Restoring Credit and Confidence in U.S. Banks

[Guest Fed Up]

Joint Statement

 

BY Secretary of the Treasury Timothy F. Geithner, Chairman of the Board of Governors of the Federal Reserve System Ben S. Bernanke, Chairman of the Federal Deposit Insurance Corporation Sheila Bair, Comptroller of the Currency John C. Dugan, and Director Of The Office Of Thrift Supervision John M. Reich -

Financial Stability Plan

February 10, 2009

 

Today, the Department of the Treasury, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision are announcing a comprehensive set of measures to restore confidence in the strength of U.S. financial institutions and restart the critical flow of credit to households and businesses. This program will help lay the groundwork for restoring the flows of credit necessary to support recovery.

 

The core program elements include:

 

A new Capital Assistance Program to help ensure that our banking institutions have sufficient capital to withstand the challenges ahead, paired with a supervisory process to produce a more consistent and forward-looking assessment of the risks on banks' balance sheets and their potential capital needs.

A new Public-Private Investment Fund on an initial scale of up to $500 billion, with the potential to expand up to $1 trillion, to catalyze the removal of legacy assets from the balance sheets of financial institutions. This fund will combine public and private capital with government financing to help free up capital to support new lending.

A new Treasury and Federal Reserve initiative to dramatically expand – up to $1 trillion – the existing Term Asset-Backed Securities Lending Facility (TALF) in order to reduce credit spreads and restart the securitized credit markets that in recent years supported a substantial portion of lending to households, students, small businesses, and others.

An extension of the FDIC's Temporary Liquidity Guarantee Program to October 31, 2009.

A new framework of governance and oversight to help ensure that banks receiving funds are held responsible for appropriate use of those funds through stronger conditions on lending, dividends and executive compensation along with enhanced reporting to the public.

Alongside this program, the Administration will launch a comprehensive program to help address the housing crisis.

 

We will begin immediately a process of consultation designed to solicit further input from key public and private stakeholders. Details on all programs will be posted on FinancialStability.gov over the course of the next several weeks.

 

Congress has already allocated substantial resources and authority for this program through the Emergency Economic Stabilization Act (EESA). We will move ahead quickly and carefully to use the authorities provided. As we do so, we will continue to consult closely with Congress to ensure we have the resources to make this program work effectively over time. We anticipate adapting the program as we move forward.

 

New Financial Stability Trust

 

The program will consist of three elements: (1) a forward-looking assessment of the risks on bank balance sheets and their capital needs, (2) a capital program to help banks establish an additional buffer that strengthens both the amount and quality of the capital and (3) efforts to improve the disclosure of exposures on bank balance sheets. In conducting these exercises, supervisors recognize the need not to adopt an overly conservative posture or take steps that could inappropriately constrain lending.

 

Capital Assistance Program (CAP)

 

While the vast majority of U.S. banking institutions continue to exceed regulatory requirements for being well-capitalized, the highly uncertain economic environment has eroded confidence in the amount and quality of capital held by some banks.

 

As an essential part of restoring confidence in U.S. banking institutions, the supervisory agencies will undertake a coordinated and consistent capital planning exercise with each of the major U.S. banking institutions. As part of this process, supervisors will conduct a special forward-looking "stress" assessment of the losses that could occur across a range of economic scenarios, including conditions more severe than currently anticipated or than are typically used in the capital planning process.

 

This stress testing exercise will allow supervisors to determine whether an additional buffer, particularly one that strengthens the composition of capital, is needed for the bank to comfortably absorb losses and continue lending, even in a more adverse environment. Banks will be encouraged to access private markets to raise any additional capital needed to establish this buffer. However, in light of the current challenging market environment, the Treasury will make a new capital facility generally available to eligible banking institutions as a bridge to private capital until market conditions normalize.

 

This additional capital buffer is designed to help absorb larger than expected future losses and to support lending to creditworthy borrowers during an economic downturn.

 

Our expectation is that the capital provided under the CAP will be in the form of a preferred security that is convertible into common equity, with a dividend rate to be specified and a conversion price set at a modest discount from the prevailing level of the institution's stock price up to February 9th, 2009. This security would serve as a source of "contingent" common equity, convertible solely at the issuer's option for an extended period of time.

 

The instrument will be designed to give banks the incentive to replace USG-provided capital with private capital or to redeem the USG capital when conditions permit. In addition, with supervisory approval, banks will be allowed to apply to exchange the existing CPP preferred stock for the new CAP instrument.

 

By reassuring investors, creditors, and counterparties of financial institutions--as well as the institutions themselves--that there is a sufficient amount and quality of capital to withstand even a considerably weaker-than-expected economic environment, the CAP instrument should improve confidence and increase the willingness of financial institutions to lend.

 

Any capital investments made by Treasury under the CAP will be placed in a separate entity set up to manage the government's investments in US financial institutions.

 

Eligible U.S. banking institutions with assets in excess of $100 billion on a consolidated basis will be required to participate in the coordinated supervisory review process, and may access the CAP as a means to establish any necessary additional buffer. Eligible US banking institutions with consolidated assets below $100 billion may also obtain capital from the CAP. Eligibility will be consistent with the criteria and deliberative process established for identifying Qualifying Financial Institutions (QFIs) in the existing Capital Purchase Program (CPP).

 

The U.S. government has a range of other tools available for use in extraordinary circumstances to help mitigate the strains facing banks and restore confidence during this period of significant uncertainty. These tools include the provision of credit loss protection for specified asset pools held on the balance sheets of institutions as well as the guaranteeing of liabilities.

 

In pursuit of its commitment to restore and maintain the strength and stability of the U.S. financial system, the U.S. government remains committed to preventing the failure of any financial institution where that failure would pose a systemic risk to the economy.

 

Enhancing public disclosure

 

Increased transparency will facilitate more effective market discipline in financial markets. We will work with bank regulatory agencies and the Securities and Exchange Commission and accounting standard setters in their efforts to improve public disclosure by banks. This process will aim to increase the publicly available information about the range of exposures on bank balance sheets.

 

New Public-Private Investment Fund (PPIF)

 

As a complement to the CAP, the Treasury, working with the Federal Reserve, FDIC, and private investors, will create a new Public-Private Investment Fund to acquire real-estate related "legacy" assets. By selling to PPIF, financial institutions will be able to reduce balance sheet risk, support new lending and help improve overall market functioning. The PPIF facility will be sized up to $500 billion and we envision expanding the program to up to $1 trillion over time.

 

This PPIF will combine a mix of government and private capital with financing supported by the Federal Reserve and the FDIC. Designing this structure in an efficient manner will require a careful balance between the interests of taxpayers, investors, and the financial institutions, and we will continue to consult with market participants to design the best structure. The participation of private investors will help promote competitive prices that will sufficiently compensate and protect taxpayers, while providing additional risk capital to support the purchase program.

 

Temporary Financing and Direct Purchase Facilities

 

Full restoration of credit flows to households and businesses will require restarting critical segments of our financial markets, particularly securitization markets. The facilities described below are designed to improve the functioning of markets where dislocation is most acute and most detrimental to economic activity.

 

Expansion of the Term Asset-Backed Securities Lending Facility (TALF)

 

The Term Asset-Backed Securities Lending Facility (TALF) combines capital provided by the TARP with funding from the Federal Reserve in order to promote lending by increasing investor demand for securitized loans. The TALF will significantly expand the availability and reduce the cost of term financing for investors in asset-backed securities (ABS), which will stimulate demand for ABS and thereby allow originators of securitized loans to lower the cost and increase the availability of credit to consumers and businesses.

