Banking Bailout Party: New Details Emerge
The New York Times has details about the new bailout plan Treasury Secretary Tim Geithner is scheduled to talk about later today. Here's a rundown of what's on the menu:
- No "severe limits on executive pay for companies receiving government aid."
- Bank executives will stay, shareholders will not be wiped out.
- There will be "a joint Treasury and Federal Reserve program, at an initial cost of $250 billion to $500 billion, to encourage investors to acquire soured mortgage-related assets from banks." The FDIC might provide guarantees to investors.
- A program run by the Federal Reserve to try to unfreeze the market for commercial, student, auto and credit card loans will be expanded from $200 billion to up to $1 trillion.
- A review of the capital levels of all banks, including projections of future losses, to determine how much additional capital each bank should receive.
- Next week, the New York Times says a separate $50 billion program to help homeowners facing foreclosure refinance into fixed rate loans will be announced.
There will be, however, restrictions on banks using bailout funds to acquire other banks, as well and restrictions on lobbying. The $500,000 pay cap is still in place, but applies only to very senior executives. Some argued that it should be extended to all employees of banks receiving funds.
Bloomberg also notes that TARP will be renamed:
Geithner will also give the $700 billion Troubled Asset Relief Program a new name: the Financial Stability Plan.
Whatever makes you feel better, we suppose.
Geithner Said to Have Prevailed on the Bailout [NYT]
(Photo:The Joy Of The Mundane)
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Comments:
Wooo, party!
Will there be cake?
@B: The cake is a lie. Just like this bs. I don't necessarily want heads to roll, but I would like to see these execs get hit in the wallet because of the greed and ignorance they have exhibited over the years. It's not like they need all that (excuse me, our) money.
So last week there was an executive pay penalty and now there is no "severe limits on executive pay for companies receiving government aid"?
I am confused.
Renaming it will solve all our problems! Hooray for Washington!
And really, if there are no penalties to executives or shareholders, why should any be responsible in the future? Just grab as much money and profit as you can now and someone else will pay for it later.
Great message to send to the market. It really sickens me.
I swear the next person who uses the buzzword "toxic assets" is going to get punched. Thank you for avoiding this expression.
I'll accept "nonperforming assets" or "non-earning assets" or even just "bad assets." But this media parroting is driving me crazy.
>>the Financial Stability Plan
I'd laugh but after the 'speech' last night, it's not even dark humor. So what the banks really need is more intervention from the federal government. On top of previously forcing banks to offer home loans to those not qualified and printing more money than God, the answer to all our prayers is going into more debt, printing more money, and all but nationalization of the banking system
I like how everyone's loosened up about tossing the word "Trillion" around now. There was such a stigma attached to it before.
Need a few hundred billion? Here, have a trillion instead!
If you have a problem with bank executives and their awesomely dumb bonuses, join a credit union. That's what I'm doing in a few months.
They should be forced to have all executive lunches off the McDonald's Dollar Menu. :P
I'm so glad we elected a bunch of chicken little's. I have a feeling the sky will be falling until they have every dime of our money.
@nighttrain2007: Really, the problem was not forcing banks to offer home loans to those not qualified. That is a myth. The majority of loans made, that went bad, were done by lending institutions not covered by the CRA legislation. Once the larger lending institutions saw the quick profits that could be made some of them starting joining up. But the McMansion craze was not federally mandated. The people that were flipping houses were not federally mandated and the mortgage brokers who were making moving people towards higher commission loans were not federally mandated.
@thezone: Encouraging banks to lend to less qualified debtors was part of the problem. This is a convoluted situation, it may be convenient but its inaccurate to try to point blame at an single individual, group or piece of legislation.
@HIV 2 Elway Resurrected: It might get confusing if we go too far
"The Obama administration is concerned about the increasing levels of bank loans no longer accruing interest, plus those 90+ days past due and still accruing, plus reposessions and other real estate owned, as a proportion of total loans plus reposessions and other real estate owned"
/npa ratio for the confusion!
@Ash78: Forgot to add "restructured loans with less than 12 months of satisfactory performance under new terms" :D
@HIV 2 Elway Resurrected: >>its inaccurate to try to point blame at an single individual, group or piece of legislation.
