You HAVE to bail out banks. You can let GM go. But you can't let your financial system crumble based on some ideology.
The stock split is a separate issue, but even accounting for that, AIG stock more than tripled in August. No one knows why, though. Lots of guessing that it's short covering or just daytrading gone crazy.
Timely news here... http://www.cnbc.com/id/32637383 Bank of America wants to pay back $20B of the $45B it owes the gov't, and it would eliminate about $100B of gov't guarantees currently outstanding. Whether they will do so is still unclear.
What's interesting on that one is that BofA wants to get out of the loss sharing arrangement with the government yet the govt wants to be paid for that breakage? I would think the government would love to get off the hook for having to participate in losses and so wouldn't be due a fee for such a issue. Now this could just be a poorly written article as it really doesn't make sense why there is a fee...perhaps the fee really means dividends, or the value of the options, etc.
http://trueslant.com/matttaibbi/2009/09/01/bailout-propaganda-begins/ MATT TAIBBI TAIBBLOG MY PROFILEMY HEADLINE GRABSMY RSS FEED Sep. 1 2009 - 9:42 am | 773 views | 0 recommendations | 8 comments Bailout Propaganda Begins Nearly a year after the federal rescue of the nation’s biggest banks, taxpayers have begun seeing profits from the hundreds of billions of dollars in aid that many critics thought might never be seen again. via As Biggest Banks Repay Bailout Money, the U.S. Sees a Profit – NYTimes.com. It was inevitable that the same people who pushed through the multi-trillion-dollar bailout of Wall Street would come out later on and tell us what a great idea theirs turned out to be, in retrospect and under the light of evidentiary examination. And we’re getting that now, with a pair of reports, the above one in the New York Times and another in the Financial Times, telling us the bailout is working because the government has made some money on TARP. They came to this conclusion by quoting Fed officials, who apparently calculated how much interest the Fed earned on TARP investments above what it would have earned on T-bills. The amount so far, according to these worthy gentlemen: $14 billion. This is sort of like calculating the returns on a mutual fund by only counting the stocks in the fund that have gone up. Forgetting for a moment that TARP is only slightly relevant in the entire bailout scheme — more on that in a moment — the TARP calculations are a joke, apparently leaving out huge future losses from AIG and Citigroup and others in the red. Since only a small portion of the debt has been put down by the best borrowers, and since the borrowers in the worst shape haven’t retired their obligations yet, it’s crazy to make any conclusions about TARP, pure sophistry. Moreover, a think tank set up to analyze TARP, Ethisphere, calculated in June that TARP was still $148 billion down overall, a debt of over $1200 per American. To start talking about what a success TARP is now is beyond meaningless. The other reason for that is that it’s only a tiny sliver of the whole bailout picture. The real burden carried by the government and the Fed comes from the various anonymous bailout facilities — the TALF, the PPIP, the Maiden Lanes, and so on. The losses from the Fed’s purchase of distressed/crap Bear Stearns assets (Maiden Lane I) and AIG assets (MaidenLanes II and III) alone were as recently as late July calculated in the $8.6 billion range, and even that number is very conservative. Then there’s the trillion or so dollars that the Fed used on buying up mortgage-backed securities and Treasuries; we don’t know what their market value is now. And there are untold trillions more the Fed has loaned out in the last 18 months and which we are not likely to find out much about, unless the recent court ruling green-lighting Bloomberg’s FOIA request for those records actually goes through. In light of all this, the Fed’s decision to brag publicly about a few loans that are actually performing is sort of scary — it speaks to a level of intellectual desperation and magical-thinking unusual even for a banker in the subprime/MBS era. Don’t be surprised if you hear more of this sort of thing in the coming years.
Add Wells Fargo to the list: http://www.cnbc.com/id/32647359 Another $25B. So that's $45B more just today, if BoA is able to do their $20B. I wonder if any site has the accounting of how much is still outstanding - I imagine it's under $200B or so at this point because I think it peaked around $350B.
i can go either way on a manufacturer. GM is so huge, i can understand those arguments. but i can also understand saying we should let it go. but not a major bank. our financial system does this ever so often...and we're forced to subsidize its repair because failing to do so devastates the entire economy. suggested reading: "The Cost of Capitalism" -- seriously great book. Here's a sample: "On a mark-to-market basis, the banking system of Japan was equally bankrupt in the 90's to the American banking system of the 1930's. But the US experienced 25% unemployment and industrial production fell by 40%. In Japan, the jobless rate never climbed above 6% and production fell by 10% and then went sideways for 5 years. Banking system survival was the difference...the US losts 9,600 banks...in Japan, banks limped their way through the decade with a few forced mergers and government money to recapitalize the system...but there were no bank runs. The center held. The visible hand of government is the reason that Japan's banks survived and the US depression era banks collapsed. The collapse of banks in America wiped savings of millions of Americans. The consequent plunge in buying power drove sales, output, employment and production into a free fall. The lesson is: banks are not like other businesses. The "too big to fail" doctrine has been in practice since the 30's...both Bush presidents signed major bailouts into law, ideological leanings notwithstanding. Allowing banks to fail creates deflationary destruction."
I believe Goldman and JP Morgan were the two major players that didn't want the money. Though in Goldman's case, they restructured themselves as a bank holding company, so they clearly were having some real problems there. I'm not sure on Wells Fargo, but I think when the initial TARP report came out earlier this year, they weren't on the list of companies sound enough to repay their TARP at that time.
Right after that happened, it went down below $15. Last Friday, it hit $55. I'm not sure what's driving it either. I'd LIKE to think it's the new CEO saying he's going to bring the company back in a year and not sell off assets at firesale prices, but it may just be a short squeeze.