 

The Treasury and Federal Reserve have agreed to dramatically increase the size of the TALF from $200 billion to as much as $1 trillion and to expand the eligible asset classes from the current newly issued `AAA' rated ABS collateralized by credit card, auto, student, and Small Business Administration loans to include newly issued `AAA' commercial mortgage-backed securities (CMBS). In addition, the Treasury will continue to consult with the Federal Reserve regarding possible further expansion of the TALF program to include other asset classes, such as non-Agency residential mortgage-backed securities (RMBS) and assets collateralized by corporate debt.

 

This facility is designed in a way that gradually reduces its attractiveness and scale as the economy and financial conditions recover.

 

Ongoing mortgage-backed securities (MBS) and Agency Debt Purchases

 

The Federal Reserve will continue its current purchase program of Agency debt and mortgage-backed securities (MBS) on a total scale of at least $600 billion. The Federal Reserve and the Treasury stand ready to expand their MBS purchase programs as conditions warrant. These purchase programs should help to stimulate economic activity by reducing mortgage rates, thereby improving housing affordability and the demand for houses, as well as reducing interest payments and freeing up funds for households that refinance.

 

Additional tools for the Federal Reserve

 

In order for the Federal Reserve to manage monetary policy over time in a way consistent with maximum sustainable employment and price stability, it must be able to manage its balance sheet, and in particular, to control the amount of reserves that the Fed provides to the banking system. The amount of reserves is the key determinant of the interest rate that the Federal Reserve uses to pursue its monetary policy objectives. Treasury and the Federal Reserve will seek legislation to give the Federal Reserve the additional tools to enable it to manage more effectively the level of reserves.

 

Extension of Temporary Liquidity Guarantee Program (TLGP)

 

The FDIC's Temporary Liquidity Guarantee Program has contributed importantly to the gradual easing of liquidity strains on our financial institutions. Though funding conditions have eased somewhat, this temporary program will be extended for an additional four months to provide liquidity to our banks as part of this overall strategy to move our economy forward.

 

With that in mind, for an additional premium, the FDIC will extend the TLGP program through October 2009.

 

Stronger Conditions on Lending, Executive Compensation, and Reporting

 

Going forward, the Financial Stability Plan will call for a new level of transparency, accountability and conditionality with tougher standards for firms receiving exceptional assistance. These stronger conditions were informed by recommendations made by formal oversight groups – the Congressional Oversight Panel, the Special Inspector General, and the Government Accountability Office -- as well as Congressional banking oversight leaders.

 

Use of government-provided capital and impact on lending

 

Recipients of capital provided under the CAP will be required to submit a plan for how they intend to use this capital to preserve and strengthen their lending capacity – specifically, they will commit to increase lending activities above levels relative to what would have been possible without government support. This plan will be submitted during the application process, and the Treasury Department will make these plans public upon distribution of the capital investment to the firm.

 

These firms must submit to Treasury monthly or quarterly reports on their lending by category. This report will also include a comparison to estimates of what their lending would have been in the absence of government support. For public companies, similar reports will be filed on an 8K simultaneous with the filing of their 10Q and 10K reports. All these reports will be put on the Treasury website FinancialStability.gov.

 

Taxpayers' Right to Know

 

Information disclosed or reported to Treasury by recipients pursuant to the conditions and requirements announced today will be posted on FinancialStability.gov.

 

Committing recipients to mortgage foreclosure mitigation

 

All recipients of Capital Assistance Program (CAP) funds shall commit to participate in mortgage foreclosure mitigation programs consistent with guidelines we will release on industry standard best practices.

 

Restricting dividends, stock repurchases and acquisitions

 

Limiting dividends, stock repurchases and acquisitions provides assurance to taxpayers that all of the capital invested by the government under the CAP goes to improving banks' capital bases and promoting lending. Until an institution repays all funds provided to it under the CAP, it shall be:

 

Restricted from paying quarterly common stock dividend payments in excess of $0.01 per share unless approved by Treasury and the primary regulator as consistent with the firm reaching its capital planning objectives.

Restricted from repurchasing shares. Special approval for share repurchases may be granted by the Treasury Department and the banking institution's primary regulator.

Restricted from pursuing acquisitions. Banking institutions that receive CAP funds are restricted from pursuing cash acquisitions of healthy firms until the government investment is repaid. Exceptions will be made for regulator-approved restructuring plans.

Limiting executive compensation

 

Firms receiving CAP funds will be required to comply with final version of the executive compensation restrictions announced February 4th.

[Guest V]

When the Federal Reserve Banks and National Banks acquire United States Bonds and Securities, State Bonds and Securities, State Subdivision Bonds and Securities, mortgages on private Real property and mortgages on private personal property, the said banks create the money and credit upon their books by bookkeeping entry. The first time that the money comes into existence is when they create it on their bank books by bookkeeping entry. The banks create it out of nothing. No substantial fund of gold or silver is back of it, or any fund at all.

[Guest Human_*]

I'm still not investing in the stock market; I will wait till the DEMOCRATS STOP TALKING DOWN ECONOMY.

 

I have my investments insured, but I can't touch them till 2016. If I do? I will get hit hard. It's incredible!!! I'm actually worth more dead Right now than alive "Till of course 2016".

---------------------------------------------------------------------------------------------------------------------

When the Federal Reserve Banks and National Banks acquire United States Bonds and Securities, State Bonds and Securities, State Subdivision Bonds and Securities, mortgages on private Real property and mortgages on private personal property, the said banks create the money and credit upon their books by bookkeeping entry. The first time that the money comes into existence is when they create it on their bank books by bookkeeping entry. The banks create it out of nothing. No substantial fund of gold or silver is back of it, or any fund at all.

[Luke_Wilbur]

Why not give banks vouchers that expire in six months? When the banks actually give credit to small business and consumers then they can give the Federal Reserve or the Department of Treasury the vouchers in return for taxpayer money. That way we can track our taxpayer money like the stock market.

[Guest LAW_*]

The President spoke at a press conference last night on this issue:

 

Bankers and executives on Wall Street need to realize that enriching themselves on the taxpayers’ dime is inexcusable; that the days of outsized rewards and reckless speculation that puts us all at risk have to be over.

 

At the same time, the rest of us can't afford to demonize every investor or entrepreneur who seeks to make a profit. That drive is what has always fueled our prosperity, and it is what will ultimately get these banks lending and our economy moving once more.

[Guest Stephen Lendman]

Obama's Latest No Banker Left Behind Scheme

 

On Wall Street, that is. So hyped by advance fanfare, Timothy Geithner unveiled his Public-Private Investment Program (PPIP) on March 23, the latest in a growing alphabet soup of handouts topping $12.5 trillion and counting - so much in so many forms, in "gov-speak" language, with so many changing and moving parts, it's hard for experts to keep up let alone the public, except to sense something is very wrong. They're being fleeced by a finance Ponzi scheme, sheer flimflam, and here's how from what we know:

 

-- $400 billion in taking over Fannie and Freddie;

 

-- $42 billion for the auto giants; billions more coming for their suppliers;

 

-- approaching $200 billion for AIG with more coming on request;

 

-- $350 billion to Citigroup in handouts and loan guarantees;

 

-- tens of billions to other banks, including $87 billion to JP Morgan Chase for bad Lehman Brothers trades;

 

-- $700 billion for TARP I; half the money released under TARP II;

 

-- over $200 billion and counting for the Term Asset-Backed Securities Loan Facility (TALF) to extend government-guaranteed loans for investors to buy "certain AAA-rated asset-backed securities (as a) component" of the Consumer and Business Lending Initiative (CBLI), established under the Emergency Economic Stabilization Act (EESA) of 2008;

 

-- the $787 billion stimulus under the American Recovery and Relief Act of 2009 (ARRA);

