthy rich, I don't pay taxes on income because I have no income other than qualified divs that get taxed at a great low rate of 15%.
On the other hand, we have a business owner making $300K a year, which is a good living, but not filthy rich. He/she pays through the ass for everything he/she touches.
One is actually providing production, be it services or merchandise, which is the way we grow GDP, while the other sits on his/her dead ass collecting money.
How does a corporation like GS get away with paying $1 Million in taxes? We live in bizzaro world.
My post before this one, where I quote the blogger, says it all.
Hi SPECTRE,
I agree with your last comment about the richest among us pay little to no taxes, but, nevertheless, they pay some. Their salaries are in the millions. They take a portion of their mult-million dollar salaries to pay their large monthly expenses, such as grounds keeping, catering, cleaning, and other services, as well as their "high-maintenance" personal wants and desires, such as purchases at their local day spa, or Nordstrom's department store, etc.
They need to feel that their "style" of life has been compromised in some or several ways in order for some heavy-handed shifts to occur.
When you see these financial banks get the huge sums of government support, yet pay little to no taxes, you have to wonder. What a gravy-train.
jerry
Jerry, agree with your point on a GS employee making an average of a $770K bonus, talk about a skewed stat. The real fat cats of the firm are receiving multi-million dollar bonuses, and we are paying for all of it. Nail their asses to the wall!
My point was that the distribution of wealth of the top 1% is as skewed as the GS bonuses.
Jerry, from Karl this AM. This is why I say they are stealing the last nickel from the AmericanTreasury.
AIG: The Looting Continues
No wonder The Fed was threatening Congress when asked about audits - it might expose the underlying realities of something like this:
European banks including Societe Generale SA and BNP Paribas SA hold almost $200 billion in guarantees sold by New York-based AIG allowing the lenders to reduce the capital required for loss reserves. The firms may keep the contracts to hedge against declining assets rather than canceling them as AIG said it expects the banks to do, according to David Havens, managing director at investment bank Hexagon Securities LLC.
$200 billion dollars for foreign banks that we, the taxpayer, have now backstopped through The Fed with zero oversight or approval by Congress?
These aren't even American businesses!
The average weighted length of the European swaps protecting residential loans is more than 25 years, while the span tied to corporate loans is about 6 years, AIG said in a regulatory filing. Contracts covering corporate loans in the Netherlands extend almost 45 years, and the swaps on mortgages in Denmark, France and Germany mature in more than 30 years.
So now we, the American Taxpayer, are backstopping mortgages in Netherlands, Denmark, France and Germany?
Remember this? (VIDEO)
Now you know why, and what The Fed and Treasury have done - in black and white.
You have been robbed America, and now they intend to steal $200 billion more - to bail out not Americans but foreigners.
Tell me again why we're doing this, and why people aren't in prison?
Jerry, nothing like a velvet covered set of brass knuckles from our loving and protecting govt.. The transparency is magical:
It's Not An Option
By INVESTOR'S BUSINESS DAILY | Posted Wednesday, July 15, 2009 4:20 PM PT
Congress: It didn't take long to run into an "uh-oh" moment when reading the House's "health care for all Americans" bill. Right there on Page 16 is a provision making individual private medical insurance illegal.
When we first saw the paragraph Tuesday, just after the 1,018-page document was released, we thought we surely must be misreading it. So we sought help from the House Ways and Means Committee.
It turns out we were right: The provision would indeed outlaw individual private coverage. Under the Orwellian header of "Protecting The Choice To Keep Current Coverage," the "Limitation On New Enrollment" section of the bill clearly states:
"Except as provided in this paragraph, the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after the first day" of the year the legislation becomes law.
So we can all keep our coverage, just as promised — with, of course, exceptions: Those who currently have private individual coverage won't be able to change it. Nor will those who leave a company to work for themselves be free to buy individual plans from private carriers.
From the beginning, opponents of the public option plan have warned that if the government gets into the business of offering subsidized health insurance coverage, the private insurance market will wither. Drawn by a public option that will be 30% to 40% cheaper than their current premiums because taxpayers will be funding it, employers will gladly scrap their private plans and go with Washington's coverage.
The nonpartisan Lewin Group estimated in April that 120 million or more Americans could lose their group coverage at work and end up in such a program. That would leave private carriers with 50 million or fewer customers. This could cause the market to, as Lewin Vice President John Sheils put it, "fizzle out altogether."
What wasn't known until now is that the bill itself will kill the market for private individual coverage by not letting any new policies be written after the public option becomes law.
The legislation is also likely to finish off health savings accounts, a goal that Democrats have had for years. They want to crush that alternative because nothing gives individuals more control over their medical care, and the government less, than HSAs.
With HSAs out of the way, a key obstacle to the left's expansion of the welfare state will be removed.
The public option won't be an option for many, but rather a mandate for buying government care. A free people should be outraged at this advance of soft tyranny.
Washington does not have the constitutional or moral authority to outlaw private markets in which parties voluntarily participate. It shouldn't be killing business opportunities, or limiting choices, or legislating major changes in Americans' lives.
It took just 16 pages of reading to find this naked attempt by the political powers to increase their reach. It's scary to think how many more breaches of liberty we'll come across in the final 1,002.
Jerry, I'm also buying extra popcorn for when the sheeple realize what CAPO & Trade will cost them. I say CAPO and not CAP because it sounds more Italian, and when you are being fleeced it just seems right. I have said for years the only reason they are interested in carbon is so that they could create a market to extract even more money from J6P.
They are as concerned about global warming as much as they were concerned about an ownership society with housing. They must openly laugh amonst themselves when devising new ways to crush the little man. The bell tolls for you J6P.
Hi SPECTRE,
Thanks for the SNIPS! It does appear that the Cap and Trade idea is just another way of allowing the financial crime syndicate to create another bubble by buying and selling these issues. This could really be a bad idea as it is being designed currently.
Regarding the public option versus private insurance: for 40 years the private health insurance industry has been controlling and rationing medical care. It has failed to deliver. We spend around $7000 per person to receive a quality way down on the quality list when ranked with the other industrial nations. We are not getting what we are paying for. Canada spends under $4000 per person and is ranked higher that the US in quality of care for what they pay.
The cost of insurance health care is killing working Americans who are more and more going without insurance. If a person wants private insurance coverage, well let them pay for it, but don't deprive others from receiving a quality public option.
Regarding foreign bank bailouts, it just shows how intertwined this counterparty BS had gotten. It wove itself all over the industrialized world. You might have sent the SNIP that told the story of the distillery that brews Captain Morgan, which got bailout funds allowing them to relocate from one Caribbean island to another island. Amazing!! The taxpayer swindle continues.
jerry
Jerry, you bring up great points regarding private insurance in this country. They are certainly not lilly white when it comes to our ills. I'm all in favor of any regulations that protect our citizens against the many wrongs over the last 40 years done by private insurance companies. What I'm not in favor of is making the govt. an all powerful, single payer giant that dictates to American Citizens what they can and can't do with their own money be it health care or any other program that infringes on any part of the Bill of Rights. In other words govt., don't tread on me.
Jerry, before you read this, please sit down so you don't break your lower jaw when it hits the floor. The fools and thieves of the District of Corruption strike again.
Washington's Dilemma: This Isn't a Recession, It's a Collapse
http://seekingalpha.com/article/148526-washington-s-dilemma-this-isn-t-a-recession-it-s-a-collapse?source=hp_mostpopular
Thanks for sharing information with us...
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Its an tight view..But really great job
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I felt this news flash was important enough to post.
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looks like no hearing for the soldier challenging Obama's BC.
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