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Banks and TARP

admin — Sun, 09 May 2010 05:22:32 +0000

NEW YORK (CNNMoney.com) — With the stress tests behind them, banking regulators now face the potentially thornier issue of deciding which banks, if any, should be allowed to repay government funds.

Since regulators unveiled a long-awaited blueprint for returning money from the Treasury Department’s Troubled Asset Relief Program last week, lenders have been scrambling to raise cash so they can pay back TARP funds.

Four companies that were among those included in the stress test — BB&T (BBT, Fortune 500), U.S. Bancorp (USB, Fortune 500), Capital One (COF, Fortune 500) and Bank of New York Mellon (BK, Fortune 500) — all announced plans Monday to raise capital which would go towards buying the preferred stock and warrants associated with the government’s stake.

Before they can return taxpayer funds, banks first have to prove that they can issue debt without having to rely on the Federal Deposit Insurance Corp.’s debt guarantee program.

Even if they are able to do that, many experts contend that regulators may be tempting fate by allowing banks to carry out their TARP repayment plans.

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Obama to set new compensation guidelines for TARP Funds

admin — Wed, 10 Jun 2009 08:09:02 +0000

Nearly three months after American International Group (AIG Quote) bonuses provoked an angry reaction in Congress, the Obama administration is ready to issue broad new principles on how to compensate top financial sector executives.

Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke want to give the Fed, which regulates banks, and the Securities and Exchange Commission, which oversees the financial markets, greater powers to set compensation guidelines across the financial sector.

The new regulations stem from legislation Sen. Christopher Dodd inserted as an amendment to the economic stimulus package earlier this year. The legislation affects companies that have received assistance under the $700 billion TARP. One of its provisions requires the Treasury secretary to seek reimbursement of any compensation paid to a TARP recipient’s top 25 employees if Treasury deems the payments contrary to the public interest. To undertake that review, the administration plans to retain Kenneth R. Feinberg, a lawyer who oversaw payments to families of victims of the Sept. 11, 2001, terrorist attacks, according to people briefed on the selection.

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TARP Speculation – Mortgage Help in the Works?

admin — Fri, 27 Feb 2009 16:14:58 +0000

There is a lot of speculation and anticipation in the market in the past weeks about the new Troubled Asset Relief Program. Ideas such as the creation of “bad banks” and the nationalization of banks that avail of it have been tossed around. However, one strong reassurance from the Obama administration that this plan contains ideas that work to loosen the money from the banks’ tight fisted grip and get the credit market moving again.

One early concept was the idea of the “bad bank” that would acquire the toxic mortgage assets from other banks’ balance sheets. This would help the banks get rid of assets that would otherwise remain illiquid and this make banks more comfortable with providing credit to consumers. Right now, it’s a balance between hurting the taxpayers or not helping the bank enough.

Another idea being speculated on is an asset insurance plan, an approach that has been adopted by the Bank of America and Citigroup. In this concept, banks would absorb some losses initially and then pass later potential losses to the government. This then acts more like a traditional private mortgage insurance.

President Obama has said previously that he intends to have up to a hundred billion dollars earmarked for forclosure prevention under a foreclosure assistance program.
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