 

-- around $300 billion under the Homeowner Affordability and Stability Plan (HASP) - the so-called mortgage bailout plan;

 

-- $50 billion backing for short-term corporate IOUs held by money market funds - from the Exchange Stabilization Fund (ESF), a vehicle established by a provision in the 1934 Gold Reserve Act for foreign exchange intervention to stabilize the value of the dollar;

 

-- $500 billion for various credit market rescues;

 

-- $620 billion for industrial nations' currency swaps;

 

-- $120 billion for emerging economies' currency swaps;

 

-- $1.25 trillion for Fannie and Freddie mortgage backed securities;

 

-- $200 billion for Fannie, Freddie, and Federal Home Loan Bank bonds;

 

-- way more than the announced $300 billion for longer-term Treasuries (mostly with 7 - 10 year maturities); the Fed's been buying billions of them since last year;

 

-- Fed-expanded overnight lending to $2.4 trillion - free money at 0% interest;

 

-- a reported $750 billion for banks in the FY 2010 budget - yet to be voted on and appropriated;

 

-- a proposed $470 billion increase for the FDIC to borrow from the Treasury;

 

-- perhaps hundreds of billions more in unannounced or hidden handouts in amounts and to whom the Fed and Treasury won't say; on March 14, AIG named its big counterparties for the first time with firms like Goldman Sachs, Societe Generale, Deutsche Bank, and Barclays showing up prominently; and now

 

-- PPIP - the latest gift to Wall Street courtesy of taxpayers getting none of the gain and all the pain.

 

A Treasury Fact Sheet explains it on its web site. In "gov-speak," it cites the "challenge of legacy assets" comprised of (distressed commercial and household) "loans"/mortgages and (toxic) "securities" (mortgage-backed and others) with a new Public-Private Investment Program (PPIP) in conjunction with the FDIC and Fed to finance and guarantee it. The idea is to "repair balance sheets," encourage banks to lend, and "help drive us toward recovery." It expands TALF "to bring private investors back into the market" by offering deals too sweet to pass up:

 

-- a public-private (open-ended) trillion dollar partnership with Washington contributing up to 95-97% of the cash and investors the other 3-5%;

 

-- the Fed and FDIC (through low-cost loans and guarantees) acting as middlemen to transfer "legacy asset" losses to the public while buyers get government financing and guarantees (for no-risk investments) to purchase them on the cheap for themselves and well above fair value for the banks;

 

-- PPIP particulars are for $100 billion in mostly TARP and some private capital with Fed and FDIC $500 billion in leverage financing to expand it to $1 trillion or more in purchasing power.

 

In a March 23 Wall Street Journal op-ed, Geithner called it "My Plan for Bad Bank Assets (to) increase the flow of credit and expand liquidity (and do it by) shar(ing) risk with the private sector (to) rid banks of legacy assets." These "policies will work," says Geithner, even though everything tried to date failed, and the only achievement is what they planned - the greatest ever wealth transfer in the shortest span of time, now increased by another trillion or more through PPIP and whatever else the masters of the universe have in mind.

 

"Toxic-Asset Plan Lifts Stocks," headlined the Wall Street Journal, after surging around 7% on March 23 with banks and other financials in the lead, buoyed by the prospect of more free money, hundreds of billions for the taking, and plenty more where that came from.

 

If It Works, A Win-Win for the Money Trust

 

Here's how economist Jeffrey Sachs explains it:

 

Geithner's plan will have the Fed and FDIC "subsidize investors to buy toxic assets from the banks at inflated prices." If done, it will be another in a series of massive wealth transfers in the hundreds of billions of dollars "to bank shareholders from taxpayers." If investors incur losses, the Fed and FDIC will absorb them, meaning heads or tails they win.

 

"The investment funds will have the following balance sheet. For every $1 of toxic assets (bought), the FDIC will lend up to 85.7 cents, and the Treasury and private investors (only) 7.15 cents in equity to cover the remaining balance. FDIC loans will be non-recourse, meaning that if the toxic assets (bought) fall in value below the amount of FDIC loans, the investment funds will default on the loans and the FDIC will end up holding the toxic assets...."

 

In other words, "The FDIC is giving a 'heads you win, tails the taxpayer loses' offer to private investors.' " Economist Paul Krugman agrees calling it a one-way bet, "a disguised way to subsidize purchases of bad assets."

 

Economist James Galbraith calls it another massive "ineffective" giveaway to banks with taxpayers getting hosed from a repackaged trash removal scheme that's been around since last fall when Geithner, as New York Fed president, planned it with Wall Street CEOs. They see it as a temporary liquidity problem (which it's not) so the idea is to clean up the system and get banks lending again. But here's the rub:

 

"If Geithner's plan to fix the banks would also fix the economy," maybe the idea makes sense. "But no smart economist we know thinks that it will." It's a giant swindle, but that aside, Geithner has "five fundamental misconceptions:"

 

(1) The trouble with the economy is that banks aren't lending, he says.

 

In fact, it's because businesses and mainly households are way over-extended and "are now collapsing under the weight of it. As consumers retrench (of necessity), companies that sell to them (must also), thus exacerbating the problem. The banks, meanwhile, are lending," just not as much as they used to.

 

"Also, the shadow banking system (securitization markets), which actually provided more funding to the economy than the banks, has collapsed."

 

(2) The banks aren't lending because their balance sheets are loaded with 'bad assets.'

 

In fact, "banks aren't lending (enough) because they have decided to stop making loans to people and companies who can't pay them back" or don't want more loans in the first place. They're also scared that new debt will cause more write-offs, greater losses, and the threat they'll be wiped out entirely. So their strategy is hunker down and wait for a better time to do business.

 

(3) Bad assets are "bad" because the market doesn't understand how much they're really worth.

 

In fact, they're bad because "they are worth (lots) less than banks say they are." A major factor is the near-30% drop in house prices wiping out over $5 trillion in valuations. Lenders want households to take losses because if they do it themselves they'll be wiped out. So PPIP arranges it for them.

 

(4) Once "bad assets" are off balance sheets, banks will start lending again.

 

In fact, banks will stay cautious until the housing market and economy improve. So far, that's nowhere in sight.

 

(5) Once banks start lending, the economy will recover.

 

In fact, house prices are falling, savings have been wiped out, huge job losses are continuing, and "consumers will have debt coming out of their ears" that will take years to work off.

 

Geithner's plan just shifts debt from lenders to taxpayers "where it will sit until the government finally admits that a major portion will never be paid back." Galbraith's conclusion: Geithner's plan is "extremely dangerous" besides being a scam to cheat the public. Why does Wall Street love it? Because it wrote it in the first place, so the whole scheme is arranged for its benefit - if it works.

 

It's a big "if" as investors want the lowest possible prices and banks the highest. The question is will they compromise and for what - the better quality junk investors want or the most toxic stuff banks want to offload for whatever they can get.

 

Even a Wall Street Journal editorial raised doubts about "Geithner's Asset Play. At least it's an attempt to clean up bank balance sheets," it said, but hold the cheers. "The best news (is that Geithner has) a strategy. The uncertainty was almost as toxic as those securities. Now all (he) has to do is find private investors willing to 'partner' with the feds to bid for those rotten assets, coax the banks to sell them at a loss, and hope the economy doesn't keep falling...."

 

"Other than that, general, how (did) the siege of Moscow" go?

 

In a front of the paper article, a trio of Journal writers said "visions of vilification of Wall Street executives on Capitol Hill remain fresh in the minds of potential (bad asset) buyers....numerous (ones) express(ing) concern that they, too, might be hauled before Congress for a grilling, or be subjected to new taxes if they profit from partnerships with the federal government."