It's not inaccurate at all. The fault lies mainly with the actions of the US government. The same as it did starting in the late 1920s and going through WWII. Obama is doing nothing but recreating the mistakes of FDR, who extended the Depression of the 1930s
Just when there was an acronym all of the mouthbreathing electorate had memorized. I guess the silverlining is that "FSP" will evoke a different mental image than "TARP". I thought it was kinda strange that the government was using supplies from Harbor Freight to try and lift the banking industry from self-created ruin...
@nighttrain2007: Obama is trying to make the situation look worse than it actually is so he can look like a hero in 18 months when this ship rights itself. If the first weeks of his reign are indicative of things to come, we're in for a solid 4 years of campaigning and empty rhetoric.
Blaming the government for the mistakes of the banks is inaccurate. The problems were brought about by pure greed and the desire to make a quick buck.
What I do have a problem with is the government using tax dollars to prop up these flawed companies with little to no pain to those responsible.
Why should the banks no go back to their quick profit schemes if they know that they are "too big to fail" and can count on the government to save them when things go bad.
They should not give a dime to any of these banks until there are safeguards in place to prevent greed from bringing down the economy again.
I am not going to say that government has all of the answers, but the absence of regulation has proved that these institutions cannot be trusted to govern themselves.
They better extend the pay cap to all employees or companies will just skirt the law by giving their CEOs lesser titles.
I love how everyone is so concerned that the "talent" from these places might "bail" if there is a cap on their pay.
Bail, away, I say!! Take your sorry butt out to the Marketplace and see if what you've got is what anyone wants!!
@nighttrain2007: I think this is also a somewhat inaccurate view. Even FDR's initial reaction did have a positive affect and only after he began to ease up on the New Deal's original policies did it become clear there were downsides. Had the economy not initially rebounded so well, he would have stayed the course and perhaps avoided any extension of the depression.
Suffice it to say, it was much more complicated than saying "FDR did bad things that made teh depression worse." I do agree the Fed has to shoulder most of this current blame, and rightfully so.
@RStui: Right, where are these people going to go?
I think the executives are afraid that maybe a CEO could run the company on a much lower salary, and then how could they justify their $10 million compensation? Isn't that how it's worked for rank and file workers for years?
@tailstoo: They should at least say "no pay/bonus increases beyond previous year's levels including all forms of compensation". I'd like it to go further but that would be a good start...
We all see what's happening, but we are powerless to stop it. You can argue all that you want. But at the end of the day, the facts are the facts: government intervention played a role in our current problems. Having the government tell the free market how it can and cannot run their business is not the way our system is supposed to work.
If somebody goes out and spends too much money because they were extended more credit than they deserved or could afford, the way to fix the problem isn't to increase their credit limit! That's what we're doing here with this legislation. How does that even remotely make sense???
Call it TARP, call it FSP, call it whatever you would like. It's government intervention into the system. If banks made bad loans, let them, and their shareholders hold management accountable. If that means some banks go out of business, so be it.
Everyone carped at the Bush administration about how they were eroding our rights. Read the legislation that the Obama Administration and the allegedly bi-partisan Democrats put on the table to solve the banking and mortgage crisis. It intrudes into your relationship with you and your doctor, rations healthcare, and does all manner of other things which have nothing whatsoever to do with solving the real problem. Most of the legislators who voted on this don't know half of what's in the bill. In addition to which, it's a moving target.
All this tough talk about limiting bank executives compensation: I call BS on this one. Meanwhile, while no one is looking, we get Tom Daschel's brand of socialized medicine crammed down our throat.
@ElizabethD: I'm not blamming him but he already seems like someone more concerned with getting reelected that, you know, running the country.
@nighttrain2007: Oh, the communist boogieman strikes again.
You really don't know what nationalization means, do you?
drdom; Your "facts" need work. LACK of government intervention caused a role in our current problems, ie. the repeal of the Glass-Steagal act, lack of regulations on the so-called 'shadow banking' system (investment banks), and so forth. As has been already stated, the majority of bad loans came from banks not regulated by the CRA.
@drdom: Just popping in to call "nutjob!" on this. I know the republicans and everyone out there from the Rich Persons' Fan Club would love to see the government get out of the way, but THAT is what let this happen in the first place.
