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Author Topic: Bad bank bafflement - Taxpayer Ripoff?  (Read 1716 times)
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WhiskeyGirl
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« on: January 17, 2009, 06:07:07 PM »

I'm thinking the sky really is falling and some on Capitol Hill are in denial...

The sky started long before calls in 2005 for reform.  The call went unanswered.


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The idea of setting up a “bad bank” or “aggregator bank” to take over the financial system’s troubled assets seems to be gaining steam. So let me go on record as saying that I don’t understand the proposal.

It comes back to the original questions about the TARP. Financial institutions that want to “get bad assets off their balance sheets” can do that any time they like, by writing those assets down to zero — or by selling them at whatever price they can. If we create a new institution to take over those assets, the $700 billion question is, at what price? And I still haven’t seen anything that explains how the price will be determined.


I haven't seen my $1 billion dollar bailout check in the mail.  I haven't seen my $$$ millions in 2008 bonuses from Wall Street either.  

http://krugman.blogs.nytimes.com/2009/01/17/bad-bank-bafflement/

Why don't taxpayers and Capitol Hill take a big step back, away from all these banks and bailouts, take a deep breath, let the chips fall where they may?  Put the problem aside.  Review is say six months to a year. 

Sometimes, the dust has to settle.  imho - the Capital Hill and the new administration has a firemans fan going and the dust won't settle for generations.

just my humble opinions
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WhiskeyGirl
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« Reply #1 on: January 17, 2009, 06:26:14 PM »

Anyone planning on doing a post-mortem on Freddie/Fannie/CRA and other Wall Street type failures now that Bush is almost gone?

There was one place I read today that made that suggestion.  Who will the 'finger' be pointing at?  Congress?  The Obama administration?  

Could any of this (Freddie/Fannie/others) have been prevented by quick action in 2005?  Why were the failures and alarming information ignored?    

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A top adviser to Obama, who takes office on Tuesday, said a fresh approach to the crisis would be unveiled in coming days. A person familiar with the thinking of Obama's team said his administration was considering setting up a government-run bank to acquire bad assets clogging the financial system.

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Efforts to corral the toxic assets behind the financial turmoil come in the last days of President George W. Bush's administration, which has struggled to contain the crisis and was slow to recognize how much it was weakening the economy.

In addition to steps to bolster banks, Obama officials want to aggressively attack the underlying causes of the credit crisis, David Axelrod, a top adviser to Obama, told Reuters.

"What we have to do is approach this with a lot more transparency on the front end," Axelrod said about what he called a revamped financial rescue package.

"Only a handful of times in our history has a generation been confronted with challenges so vast," Obama said as he began a train trip from Philadelphia to Washington three days before his inauguration.

Obama has vowed to spend hundreds of billions of dollars to jolt the country out of a deepening recession.

The 'generation' had opportunities in 2005 to step up to the plate and take on the challenge of reforming Freddie/Fannie and other problems that led to the current 'toxic mess'.  The 'toxic' assets, IIRC, some are more than ten years old, did not go bad overnight.

In the last days of the Bush administration, I would imagine the options for action were limited.  The patient was screaming for help in 2005 and some answered the calls, others just ignored the opportunity to repair a growing problem. 

I think the patient could have been 'jolted' back to like back in 2005, or earlier.  Will any 'jolts' always be a day late and a dollar short?  Any way to make up for lost time?

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Advisers to Obama were also considering the idea of a bank to hold bad loans, but the source familiar with his team's thinking said it was among a range of options that could be pursued.

Bad bank to hold exactly what?  Worthless paper?  Why don't the banks write off these assets themselves?  Take responsibility for all those years of bonus and other compensation.

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Major German banks have so far written off only about a quarter of the nearly 300 billion euros ($397.7 billion) in toxic U.S. assets on their books, a German magazine reported, citing a government survey of 20 big lenders.

If GERMAN banks have $397.7 billion in toxic U.S. assets to be written off, how much in toxic assets are on books of U.S. banks?  $100 trillion?  $1,000 trillion?  TARP recipients?  Those not getting TARP money?  This just boggles the mind.

Anyone keep track of all these bad assets on the books in the U.S.?  Maybe there should be some transparency of the REAL number.  Be honest with taxpayers.  More shell games?  Bigger executive bonus/compensation/payouts for 2009?  Another bigger and better Ponzi scheme to entertain taxpayers with?

http://www.reuters.com/article/ousiv/idUSTRE4B70ME20090117

just my humble opinions
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It doesn't do any good to hate anyone,
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WhiskeyGirl
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« Reply #2 on: January 17, 2009, 06:35:28 PM »

Looks like the UK is thinking about fixing the problem, not just pouring money on the flames...

Taxpayers face years of debt in bank salvage deal

Quote
The Prime Minister is understood to have favoured the new "pay as you go" insurance deal over a single toxic bank because of the potential shock to taxpayers if they faced an immediate multi-billion pound hit so soon after last October's £37 billion bank rescue package. However, the impact of the two schemes is intended to be broadly similar.


   wow...imagine that...politicians worried about shocking taxpayers after a previous large bailout...

Anyone in the US worrying about shocking taxpayers?  Media reporting how serious this is?


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...A source close to Alistair Darling, the Chancellor, said: "What Alistair has been totally focused on is removing the blockages from the system."

Were taxpayers to directly acquire the banks' worst assets, one of the major problems would have been valuing them. The insurance scheme puts less pressure on the Government and banks to strike a price for toxic assets. Lenders would keep their bad debts on their books but they would be underwritten by the taxpayer.


wow...someone looking out for UK taxpayersAnyone looking out for the US taxpayer?  Or, looking out for someone elses pocket?  Looking out for special interests?