 

They quoted Washington lobbyist, Lendall Porterfield, whose clients include hedge funds and banks, saying: "There are still some very serious reservations about doing business with the government, because you don't know what the rules may be tomorrow, next week or next month."

 

Economist Nouriel Roubini wants two firmly in place:

 

-- force banks to sell toxic assets at true value and take the losses; and

 

-- shut down the insolvent ones.

 

For his part, Financial Times writer Martin Wolf expressed deep concerns about PPIP in his March 25 column headlined: "Successful bank rescue still far away." He's "ever more worried" and says why:

 

-- he expected a "popular new president to be decisive;"

 

-- he fears a "Congress indulging in a populist frenzy" and an administration "hoping for the best;"

 

-- instead of letting businesses succeed or fail on their own, "bailouts have poured staggering sums into the failed institutions that brought the economy down;"

 

-- PPIP is a "vulture (investor) relief scheme," cash for trash, with Washington putting up most of the money, bearing nearly all the risk, while private parties get all the gain - if the plan works;

 

-- PPIP masks a "more fundamental problem" of "chronic under-capitalization of US finance" and it may make achieving it harder - given growing public anger, a "timid" president, Congress on the "warpath," and being less likely to put up the kind of money needed to do it;

 

-- enriching vulture investors may "convince ordinary Americans that their government is a racket run for the benefit of Wall Street;" and

 

-- when all is said and done, PPIP may not work.

 

As a result, "Nobody can be confident that the US yet has a workable solution to its banking disaster....If this is not frightening, I do not know what is."

 

Economist Jack Rasmus calls PPIP a "win they win vs. lose they win proposition -- i.e. free money with which to leverage to make even more money" with government taking nearly all the risk. It's "an offer that no capitalist speculator could ever refuse" with nothing for the public except the bill.

 

It's why Dean Baker, co-director of the Center for Economic and Policy Research, called it "another Rube Goldberg contraption intended to funnel taxpayer dollars to bankrupt banks...." However, the process plays out, "much of the toxic waste (will) stay on the banks' books (since it's) likely that the gap between the asking price and the offer (won't) be closed for a large portion of these assets, even with the government subsidy."

 

So what's next? "The Obama administration will be forced to go to Congress with yet another bailout proposal. (It's) hard to understand this plan as anything other than a last ditch effort to save Wall Street banks. (Obama) seems prepared to risk his presidency on their behalf" and odds are he'll lose.

 

Whatever happens going forward, the uncertainties and dangers are enormous:

 

-- Eurointelligence refers to "Geithner's trillion dollar gamble" despite the positive market reaction;

 

-- will taxpayers stand for it, how long, and at what cost;

 

-- will enough buyers settle for the best deals they can get, and/or will banks compromise enough to matter; put another way - will government "grease" attract enough buyers willing to invest at valuations banks will accept; so far, they've stubbornly refused to take losses, preferring instead to keep junk on their books at fictitious values hoping eventually they'll be real or close enough; another disincentive is talk that the Financial Accounting Standards Board (FASB) will ease mark-to-market accounting rules to legitimize fake values;

 

-- whatever they do, can banks offload enough to matter or are they so over-indebted that nothing can work;

 

-- how much in the way of deficits, money printing and dollar debasing can the nation stand, and how long will sovereign and private debt buyers put up with it;

 

-- going forward, how many banks are too weak to survive no matter what's done to save them - that is, ones big enough to matter (like Citigroup), not others targeted to be bought up or closed down - and globally that's what's behind this scheme in the first place;

 

-- what about the CEOs that caused the global crisis and left their banks insolvent; issues of fraud and bailouts aside, why weren't they fired long ago; why are they still in charge drawing big salaries and bonuses; why wasn't the main demand to fire these guys and replace them with responsible managers; and

 

-- skeptics call Geithner's plan much like Paulson's, except for some differences in details.

 

On March 24, Dan Roberts in the London Guardian headlined: "US follows UK - on the wrong road." Geithner's plan "aims to achieve roughly the same as the British government's (bad loans) insurance for the Royal Bank of Scotland and Lloyds. So how do the two schemes compare?"

 

Details aside, they "work on the same principle: that banks will (behave) normally again and (benefit) the economy (once) they're protected from past mistakes. But these responses underestimate the scale of the crisis." Geithner's plan covers not just toxic assets but many ordinary bank loans as well.

 

"Similarly, the assets put forward by Lloyds in the UK insurance scheme include every buy-to-let mortgage issued by HBOS, not just the ones already in default. Judge the banks on their actions (not just their words), and you would conclude this crisis has some way to go. Yet both governments assume banks (suffer) from a crisis of confidence (simply cured) by removing (toxic debt) uncertainty. What neither seems willing to acknowledge is the likelihood that much of their lending has gone for good; that this is not a liquidity crisis, but a solvency (one)." Britain's plan didn't work and neither will Washington's.

 

No comment from the Journal except to say: "Whatever the Geithner plan's pitfalls, we sincerely hope it works. The feds so thoroughly botched the TARP and (other) bailouts that Treasury has few options left."

 

Indeed so. No accounting magic can erase losses, inspire investors, and turn a sick economy around. Especially since all Washington schemes make it sicker, and now Geithner's thrown more fuel on the fire. Problem one is reducing the huge debt overhang and helping beleaguered households. His solutions:

 

-- help Wall Street, not people and

 

-- pile on more debt but hope bank "operating" results improve enough to create an illusion of recovery.

 

It won't work, and at the same time, the latest Fed Flow of Funds data show trillions in vanished household wealth - $12.9 trillion from real estate, savings, investments, and other personal losses. So while insolvent banks are partying, the crisis is deepening. It's far from being resolved, at best has a long way to run, so Bank of America's Richard Bernstein advised clients to sell bank stocks after their rally because PPIP won't stop their profits from falling.

 

Worse still, according to financial expert and investor safety advocate Martin Weiss, Washington greatly underestimates the "magnitude of the debt crisis." He cites the following:

 

-- the current FDIC "Problem List" includes 252 banks with $159 billion in assets;

 

-- from his analysis, he lists 1568 troubled banks and thrifts by name with $2.32 trillion "at risk of failure" - because of "weak capital, asset quality, earnings, and other factors;"

 

Last year when TARP was announced, Treasury officials thought it would stabilize the economy and improve the health of recipients like Citigroup. However, it quickly learned that Citi and other major banks needed emergency capital to keep from collapsing - for their credit default swap (CDS) problems alone.

 

AIG's $2 trillion CDS portfolio triggered a government takeover, but it's not alone. Citi has $2.9 trillion, JP Morgan Chase $9.2 trillion, and the Bank of International Settlements reports a global $57 trillion burden, much of it toxic and plenty to sink holders of enough of it.

 

The problem in America is so great that "the money available to the government is too small for a crisis of these dimensions." Forced mergers, buyouts and handouts have done "little more than shift toxic assets like DDT up the food chain." Further, Washington's "promises to buy up the toxic paper have done little more than encourage banks to hold on, piling up even bigger losses."

 

Another CDS is also worrisome, one no one talks about but should, on US sovereign debt - Treasury bills, notes and bonds. "A small but growing number of investors are not only thinking the unthinkable, they're actually spending money on it, bidding up the premiums on Treasury bond (CDSs) to 14 times their 2007 level" because they're worried about the Treasury's credibility and borrowing power.

 

Their message is clear and important - "there's no free lunch; the government (can't) bail out every failing giant with no consequences; and contrary to popular belief, even Uncle Sam must face his day of reckoning with creditors."

