SNL Financial came out with a report today that said 90 banks have missed at least 1 TARP dividend payment, that is about 11% of all TARP recipients have defaulted for those of you keeping count. Keep in mind that about 829 institutions received TARP funds and about 50+ have repaid TARP funds, mostly the big name institutions that we all know and love. What is critical to note is that the defaults, I would call missing a payment a default since banks call a borrower who misses a payment to be in default, are increasing, not decreasing, as we approach the 2 year anniversary of the historic TARP legislation.
What that tells me is that not everything is fine when we are 2 years into the largest bailout in the history of bailouts and we have banks defaulting, remember only the “strongest banks” were getting bailed out, and bank closures accelerating as well. All of this while the pundits talk about “the greatest V shaped recovery in history” which is laughable. If we were in recovery mode wouldn’t these banks be earning their way out of this mess? They have the greatest accounting gimmick, mark to model, at their disposal and they are defaulting and being taken over by regulators at an increasing rate, how can that be? Perhaps the system is not as strong as we are told, that sounds about right to me.
We have to face the facts and the fact is that the data does not lie, banks are defaulting and failing. Real estate prices, both residential and, especially, commercial are falling which means more problems for banks. The banking industry as a whole is much larger than Citi, Bank of America and JP Morgan, and I am hard pressed to make the statement that those banks are largely benefiting from proprietary trading, government bond underwriting and the ability to mark to model. In other words, the bailout failed with the exception of the too big to fails and, as we already knew, the bailout was really just a selective bailout anyhow. How could Bear, Sterns be allowed to be acquired, but Lehman fail? Just days after Lehman fails AIG gets bailed out, the proof is pretty overwhelming about the selectivity of the bailouts, in my opinion, and TARP was designed to make the big banks flourish and the rest of the banks, well who cares because no one cares about the rest of the banks. I mean, who ever heard of Midwest Banc Holdings anyhow, except for the depositors.
So, as the ECB gets ready to release useless stress test results, which I am sure will show Greek and Spanish banks in trouble, but everything else hunky dory, consider the fact that our stress test and bailouts were completely and utterly useless. In other words, if you cannot trust our results, it has taken almost 2 years for the failures to show up, how can you trust the ECB’s results? Geithner knows this which is why he pushed for the stress test. He knew you can fool the markets for a little while with useless stress test and a seemingly huge bailout fund. However, the results cannot be hidden forever and our results are public, for those willing to look for the statistics, and prove that their strategy just kicks the can down the road and still leads to failure. Unless you consider accelerating defaults and closures a success, I am sure some talking head somewhere will see it as a stunning success, but in the real world most people see escalating failure for what it is, failure.
There is a lot of hot air coming out of Washington and the press about who saved the financial system over the past few months. The White House claims they saved the system, the press agrees, and others say Ben Bernanke saved the system, even though he caused or helped cause the problems. Others in Congress believe that they helped save the system, who knows how they think that. Out of all of these credit seeking entities it does raise the question of who really saved the system, for now.
As far as the White House is concerned, I cannot think of one legislative item they produced in the past year that directly did anything for the banking system, but they demand credit for the save. The fact of the matter is that TARP, for all of its flaws, did save the system and that was a Bush era solution. Obama and Geithner simply imposed a ‘stress’ test for the banking system, just an FYI on the stress test, we surpassed the ‘rigid demands of that test’ as far as unemployment and other economic hardships. It is safe to assume that the stress tests were a joke and meaningless other than a confidence booster. Outside of that particular item the administration simply spent trillions on pet projects through the stimulus bill, which is clearly a failure, and that is it. Obama had nothing to do with saving the system outside of his vote for TARP, period.
To think Obama or any Congress person did anything else to save the system is pure partisan politics. I am fine with people giving the credit to Obama, because it proves my point that people do not follow what is really going on and have the attention span of a nat. However, this is a double edge sward because nothing has changed within the system itself so are they going to take credit when this thing falls apart? I doubt it, but it will be interesting to watch them weasel their way out of it. It is also clear that the latest proposal to separate prop trading from banks proves that the current administration does not and never did understand what caused the problems to begin with. In short, they are empty on intellectual knowledge and packed full of the people who helped create the problem so they are all simply doing a major CYA right now.
Congress has done nothing for the system, sure we got show trials, but they just threw a bond broker in jail for selling AAA rated securities, talk about misplaced blame! The reality is one person saved the system, in my opinion, Ben Bernanke. Now, just because I am giving him credit for the save it does not mean I like him or his policies. Yes, he cleaned up, or started to, his own mess, but make no mistake about it, he caused or helped create the current mess. Ben denies that he had any responsibility in making the mess, but he did as he endorsed, feverishly, low interest rates for a prolonged period of time during the early 2000’s. He actively endorsed QE by other countries and, now, the US and did not realize that housing prices increasing at 10-20% a year were a bad thing, huh?
Ben did save the system, but he also is responsible for its demise at the same time, so how much credit can you really give him? I do not think Ben should be reappointed as he clearly has no forward looking vision as far as potential trouble in the economy. That is one reason why I find it funny that Ben ‘sees no bubbles’ in the US markets or economy now. Yes, I believe equities are in a bubble, I have always believed that, since there was no real fundamental reason for the markets to go from the March lows to 1,150 on the S&P and 10,600 on the Dow. The markets were due for a bounce as stocks were pricing in a financial system collapse, but not all the way back up to current levels. As it turns out we might be at the precipice of the much anticipated correction now, a weak currency and massive pumping up of the monetary system is not a good thing over the long-term and is why we saw such a rally.