Unfortunately, too much of the government is still concerned with protecting the precious Rich People, so even in lieu of correcting the problem, we get more protectionism for greed.
@tailstoo: Good, that's the way they want you. The more confused you are, the more they can get away with.
...And a paltry $50bn for the millions of homeowners for whom it's too late to refinance anyway, and for most of whom the problem is now lost jobs and undervalued homes, not adjustable rates.
Way to define the epitome of "too little too late", there.
But thank goodness we're "saving" the people who comprise banking corporations. They're TOTALLY the people who need help right now.
@tailstoo: Can you explain to me in simple terms why we need a "Federal Reserve Bank"? Why?" Because bankers told you and you believed that private bankers in "association" with government would create sound fiscal policy? Oh, ok.
@RStui: Tisk, tisk, are we not forgetting who is paying the regulators? I didn't think we forgot that part.
@Mary Marsala with Fries: Not only that, but most modified loans wind up in foreclosure anyways. It's unlikely that a subsidized refi would be any better than a mod in these circumstances.
@Mary Marsala with Fries: Except that we've had more banking regulation passed since 1980 than in all the years prior.
@drdom: No, please don't call this a "free market" If it were "free", then the government would not have interfered with the demise of the big bankers and would have let them sleep in the bed they made. The free market you understand is really the government allowing the elite (aka bankers, big money contributors, etc) to keep their profits while also covering their losses. This is like how your parents would fix your mistakes. The only difference is the government only requires the masses to grow up and be responsible.
@nighttrain2007: FDR did not extend the great depression. Another right wing lie. FDR's programs took us from nearly 25% unemployment to under 15% within 5 years. The only reason there was a brief upturn was FDR listened to conservatives and lowered spending before the rest of the economy had picked up. Please cite one credible economist who says the depression was prolonged by FDR.
@HIV 2 Elway Resurrected: This is nonsense. Obama has moved quicker than nearly every other incoming president. Please tell me how Bush 1 or 2 or Regan did better in their first 2 weeks in office.
@rpm773: Why have a trillion dollars when you can have, one million? Oh hell, let's just give everyone in America a billion dollars and how about we just make a google dollar bill? Do we want to end up making the dollar equal to dirt in value? History repeats itself, and no one ever learns.
@drdom: So how exactly did the Bush administration get in the way of business doing what it was supposed to do? Over the last 8 years there has been massive deregulation of the banking industry. This has caused the problems we have today. Banks have been allowed to become way too big. Now we have a few large corporations that cannot be allowed to fail.
Additionally, please cite a reference to the stimulus bill being passed that will interfere with our relationship with our doctor or will ration health care. These are all tin foil hat conspiracies created by people who don't want equal access to health care for all Americans.
@thezone: Bush 2 was rightfully criticized for not being visible enough. But Obama is already overexposing himself. Interviews with Al Jazeera, town hall meetings, everything he does being televised. The President doesn't need to address the nation publicly after every step he takes, save that for big events and get back to work. I don't need to hear from him everyday and certainly don't need it multiple times a day.
And this crisis didn't occur in the 80s or 90s. It occurred after de-regulation at the end of Clinton's administration and during the Bush administration (again, repeal of Glass-Steagal as an example) as well as failure to further regulate investment banks despite the fact that they served the same function as normal banks.
@HIV 2 Elway Resurrected: Probably a reaction to the last administration who didn't want to tell the public anything and said that anyone who questioned what they were doing was anti-American.
@thezone:
[thomas.loc.gov]
Search for "National Coordinator of Health Information Technology"
More info here: [www.bloomberg.com]
@nighttrain2007: You hit the nail on the head! If we HAD regulated banks as in the PAST they would not have sold bundled securities to the world or then bought "insurance" to cover the losses they knew were coming to save themselves and the big bonuses they earned!
@drdom: Read this: [www.thedailybeast.com]
Let the Democrats do what they want. Right now they run everything. If conditions improve (which I doubt), so be it. The country will be better off. If conditions collapse, then the republicans will storm back in 2010/2012. This stuff is cyclical.
Feelin' better already.
Or is it because Michael Phelps is a friend of mine