 

Also, "the public knows intuitively that (too much debt) got us into trouble. Yet the solution being offered is to encourage banks to lend more and people to (save less and) borrow (and spend) more." The only way forward is to change course because there's "no other choice....We have to bite the bullet, pay the penalty for our past mistakes," and make hard sacrifices for a sound recovery.

 

That includes shuttering insolvent banks and other companies (even big ones), not bail them out. Even Kansas City Fed president Thomas Hoenig recommends that:

 

"public authorities....declare any financial institution insolvent whenever its capital level falls too low to support its ongoing operations and claims against it, or whenever the market loses confidence in the firm and refuses to provide funding and capital."

 

The wrong choices are trillions more in handouts, reckless money creation, dollar debasing, and an eventual inflation destroying the purchasing power for millions. So far, that's where Congress and Obama's money managers are heading us, and already the bill for their actions is past due.

[Guest LAW_*]

Goldman Sachs Prices $5 Billion Public Offering of Common Equity

 

The Goldman Sachs Group, Inc. (NYSE: GS) announced today that it has priced a public offering of 40,650,407 shares of its common stock at a price to the public of $123.00 per share for total gross proceeds of approximately $5 billion. In addition, Goldman, Sachs & Co., the sole underwriter, has an option to purchase up to an additional 6,097,561 shares of common stock to the extent that it sells more than 40,650,407 shares.

 

Goldman Sachs reported net revenues of $9.43 billion and net earnings of $1.81 billion for its first quarter ended March 27, 2009.

 

Goldman Sachs ranked first in worldwide completed mergers and acquisitions for the calendar year-to-date.

 

Fixed income, Currency and Commodities (FICC) generated record quarterly net revenues of $6.56 billion, 34% higher than its previous record, reflecting strength accross most businesses, including record results in interest rate products and commodities.

 

The firm's average global core excess liquidity was 163.74 billion for the first quarter of 2009, up from $111.43 billion for the fourth quarter of 2008.

 

Given the difficult market conditions, we are pleased with this quarter's performance. Our results reflect the strength and diversity of our client franchise, the resilience of our business model and the dedication and focus of our people. - Lloyd C. Blankfein, Chairman and Chief Executive Officer.

 

Investment Banking

 

Net revenues in Investment Banking were $823 million, 30% lower than the first quarter of 2008 abd 20% lower than the fourth quarter of 2008.

 

Net revenues in Financial Advisory were $527 million, 21% lower than the first quarter of 2008, reflecting lower levels of deal activity.

 

Net revenues in equity underwriting were significantly lower, primarly reflecting a significant decline in industry-wide equity and equity-related offerings.

 

Trading and Principal Investments

 

Net revenues in Trading and Principal Investments were $7.15 billion, compared with net revenues of $5.12 billion for the first quarter of 2008 and negative net revenues of $4.36 billion for the fourth quarter of 2008.

 

Net revenues in FICC were $6.56 billion, more than double the amount in the first quarter of 2008. These results reflected particularly strong performance in interest rate products, commodities and credit products, as FICC operated in a generally favorable environment characterized by client-driven activity, particularly in more liquid products, and high levels of volatility.

 

In the first quarter of 2008, credit products included a loss of approx. $1 billion, net of hedges, related to non-investment-grade credit origination activities, and mortgages included a net loss of approx. $1 billion on residential mortgage loans and securities.

 

Principal investments recorded a net loss of $1.41 billion for the first quarter of 2009. These results included net losses of $640 million from real estate principal investments and $621 million from corporate principal investments, a well as $151 million loss related to the firm's investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC).

[Guest LAW_*]

Bank of America Corporation today reported first-quarter 2009 net income of $4.2 billion. After preferred dividends, including $402 million paid to the U.S. government, diluted earnings per share were $0.44.

 

Those results compared with net income of $1.2 billion, or diluted earnings per share of $0.23 after preferred dividends, during the same period last year.

 

Results for the quarter include Merrill Lynch & Co., which Bank of America purchased on January 1, 2009, and Countrywide Financial, which was acquired on July 1, 2008. Merrill Lynch contributed $3.7 billion to net income, excluding certain merger costs, on strong capital markets revenue. Countrywide also added to net income as mortgage lending and refinancing volume increased. The year-ago period does not include Merrill Lynch and Countrywide results.

 

The company also took several actions in the quarter to enhance its capital and liquidity position, including strengthening its loan loss reserves and building its cash position.

 

"The fact that we were able to post strong, positive net income for the quarter is extremely welcome news in this environment," said Kenneth D. Lewis, chairman and chief executive officer. "It shows the power of our diversified business model as well as the ability of our associates to execute. We are especially gratified that our new teammates at Countrywide and Merrill Lynch had outstanding performance that contributed significantly to our success."

 

However, we understand that we continue to face extremely difficult challenges primarily from deteriorating credit quality driven by weakness in the economy and growing unemployment," Lewis said. "Our company continues to be a solid contributor to the effort to revitalize the U.S. economy through our industry-leading efforts to reform mortgage lending, restructure home loans where appropriate and mitigate foreclosures wherever possible. We look forward to continuing that role."

 

First Quarter 2009 Business Highlights

 

Bank of America Merrill Lynch was No. 2 in global and U.S. investment banking fees during the quarter and based on volume was No. 1 in U.S. equity capital markets, No. 1 in U.S. high yield debt, leveraged and syndicated loans, and was a top-five advisor on mergers and acquisitions globally and in the U.S., according to first-quarter league tables.

 

Bank of America funded $85 billion in first mortgages, helping more than 382,000 people either purchase a home or refinance their existing mortgage. Approximately 25 percent were for purchases.

 

Credit extended during the quarter, including commercial renewals of $44.3 billion, was $183.1 billion compared with $180.8 billion in the fourth quarter. New credit included $85.2 billion in mortgages, $70.9 billion in commercial non-real estate, $11.2 billion in commercial real estate, $5.5 billion in domestic and small business card, $4.0 billion in home equity products and $6.3 billion in other consumer credit. Excluding commercial renewals, new credit extended during the period was $138.8 billion compared with more than $115 billion in the fourth quarter.

 

During the first quarter, Small Business Banking extended more than $720 million in new credit comprised of credit cards, loans and lines of credit to more than 45,000 new customers.

 

The company originated $16 billion in mortgages made to 102,000 low- and moderate-income borrowers.

 

To meet rising refinancing and first mortgage application volume, the company is in the process of adding approximately 5,000 positions in fulfillment. In addition, the company has more than 6,400 associates in place to address increasing needs from consumers for assistance with loan modifications.

 

To help homeowners avoid foreclosure, Bank of America modified nearly 119,000 home loans during the quarter. Last year, the company embarked on a loan modification program projected to modify over $100 billion in loans to help keep up to 630,000 borrowers in their homes. The centerpiece of the program is a proactive loan modification process to provide relief to eligible borrowers who are seriously delinquent or are likely to become seriously delinquent as a result of loan features, such as rate resets or payment recasts. In some instances, innovative new approaches will be employed to include automatic streamlined loan modifications across certain classes of borrowers. Also during the first quarter, the company began a new program that utilizes affordability measures to qualify borrowers for loan modifications.

 

Average retail deposits in the quarter increased $140.0 billion, or 27 percent, from a year earlier, including $107.3 billion in balances from Countrywide and Merrill Lynch. Excluding Countrywide and Merrill Lynch, Bank of America grew retail deposits $32.7 billion, or 6 percent, from the year-ago quarter.

 

 

 

Transition Update

 

 

The Merrill Lynch integration is on track and expected to meet targeted cost savings. Senior- and middle-management appointments have been made across all lines of business, including the complete integration of global research, and the combination of a large number of client-facing teams in corporate and investment banking and Global Markets is in place.