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John Redwood, the chairman of the Conservatives’ economic competitiveness commission, said: “If the Government is going to do an insurance scheme, it must look after the taxpayer. It could still be extremely expensive and they are trying to prop up very large international banks that might have lost a lot of money overseas.”


Wow...again looking out for the UK taxpayer.  Anyone looking out for U.S. taxpayers?

http://www.telegraph.co.uk/finance/financetopics/recession/4280229/Taxpayers-face-years-of-debt-in-bank-salvage-deal.html

just my humble opinions
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All my posts are just my humble opinions.  Please take with a grain of salt.  Smile

It doesn't do any good to hate anyone,
they'll end up in your family anyway...
WhiskeyGirl
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« Reply #3 on: January 17, 2009, 06:50:33 PM »

I think this applies in may ways to the US problem.

Quote
The problem is our banks are bigger than we are

BY JOHN REDWOOD
Last updated at 11:08 PM on 17th January 2009

Is there no limit to what the taxpayer has to pay for? The Government put £37billion into buying bank shares.

Those shares today are worth about £12billion less than Ministers paid, giving each taxpayer a loss of about £300.

Now, they are looking at the taxpayer having to stand behind billions of pounds of so-called toxic debts or foolish loans the banks made in the good times.

What have we done to deserve that?

Quote
Two trillion pounds is more than every UK person and business together earn in a year. It’s four times the annual tax revenue of the country.
 
Why does that matter? Because, as owners, we are responsible for any losses.


I read something recently that showed that individual tax revenue to the IRS was just over $1 trillion.  Business revenue was less than half of that. 

Puts the trillions in toxic debt into perspective.  How many generations will be paying for these bailouts?  Any upside for taxpayers?  Future generations?

Anyone else put this into perspective? 


Quote
If it turns out the assets of RBS are worth just two per cent less than when they bought them, it has lost the equivalent of the defence budget for next year.
 
Why is the UK in this position? Because we have one of the world’s big banking industries, attached to a medium-sized country.

Our banks lend money globally and employ thousands. They are such big enterprises they can lose sums of money big even for the Government to meet.

The Government is not just going to the aid of our domestic banks to ensure they can lend money to you or me to buy a house or car – or to local companies to pay the wages.


How could the banks get into so much trouble?

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These banks are lending huge sums to Russian billionaires and to large multinationals for large projects. When it goes wrong, it could impose too big a strain on the UK taxpayer.

Does TARP contain failed international projects?  Maybe for projects in countries that don't want to pay up?  What else is toxic on those bank books?

Maybe instead of seeing were all the pork spending for the next bailout is going, taxpayers and the globe can have a peek at all the toxic debt?  US?  Non-US debt?


Quote
The Government does need to lend short-term to the banks against security and to sort out the money markets.

It does not need to venture so much taxpayer cash backing dodgy loans to prevent a banking crisis.


Offering guarantees to get new lending to UK customers moving again may be sensible. Underwriting lots of dubious past business is too risky.


Good point.  The need to differentiate between 'dubious past business' for bailout funds and ensuring NEW LENDING TO U.S. CUSTOMERS starts up again.

http://www.dailymail.co.uk/news/article-1120779/JOHN-REDWOOD-The-problem-banks-bigger-are.html

jmho
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It doesn't do any good to hate anyone,
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WhiskeyGirl
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« Reply #4 on: January 17, 2009, 07:59:04 PM »

Quote
It's no wonder that so many Icelanders are angry. They live in a country bankrupted by the excesses of their bankers, who took on liabilities 10 times the nation's GDP, betting billions in Britain's property bubble. Bailed out only by a jumbo IMF loan, inflation and interest rates are now 18% and rising. Many are considering emigration. Only membership of the euro, if it can be secured, offers a lifeline.


From my reading over the months, many immigrants have returned home.  I wonder what future they see for those living in the U.S.?

Quote
After what happened to the world's banks last week - and to Barclays Bank in particular, whose share price collapsed 25% in an hour on Friday - it's clear that Britain is at risk of being next in line. We too have a banking system that is huge in relation to our GDP, but, like Iceland, we are not in the euro. Unless we act quickly, decisively and cleverly, the difficulties of our banks could overwhelm us, triggering an enormous run on the pound. Britain, in short, risks bankruptcy.

When will the dollar collapse?

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Events in America last week showed how the contagion in so-called investment banking - I prefer casino banking - is murdering honest-to-God commercial banking. Bank of America and Citigroup are fighting for their lives as they are engulfed by losses from their investment/casino operations.

Where did all the profits go over the years?  Anyone looking out for American taxpayers?

Quote
The prime minister is incandescent; the bank has not been straight with either the government or its shareholders about its balance-sheet risks. It did not share in the first round of bank recapitalisation, instead raising cripplingly expensive funds from Arab sovereign wealth funds.


What's on the balance sheet of all those banks and other organizations in the U.S. that are so 'toxic'?  Anyone really know?  Anyone know where all that TARP money was spent?  Buying gold in anticipation of the dollar collapse?

Who is the US borrowing money from for all these bailouts?  All this spending?  Arab sovereign wealth funds?


http://www.guardian.co.uk/commentisfree/2009/jan/18/recession-banking
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All my posts are just my humble opinions.  Please take with a grain of salt.  Smile

It doesn't do any good to hate anyone,
they'll end up in your family anyway...
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