Here is a heartening piece from the WSJ:
The U.S. Treasury Department announced Tuesday that 10 of the nation's largest banks have met the necessary requirements to repay funds they received from the government's financial-rescue fund, making way for $68 billion to possibly be returned to Treasury.
"These repayments are an encouraging sign of financial repair, but we still have work to do," said Treasury Secretary Timothy Geithner in a statement.
We don't need a pay Czar now, right Timmy?
The 10 banks are: J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley, BB&T, U.S. Bancorp, American Express Co., Capital One Financial Corp. Bank of New York Mellon Corp., Northern Trust Corp. and State Street Corp.
I will be opening accounts with these banks today with my eight dollar tax cut. I might also by some G.M stock through Morgan Stanley as my brokerage firm. If my math is right I could afford 850,000 shares of "Government Motors."
This is my favorite blurb from the article:
Morgan Stanley said Tuesday that it is "pleased to be repaying its $10 billion in TARP Capital with an attractive return for taxpayers." J.P. Morgan Chase said Tuesday it plans to repay its $25 billion in TARP funds. Translated into non BS talk
Morgan Stanley said Tuesday that it is pleased " to be running as far as possible away from creepy Tim Geithner, the new PAY CZAR, and Joe Biden's douchebaggedness."
This should be a good thing, that we now have banks that are feeling comfortable enough with their capital situation and are able to raise private capital. It amazes me that private investors are willing to invest in these banks when they know that Chrysler and GM investors were bent over the barrel. But I digress. The street should be doing a dance today, no more government control, no pay czar, finally bankers can go back to Spago.
But then again will the FEDS let go and return TARP to the dungeon it belongs in along with wage and price controls:
In Tuesday's announcement, the Treasury said much of the money would be returned to its general fund and would "help to reduce Treasury's borrowing and national debt." Mr. Geithner has described plans to reuse TARP funds that come back into the fund, recently announcing that he'd open up the funds to smaller banks.
The announcements comes as large banks have eagerly declared intentions to repay government aid given the restrictions on dividends and executive pay that go along with TARP. Meanwhile, the public and Congress have shown greater signs of bailout fatigue, leaving firms uncertain about what new restrictions they'd have to face for tapping into the financial-rescue fund.
I don't like the " plans to reuse TARP funds that come back to the fund, recently announcing that he'd open up the funds to smaller banks." Me no likey. How about we suck that money out of circulation, or use it for small business tax relief. While things could be much, much worse I tend to fall under the skeptical heading. If this method, propping up zombie banks, or keeping that money available for the next failing institution, which will happen, how are these banks any more free to engage in non coercive market activity. We don't know all of the specifics yet but I think that the Presidents remarks are prescient.
"I've said repeatedly that I have no interest in managing these banks -- or running auto companies or other private institutions, for that matter," Mr. Mr. Obama said. "But I also want to say: the return of these funds does not provide forgiveness for past excesses or permission for future misdeeds. It is critical that as our country emerges from this period of crisis, that we learn its lessons; that those who seek reward do not take reckless risk; that short-term gains are not pursued without regard for long-term consequences."
TARP is not gone, it is only sleeping.
Showing posts with label banks. Show all posts
Showing posts with label banks. Show all posts
Tuesday, June 9, 2009
Wednesday, April 15, 2009
Stress Tests and the Bank Situation
A good news piece from the WSJ this morning talking about the results of the Treasury's "Stress Tests" and how to handle the findings.
The Obama administration is considering making public some results of the stress tests being conducted on the country's 19 largest banks, said people familiar with the matter, a move that could help more clearly separate healthy banks from the weaklings.
Until now, the government has tried to treat all banks equally, pouring cash into both strong and struggling institutions to prop up the financial sector. The strategy has provided cover for beleaguered banks, which received funds along with their stronger brethren.
What the government has done through TARP and the capital injections has been to treat all banks that could be considered a systemic risk as though they all have, or might get the flu. The idea being that by inoculating all the banks with extra cash they will continue to lend.
This possible move, combined with first-quarter bank earnings and the push by some financial institutions to raise new capital and repay their bailout funds, could lay the groundwork for a new phase in the financial crisis. Within weeks, the stronger banks could emerge free of government shackles and flush with new funds, with weaker ones still reliant on federal largesse. That would transform how investors and the government view the financial sector.
Since announcing the stress tests earlier this year, the government hasn't made clear what, if anything, would be disclosed about the assessments. The Treasury originally suggested it would defer to individual banks to disclose results. But some regulators worried about banks selectively leaking information, causing a possible bias against rivals.
We should look at how these findings are released to investors, as we don't want to have a run on the weaker financial institutions. The truth is that we have signed up to support the flu-ridden banks until they get better. This is the fundamental problem with the intervention by the government. Banks that would have continued lending through the crisis and not over-leveraging themselves have been almost forced to over-leverage their balance sheets as the FEDS are forcing them to extend credit as a condition of the TARP funds. This is why the banks that are strong are doing everything possible to get out of TARP.
The stress tests were designed to build confidence that the nation's largest banks could weather a severe and prolonged economic downturn. Regulators are trying to determine how much assistance banks might need to continue lending in such circumstances. Banks that need more capital will get six months to raise it from private investors or take cash infusions from the government.