 

 

Merrill Lynch financial advisors and Bank of America are engaged in client referrals. Merrill Lynch financial advisors are in the process of integrating Bank of America's broad product set to offer clients. The business has had early success with a sales program for certificates of deposit, which booked more than $135 million in CDs in Florida alone. The program soon will be rolled out nationally.

 

 

Bank of America and Merrill Lynch investment banking teams worked jointly, providing advice and financing on numerous transactions in the quarter.

 

 

The Countrywide transition is on track. Cost savings from the acquisition are ahead of schedule.

 

 

Later this month, the company will introduce the Bank of America Home Loans and Insurance brand to consumers.

 

 

First Quarter 2009 Financial Summary

 

 

Revenue and Expense

 

 

Revenue net of interest expense on a fully taxable-equivalent basis more than doubled to a record $36.1 billion from a year ago.

 

 

Net interest income on a fully taxable-equivalent basis rose 25 percent to $12.8 billion from $10.3 billion in the first quarter of 2008 due to an improved rate environment, the addition of Countrywide and Merrill Lynch and an increase in market-based net interest income. These improvements were impacted by the sale of securities and higher funding costs related to an increase in long-term debt. The net interest yield declined three basis points to 2.70 percent due to lower-yielding assets associated with the acquisitions during the past year.

 

 

Noninterest income rose more than threefold to $23.3 billion compared with a year earlier. Increases in trading account profits, investment and brokerage services, gains on sales of debt securities and other income reflected the addition of Merrill Lynch while growth in mortgage banking income reflected the Countrywide acquisition and higher mortgage activity due to lower interest rates. Equity investment income includes a $1.9 billion pretax gain on the sale of China Construction Bank (CCB) shares. Bank of America continues to own approximately 17 percent of the common shares of CCB. These increases were partially offset by lower card income due to higher credit costs on securitized credit card loans and lower revenues.

 

 

Noninterest income included $2.2 billion in gains related to mark-to-market adjustments on certain Merrill Lynch structured notes as a result of credit spreads widening.

 

 

Noninterest expense increased to $17.0 billion from $9.3 billion a year earlier. Higher personnel and general operating expenses, driven in part by the Merrill Lynch and Countrywide acquisitions, contributed $6.4 billion of the increase. Pretax merger and restructuring charges related to acquisitions rose to $765 million from $170 million a year earlier.

 

 

The efficiency ratio on a fully taxable-equivalent basis was 47.12 percent compared with 53.32 percent a year earlier. Pretax, pre-provision income on fully taxable-equivalent basis was a record $19.1 billion.

 

 

Credit Quality

 

 

Credit quality deteriorated further across all lines of business as housing prices continued to fall and the economic environment weakened. Consumers are under significant stress from rising unemployment and underemployment levels. These conditions led to higher losses in almost all consumer portfolios.

 

 

Declining home values, reduced spending by consumers and businesses and continued turmoil in the financial markets negatively impacted the commercial portfolio. Commercial losses increased from the prior quarter driven by higher broad-based losses in the non-homebuilder portion of the real estate portfolio within Global Banking and the small business portfolio within Global Card Services.

 

 

The provision for credit losses of $13.4 billion rose from $8.5 billion in the fourth quarter and included a $6.4 billion net addition to the allowance for loan and lease losses. Reserves were added across most consumer portfolios reflecting increasing economic stress on consumers. Reserves were also increased on commercial portfolios. Nonperforming assets were $25.7 billion compared with $18.2 billion at December 31, 2008 and $7.8 billion at March 31, 2008, reflecting the continued deterioration in portfolios tied to housing. The 2009 coverage ratios and amounts shown in the following table include Merrill Lynch.

[Guest Martin Carbone]

Local government can make billions of dollars / year by operating local, Narrow, State-chartered, 4% mortgage banks

 

THIS BANKING PLAN, IN AN EXPANDED FORM, WILL REDUCE AMERICAN HOME-OWNERS MORTGAGE PAYMENTS BY $66 BILLION / YEAR AND GENERATE OVER $100 BILLION / YEAR IN PROFITS THAT CAN BE SPENT BY LOCAL GOVERNMENTS TO IMPROVE THE LIVES OF ALL TAXPAYERS.

 

The plan presented at the link is a modest starting version of the plan for a Community banking plan that will generate $66 Billion to help Americans live better.

http://www.primeronmoney.com/howtosolve.html

 

The plan tells how to easily solve our Money and Banking problems — It is an original, extremely simple plan that needs no new laws — just good management and control of a slightly altered banking system (banks will not be allowed to sell-off their loans). A plan is presented whereby local governments will (a) start ( 4,000 © Narrow, State-Chartered, Community Banks which will (d) specialize in giving 4% mortgage loans in (e) accordance with the Fractional Reserve banking system we have now. This plan pencils-out to a profit of $66 Billion / year that can be used to improve the lives of those people living near the 4,000 banks, which will each, on the average, serve 75,000 American home-owners with 5,000, 4% mortgages.

 

Supporting data — There are currently about $3.6 Trillion of real estate loans currently in existence in the United States. If each loan is covered by 6% mortgages — the current interest on those loans is about $200 Billion / year. If those mortgages are reduced to 4%, that will save the home-owners about $66 billion / year — resulting in interest payments reduced to $133 Billion / year. In addition, if those banks are operated by efficient State-chartered narrow banks run by local governments, they will generate profits of well over $100 Billion / year that can be used by the local government to improve the lives of all citizen / taxpayers.

[Guest LPAC]

Today, the House of Representatives was scheduled to vote on the anti-fraud bill passed by the Senate, which included two amendments to investigate financial crimes: the Dorgan (D-N. Dak.)-McCain (R-Ariz.) amendment, calling for a Senate Select "Pecora" Committee with subpoena powers, and the Isakson (R-Ga.)-Conrad (D-N.Dak.) amendment, calling for an irrelevant and independent "911 Commission" to investigate, and report back to Congress on Dec. 15, 2010.

 

According to conservative Republican Rep. Darrell Issa's (Calif.) spokesman, Pelosi negotiated the Dorgan amendment out of the bill before it went to the House Floor. The Isakson-Conrad "Commission" amendment passed 367-59; all 59 opposed were Republicans. Pelosi agreed with Issa on a Presidential Commission modeled on the 9/11 Commission, which is the Senate Isakson-Conrad amendment. The bill passed by the House today goes to House-Senate conference committee.

 

The 10 members of the Commission will be chosen by eight members of the Congressional leadership. Among the eight, Sen. Richard Shelby (R-Ala.), the Ranking Member of the Senate Banking Committee, is the only one who has called for—and still demands—a real Pecora investigation in the Senate Banking Committee, where the original Pecora investigation was held. The other seven have defended the financial predators from investigation, and bailed them out at the expense of the American people. The appointments are to be made by Pelosi and Senate Majority Leader Harry Reid (two commissioners each); House Minority Leader John Boehner (R-Ohio); Senate Minority Leader Mitch McConnell (R-Ken.); Senate Banking Chair Chris Dodd (D-Conn.); House Financial Services Committee Chair Barney Frank (D-Mass.), Ranking Member Spencer Bachus (R-Ala.), and Shelby.

[Guest DC Geek]

I thought you guys would like this link.

 

http://www.ffiec.gov/nicpubweb/nicweb/Top50Form.aspx

 

It has great information on the top 50 banks in the United States.