Regardless, Ben believes the market’s reaction is normal which can be interpreted many different ways, the conspiracy minded will say that confirms the Fed is buying S&P futures, but I read it as Bernanke is just oblivious to reality as the market grinded its way higher, with no volume or flows from retail investors, away from the economic reality of the times. Green shoots are everywhere according to Ben, but consumer credit is contracting, housing is being propped up, unemployment is grinding higher, the national debt is increasing a scary rate, Greece, Ireland, and other European countries are on the verge of default, Dubai did default, banks will not lend and hiring is minuscule at best. Sure we saw some GDP growth, government induced, and some areas, technology, look promising, but other than that there is no fundamental good economic data to support the current market levels.
It is clear that the pricing in of all the good news has already happened, Intel released good earnings and it sold off, the same with IBM and a host of other firms. Just because the market goes up does not mean everything is fine or that the market is forward looking, it is not. If the market was a good forward indicator we would not have sharp corrections because the market would always know in advance. If the market was forward looking we would not have seen the Dow hit 14,000 in the fall of 2007 when all the warning signs were clear as a bell, the Fed was dumping hundreds of billions of dollars into the overnight markets. What I am saying is I am happy if you are long and made money, but just because you made money and the market is trading at irrational levels it does not mean it is correct. The market is also not a forward looking instrument, so stop saying it is.
At the end of the day it was only Ben who saved the system pushing rates to zero, putting together those funding programs, TALF and such, but he did this at a price. By moving rates to zero he forced savers out of secure investments into higher risk assets so firms can refinance their garbage and give it to safety seeking investors because they have nowhere to turn for yield. Ben has expanded the balance sheet to new weekly records for the past year and it will continue to grow indefinitely, at this rate. Ben has started QE and it looks like he cannot stop those programs without a huge amount of pain to everyone, so it will continue forever. Ben has risked the entire future of the USA by putting the central bank in a position to permanently devalue the dollar, part of the ultimate goal I might add, and by taking excessive credit risk.
Ben just might have put the country at greater risk than the banks did in the previous 10 years. While I know deflation is in the works for the foreseeable future it is only a matter of time before inflation does hit or we are forced to openly devalue the dollar. All because Ben saved the system for a few bankers who we could have lived without as smaller institutions would have stepped up to the plate. To re-nominate this guy is the single worst idea I have ever heard. To give credit to Obama for saving the system is laughable at best, just because we want to have a beer with the guy does not change the fact that his policies are horrible and he has done nothing in his first year in office. We have to stop being influenced by what we want to believe and look at the facts on the ground. Those facts tell us Washington and the Fed have failed, end of story.
Clearly when you have Goldmanites design a bailout program for financial institutions not only will they give them money upfront, but they also build the bailout so firms can profit for years to come. How you might ask?
Well, look at AIG for example, They got bailed out, with $13B going to Goldman Sachs and now Morgan Stanley is going to get a piece and Earnest and young. According to Bloomberg, Earnest and Young could recieve up to $60 million in fees from AIG for advice when the previous cap was set at $40 million in 2008.
Morgan Stanley will receive a $4 million retainer fee and an additional $2.5 million per quarter for advising AIG. The firm also could receive $72 millions if AIG lists its American International Assurance division on the Hong Kong exchange next year. All-in-all not a bad pay day for the financial sector at the expense of American tax payers, who says failure doesn’t pay?
This is one of those things that should make people question what is going on with these bailouts and TARP. With the expected cost of TARP reaching, potentially, $23 trillion a few million or even billion here and there is nothing, but these firms are not risking anything and they are receiving a nice payday.
Goldman and Morgan Stanley were both doomed to collapse last year before their bailouts and approval to become commercial banks. This begs the question, should they be compensated at all for advising a government owned entity when they would not be in business if it wasn’t for the government, a.k.a the US taxpayer?
This whole bailout was for the complete benefit of the financial institutions and not for the American people. It was payback for all the money funneled into Washington through lobbyists and campaign contributions, period. The taxpayer will not benefit from these bailouts. For example, have you received a dividend check yet from the firms who paid the Treasury interest on their TARP funds? Nope, well at least I have not gotten my check, so stop telling us we will profit from this, we won’t. Our taxes will not go down nor will our Social Security benefits increase, instead the money will be left in a slush fund indefinitely.
The only ones profiting are the same assholes who are responsible for the global meltdown, but no one says a word. Obama loves the banks, they gave him $23 million last year which is more than Hillary received, and will do nothing to stop this insanity. Instead firms will just collect funds when needed and pay out those funds to other investment banks in the form of advisory fees. The circle jerk continues at our expense.
If you are not outraged then you are not paying attention to anything that is going on.
U.S. Bailout Costs May Reach $23.7 Trillion, TARP Inspector Says, according to Bloomberg. U.S. taxpayers may be on the hook for as much as $23.7 trillion to bail out financial companies, according to Neil Barofsky, special inspector general for the Treasury’s Troubled Asset Relief Program. Barofsky made the estimate in testimony prepared for a congressional hearing tomorrow.
That piece of info fills me with warmth and joy. That is just incredible news, I thought the estimate would be $10-13T, but this blew me away. So, we are on the hook for 140% of our GDP for bailouts and we shouldn’t be mad that Goldman and others are raking in the money now?
All of those firms, including Goldman, would have been toast so may be they should have to pay us interest for awhile. Yes, all of the debt we have issued on top of the TARP money pit will have no impact on the dollar or the economy.
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