Banks not under the TARP protection will have an easier time raising capital than a large bank, like Citi, for instance. Investors know that the FEDS are in the capital injection game for the long-haul and are the lender of last resort. They should just drop the six months provision. They won't get the money from the market. We are trying to cure the flu with anti-biotics.
A senior U.S. Treasury official said the government will accept repayment of rescue funds from any institution whose regulator dubs it healthy enough to operate without federal capital.
The move to stop treating banks equally is sparking concern about the effect on specific institutions seen as weaker than peers. "You can create a run on a bank pretty quickly," said Eugene Ludwig, chief executive of consulting firm Promontory Financial Group and a former Comptroller of the Currency.
Of course you can create a run on a bank, just ask Chuck Schumer. However, I was under the impression that we increased the FDIC deposit insurance amount to $250,000 to prevent runs on the bank. What the government needs to do is make the "stress test" information available to the public so that they can choose what to do with their money.
Wayne Abernathy, executive vice president of financial institutions policy and regulator affairs at the American Bankers Association, said the government needs to provide information about the results but also protect examination data.
"I don't think they can ignore the appetite they have created for this information," Mr. Abernathy said. Having the government publicize some information would allow policy makers to control the message. "It's what can we say that is meaningful while still protecting the quality of that exam data," he said.
Mr. Ludwig cautioned that any information could give rise to mischief. "Bank exams are confidential for good reason," he said. "Given the kind of confidential information they contain, there is always the possibility of misuse or misinterpretation."
I fear that we will have some bad news come out of the release of the stress test results. Of course then again, the banks are lending free money so even a moron could make money, but we will see.
The Obama administration is considering making public some results of the stress tests being conducted on the country's 19 largest banks, said people familiar with the matter, a move that could help more clearly separate healthy banks from the weaklings.
Until now, the government has tried to treat all banks equally, pouring cash into both strong and struggling institutions to prop up the financial sector. The strategy has provided cover for beleaguered banks, which received funds along with their stronger brethren.
What the government has done through TARP and the capital injections has been to treat all banks that could be considered a systemic risk as though they all have, or might get the flu. The idea being that by inoculating all the banks with extra cash they will continue to lend.
This possible move, combined with first-quarter bank earnings and the push by some financial institutions to raise new capital and repay their bailout funds, could lay the groundwork for a new phase in the financial crisis. Within weeks, the stronger banks could emerge free of government shackles and flush with new funds, with weaker ones still reliant on federal largesse. That would transform how investors and the government view the financial sector.
Since announcing the stress tests earlier this year, the government hasn't made clear what, if anything, would be disclosed about the assessments. The Treasury originally suggested it would defer to individual banks to disclose results. But some regulators worried about banks selectively leaking information, causing a possible bias against rivals.
We should look at how these findings are released to investors, as we don't want to have a run on the weaker financial institutions. The truth is that we have signed up to support the flu-ridden banks until they get better. This is the fundamental problem with the intervention by the government. Banks that would have continued lending through the crisis and not over-leveraging themselves have been almost forced to over-leverage their balance sheets as the FEDS are forcing them to extend credit as a condition of the TARP funds. This is why the banks that are strong are doing everything possible to get out of TARP.
The stress tests were designed to build confidence that the nation's largest banks could weather a severe and prolonged economic downturn. Regulators are trying to determine how much assistance banks might need to continue lending in such circumstances. Banks that need more capital will get six months to raise it from private investors or take cash infusions from the government.
Banks not under the TARP protection will have an easier time raising capital than a large bank, like Citi, for instance. Investors know that the FEDS are in the capital injection game for the long-haul and are the lender of last resort. They should just drop the six months provision. They won't get the money from the market. We are trying to cure the flu with anti-biotics.
A senior U.S. Treasury official said the government will accept repayment of rescue funds from any institution whose regulator dubs it healthy enough to operate without federal capital.
The move to stop treating banks equally is sparking concern about the effect on specific institutions seen as weaker than peers. "You can create a run on a bank pretty quickly," said Eugene Ludwig, chief executive of consulting firm Promontory Financial Group and a former Comptroller of the Currency.
Of course you can create a run on a bank, just ask Chuck Schumer. However, I was under the impression that we increased the FDIC deposit insurance amount to $250,000 to prevent runs on the bank. What the government needs to do is make the "stress test" information available to the public so that they can choose what to do with their money.
Wayne Abernathy, executive vice president of financial institutions policy and regulator affairs at the American Bankers Association, said the government needs to provide information about the results but also protect examination data.
"I don't think they can ignore the appetite they have created for this information," Mr. Abernathy said. Having the government publicize some information would allow policy makers to control the message. "It's what can we say that is meaningful while still protecting the quality of that exam data," he said.
Mr. Ludwig cautioned that any information could give rise to mischief. "Bank exams are confidential for good reason," he said. "Given the kind of confidential information they contain, there is always the possibility of misuse or misinterpretation."
I fear that we will have some bad news come out of the release of the stress test results. Of course then again, the banks are lending free money so even a moron could make money, but we will see.
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