[Guest Rainer Roth]

To protect the real economy from infection by the financial market crisis, trust in the banking system must be restored.” But can the real- and financial-economy be kept apart? Industrial corporations or conglomerates manage vast capital surpluses. The capital excesses that inflate the financial market are produced in the so-called real economy. Banks, insurances and pension funds have the money of businesses and private households that are excess, that is temporarily or permanently fallow in the reproduction of capital. Reflecting the close connection of the financial- and real-economy, the supposedly solid real economy could not have realized growth rates of the last economic cycle without the enormous expansion of indebtedness, financial markets and the fraud profits from the real estate- and stock market bubbles. The explosion of the money supply, an indirect consequence of the demand for credit furthered production. As long as business was hunky-dory, the representatives of the “real economy” and their social partners did not complain and even praised the US as the land of low interests.

 

Credit-doping is possible through the credit surplus of the real economy produced the heyday of the real economy. But it is also one cause of this deep present-day crisis. Production exceeded society’s consumption capacity on account of production by private owners for unknown markets. The credit demands that gave wings to the real economy grew far beyond the real solvency of society and now must be written-off in the trillions. Credit, an indispensable component of the real economy, leads to profound shocks to current production as the financial crisis shows.

 

The present financial system as constructed cannot continue. What must be urgently changed?

 

The most important reality that determines whether the banks can be responsible for their losses without state aid is their own capital. The less is their own capital, the more banks need state assistance. They want to assume as little responsibility as possible for the incurred risks. The state should assume these risks.

 

The capital of US commercial banks came to $1.3 trillion at the end of 2008 and the balance sums $12.4 trillion. Thus the ratio of their own capital to their balance sums amounted to 9.7 percent.

 

“…If a bank went bust, the investors and holders of bank loans would have to shoulder part of the losses, which could trigger a chain reaction” (Frankfurter Allgemeiner Zeitung) Demands like the following result: The capital holding requirement for investment banking must be raised considerably, perhaps to 20 percent of the total balance sum, not only to the risk-adjusted balance sum. That was in effect up to the 1940s.

 

The deposit security fund of private banks is so outfitted that the banks could actually answer together for bankruptcies and not the sate.

 

Guaranteeing credits should be prohibited and their insurance by buyers of negotiable credit insurance securities, which are not liquid in the insurance case.

 

Hedge funds and holding companies must be closed or if not closed subject to the same capital holding requirements as banks.

 

Trade with financial products like stocks, currencies and so on must be covered with a value-added tax. Taxing the sale of a stock, not the purchase of bread, is crucial.

 

All capital transactions with tax havens should be prohibited

[Guest Carolyn Kemp]

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending August 21, 2009. The Market Composite Index, a measure of mortgage loan application volume, increased 7.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 6.3 percent compared with the previous week and 34.1 percent compared with the same week one year earlier.

The Refinance Index increased 12.7 percent from the previous week, the third increase in the last four weeks. The seasonally adjusted Purchase Index increased 1.0 percent from one week earlier, solely boosted by increased demand for government loans. This marks the fourth consecutive weekly gain – the first time this has happened since March, when fixed mortgage rates first dropped and stayed below 5 percent.

 

The four week moving average for the seasonally adjusted Market Index is up 3.5 percent. The four week moving average is up 1.7 percent for the seasonally adjusted Purchase Index, while this average is up 4.8 percent for the Refinance Index.

 

The refinance share of mortgage activity increased to 56.5 percent of total applications from 53.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged from the previous week at 6.5 percent of total applications.

 

The average contract interest rate for 30-year fixed-rate mortgages increased to 5.24 percent from 5.15 percent, with points increasing to 1.07 from 0.98 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

 

The average contract interest rate for 15-year fixed-rate mortgages increased to 4.58 percent from 4.52 percent, with points increasing to 1.18 from 0.93 (including the origination fee) for 80 percent LTV loans.

 

The average contract interest rate for one-year ARMs increased to 6.74 percent from 6.66 percent, with points increasing to 0.17 from 0.07 (including the origination fee) for 80 percent LTV loans.

[Guest Blue Dog]

Here's another crucial piece of fallout from all of this bubble-driven speculation, one that has been particularly damaging to the middle class: financial bubbles are associated with income growth bypassing low- and middle-income families and accumulating at the very top of the income scale. Before the crash, in 2007, the wealthiest 1% of households received 23.5% of all income, the highest share on record going back to the early 1900s. But there was one ominous exception: 1928, the year before the crash that began the Great Depression, when 23.9% of the income went to the top 1%. That bubble didn’t end too well either, as you may have heard.

 

This kind of abuse is a big problem for middle-class families. During the housing bubble, banks and mortgage lenders routinely drew families into mortgages they didn’t understand and couldn’t afford. Some of these mortgages looked affordable at first, but their interest rates skyrocketed after a few years; others gave homeowners the option of interest-only payments for the first few years, without mentioning that this "option" had a good chance of leaving the homeowner with an underwater and unaffordable mortgage a few years down the road.

 

A new consumer protection agency will if created, enforce fair rules to eliminate the misleading terms, hidden fees, and exploding interest rates that some banks use to pad their profit margins at the expense of ordinary Americans.

 

The Consumer Financial Protection Agency will also regulate the practice of charging exorbitant hidden fees on credit and debit cards. For years, rather than seeing genuinely transparent competition on price and service, we’ve seen banks seeking to profit from credit card lines by burying fees in the fine print. For example, banks will make $27 billion this year just from the overdraft fees they charge on debit cards. We want to stop the practice of charging misleading or abusive hidden fees so that consumers know what they’ll be paying and can choose the product that offers the best price and terms.

[Guest Tula]

When you’re a member of the American Bankers Association (ABA) meeting in Chicago amid the worst U.S. jobless crisis and most disastrous economy since the 1930s Depression, what’s the logical move to make?

 

Dress up in a Roaring ’20s costume and party like it’s 1929.

 

Proving yet again that not only do taxpayer-bailed-out CEOs have no shame, word has it that they plan to flaunt their taxpayer-fueled wealth in our faces, the American Bankers Association is sponsoring its Roaring ’20s party in conjunction with its Oct. 27–29 meeting.

 

Thousands of mad-as-hell Americans will be rallying outside the ABA party on Oct. 27, demanding financial reform and re-regulation that will allow us to rebuild our communities, our lives and our economy.

 

(If you’re in Chicago, join us Oct. 27 at 10:30 a.m. CST. The march departs from the corner of East Wacker Drive and Stetson Avenue. After about a 15-minute march, the rally will be outside the Sheraton Chicago Hotel & Towers at 301 E. North Water St.)

 

Because when they’re not stocking up on Jay and Daisy attire, Big Bankers and financial institutions are using the $700 billion in taxpayer bailout money to attack proposals like the Consumer Financial Protection Agency that would actually help working people while decreasing the chance of another Big Bank-fueled financial meltdown. Of course, they’re not using all of our money to fight reform. Some of it—about $7 billion—is going to bonuses for top CEOs.

[Guest DOJ]

Attorney General Eric Holder at the Forum Club of the Palm Beaches

 

One of the greatest and most glaring threats facing our economy is the presence of financial fraud, particularly in our securities and financial markets.

 

Across numerous administrations, Democratic and Republican alike, the Department of Justice has worked hard to combat financial fraud and to recover ill-gotten gains for the benefit of those victimized by fraud. Despite these efforts, however, we know that financial fraud persists. Just this week, The Wall Street Journal reported that “crisis and fraud in the securities and investment banking industries are at their highest levels since records began.”

 

The simple truth is that financial crimes have become all too common. And the consequences of these schemes and scams are real, as this community knows all too well. Palm Beach is, in many respects, ground zero for the $65-billion Ponzi scheme perpetrated by Bernard Madoff -- the largest investor fraud case in our nation’s history.

 

Before the house of cards Madoff built collapsed in 2008, before he was sentenced to 150 years in prison last June, before he became a notorious criminal on the cover of newspapers around the world, he was one of your neighbors.

 

His former home sits just north of us. An 8,700 square-foot mansion that’s worth …. Well, we’ll know what its worth once the U.S. Marshals Service auctions it off and the proceeds are distributed to Madoff’s victims.

 

We all look forward to that day. But we also know that we are unlikely ever to recover all of the money that Madoff stole. And as a result of his crimes, too many people who once dreamed of retirement now fear that they will become burdens upon their families. Too many who once looked forward to the future now fear it. Too many promises can no longer be kept -- promises made to charities and schools, to churches and synagogues, to children and grandchildren.

 

The ripple effect of Mr. Madoff’s greed and deception is as breathtaking as it is heartbreaking. Unfortunately, his crimes, as significant as they were, merely represent a much larger problem, a problem that was brought into stark focus over the last year. In times of recession, when every dollar counts and each dollar is counted, financial wrongdoing comes to light. Unbalanced books are revealed. Pyramid schemes collapse.

 

Last year, Allen Stanford, Tom Petters and, most recently, Fort Lauderdale attorney Scott Rothstein – who is alleged to have run a $1 billion investment scam – joined Bernie Madoff in becoming headline news and household names. I’m proud that these men, along with more than 450 others convicted of corporate and securities fraud in 2009, have been taken out of the game. And I’m heartened that the Department of Justice, at last count, is moving forward on more than 5,000 pending Financial Institution Fraud cases.

 

But I also realize that this is just a snapshot of what we’re up against.

 

So how do we address a problem of such seriousness, size, and scope? We need a bold strategy equal to the challenge – a comprehensive, coordinated plan of action that strikes at the core of financial fraud schemes wherever they may be found.

 

This is precisely what our new, national effort will accomplish. The Department of Justice, working in concert with the White House and a network of government agencies, will use every tool at our disposal – including new resources, advanced technologies and communications capabilities, and the very best talent we have – to prevent, prosecute and punish financial fraud.

 

The cornerstone of this work is a new, interagency Financial Fraud Enforcement Task Force. This task force was established by Executive Order of the President. It was launched recently and is led by the Department of Justice.

 

In establishing the new entity, President Obama recognized that mortgage, securities and corporate fraud schemes have eroded public confidence – both at home and abroad – in the strength and integrity of America’s markets. These crimes have only added to the challenges we face in overcoming the financial crisis that has gripped our economy for the past two years. And they have led to a growing sentiment that Wall Street does not play by the same rules as Main Street.

 

These crimes have devastated and driven away many who were once willing to invest in our economy. They’ve robbed people of their homes and their economic security. They’ve depleted bank accounts and pension funds. In some places, they’ve dried up philanthropic giving and shuttered charities. They’ve placed unfair challenges before cash-strapped governments, local police departments, small businesses, and American workers and consumers.

 

But we are fighting back, and our newly-established task force is at the forefront of this effort. At the core of the task force’s mission is a more robust and strategic law enforcement effort. Through this effort, critical information will be shared in real time across the federal government – and with our state and local law enforcement partners – so that we can stop fraud schemes in their tracks.

 

We will focus on four key types of financial crime:

 

·Mortgage fraud -- from the simplest of "flip" schemes to systematic lending fraud in our nationwide housing market;

 

·Securities fraud – from traditional insider trading, to Ponzi schemes, to accounting fraud, to misrepresentations to investors;

 

·Recovery Act and rescue fraud – including the theft of federal stimulus funds and the illegal use of taxpayer dollars intended to shore up our financial institutions; and

 

·Financial discrimination – including predatory lending practices in minority communities and the sale of financial products that exploit the elderly and disadvantaged.

 

In combating these crimes, we will aggressively leverage the criminal and civil enforcement resources of the federal government. We will tackle every fraud case with the aim of recovering stolen funds for victims. We will protect the taxpayers’ investment in America’s economic recovery, and ensure that every American – regardless of age, race or national origin – has a chance to participate in that recovery. And we will enhance coordination and cooperation among the federal, state, local, tribal and territorial authorities, so that the perpetrators of these crimes are brought to justice.

 

The good news is that our new task force has a running head start. Even before the launch of the task force, the Department of Justice had responded to the financial crisis by redoubling our fraud-fighting efforts. In addition to prosecuting the Ponzi scheme fraudsters I mentioned earlier, last year we arrested the ringleaders of what has been described as the largest hedge fund insider trading case in history. And we secured 30-year and 25-year sentences for two executives of National Century Financial Enterprises following their convictions on conspiracy, fraud and money-laundering charges.

 

We’ve also devoted substantial attention to preventing and prosecuting mortgage fraud. No one in South Florida needs a lesson on the destructive consequences of widespread mortgage fraud. But you should know that, right now, the FBI is investigating more than 2,800 such cases, up almost 400 percent from five years ago.

 

 

The recently-enacted federal budget for 2010 will enhance these efforts. This budget represents the largest-ever, single-year enhancement to support and expand the Justice Department’s financial fraud programs. This will allow for additional FBI agents, prosecutors and support staff to aggressively pursue mortgage fraud, corporate fraud and other economic crimes.

 

Congress has also stepped up by providing the federal prosecutors with new tools to help investigate and prosecute financial fraud. Our task force will take full advantage of the legislative authorities Congress gave us last year in the Fraud Enforcement and Recovery Act of 2009.

 

I’m confident that with new authorities, new resources and a bold new plan of action, we can and will make measurable, meaningful progress. And we will succeed in restoring the integrity of our markets, preserving taxpayers’ resources and protecting the vast majority of workers, consumers, investors and corporate executives who play by the rules and adhere to the law.

 

To those who see the victimization of others as an avenue to wealth, take notice: If you fabricate a financial statement, if you propagate an investment scheme, if you are complicit in an act of financial fraud, you are writing your ticket to jail.

 

And to those who have lost their financial security and their confidence in our financial system: Know that we will work tirelessly to restore what you’ve lost, and to rebuild the trust that’s so essential to America’s economic recovery.

 

There is little doubt that our economy is now emerging from the financial crisis that has gripped the country over these past months. To sustain this recovery, we must marshal the best that our government and the private sector have to offer. We have our mission, and we are committed to fulfilling it. Working together I am confident that we can restore confidence, punish wrong doing and help get our economy back on track.

[Guest FRB]

Governor Elizabeth A. Duke

At the Consumer Bankers Association Annual Conference, Hollywood, Florida

 

The recent crisis in our mortgage finance system and capital markets was severe. It plunged our economy into a level of stress second only to the Great Depression of the 1930s. The results were devastating for investors, financial institutions, businesses, and consumers from Wall Street to Main Street. As a first responder, the Fed used a wide range of tools to fight the crisis in a direct and urgent manner, including lowering interest rates; maintaining a steady flow of dollars to meet demand abroad; providing liquidity to sound institutions to support faltering financial markets; and providing emergency loans to specific, troubled institutions whose failures would have had disastrous consequences for the financial system and the broad economy. The pervasiveness of the panic required that the Federal Reserve act swiftly, responsibly, and effectively. If we had been unable or unwilling to do so, I believe that today the economic and financial situation would be much worse.

[Guest Altius]

hi, you can find all US bank locations, addresses, telephone numbers and more details here. Check out the below link

 

US Bank Locations

[Guest human]

Minus this thread; Your post with the link is NICE. Thankyou good link.

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hi, you can find all US bank locations, addresses, telephone numbers and more details here. Check out the below link

 

US Bank Locations

[Guest LAW]

What are domestic and global policy priorities for the US in 2011? Charlie Rose had an insightful conversation Secretary Geithner.

 

http://www.weforum.org/videos/priorities-us-economy?fo=1

[Guest Derek]

The banks rule the world and no government can stop them.