financial bailout: IRS Decision Enables Banks to Shift Their Losses to the Public
- 02/08/09 09:36 AM
So, do IRS decisions (the IRS is a bureau of the Dept. of Treasurey) that function as change to tax laws carry the same weight as law? Yes, they do. A tax decision which can only be interpreted as being written specifically for the benefit of banks was issued just prior to the Wells Fargo & Co. purchase of Wachovia Corp. This is what happened. Two days before the October 2nd 2008 announcement of the Wells Fargo plans to purchase Wachovivia, the Internal Revenue Service issued the controversial tax change. What was the change? Prior to this decision, businesses, including banks, were restricted in the amount by which they could lower … (2 comments)
financial bailout: Here We Go Again With the Second Tranche of TARP Funding
- 02/08/09 04:36 AM
With the first tranche of TARP funds former Treasury Secretary Paulson paid 78 biilion dollars more for banks stocks than they were worth and no funds were directed toward solving the housing & foreclosure crisis. We the public immediately lost 78 billion dollars. With the second traunch of TARP fund Treasury Secretary Geithner wants to provide incentives to investors (aka banks) in the form of commitments to absord some of the losses from any assets they purchase should the value of these assets continue to decline. So banks could by each others worst assets at what ever price they negotiate. Then they get to keep any … (7 comments)
financial bailout: SEC Chairman Cox Admits His Agency Failed
- 02/05/09 04:17 PM
Failure is an understatement. At best members of the SEC are guilty of criminal negligence at worst SEC members were co-conspirators and/or accessories to the crimes. In December 2008, SEC Chairman Christopher Cox admitted that the agency had failed to thoroughly investigate multiple "credible and specific allegations regarding Mr. Madoff's 50 billion dollar financial wrongdoing," adding "I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them." On 4 February 2009 Harry Markopolos, an independendt certified fraud examiner, testified at the House Financial Services … (2 comments)
financial bailout: Does the Treasury Dept think your bank is likely to survive?
- 01/04/09 11:43 AM
Although the process is very opaque, the Treasury Dept. is assessing the condition of the nation's 8.500 banks and assigning them a rating of one to five where 1 means the Treasury Dept. will most likely make an equity investment in your bank and 5 means that it most likely wont. I explained this in my previous blog. Upon further reflection it occurred to me ask: How can the public at large manage the risk to personal and/or business assets deposited in their bank if the Treasury Dept. doesn't make this information available for public consumption. The position the Treasury Dept … (0 comments)
financial bailout: Treasury Dept Allocates 278 Billion - Where Did It Go?
- 01/04/09 09:35 AM
ProPublica, an independent non-profit newsroom that works in the public interest reports that 278 billion dollars were allocated to 282 banks. Their report is at the following website http://www.propublica.org/feature/bailout-bucks-to-banks-1028 ). However, we still don’t know how these funds are being used or if they are being used appropriately to restore liquidity to the financial markets and stem the tide of home foreclosures The Treasury Dept is using the US supervisory CAMELS ratings to help it decide which of the nation’s 8.500 banks will receive bank equity investments from the TARP funds authorized by the Emergency Economic Stabilization Act (EESA) and which … (0 comments)
financial bailout: Bailout funds are dwarfed by the 33 to 47 trillion dollar asset value of CDSs
- 11/25/08 02:22 PM
The subprime loans are just the tip of the iceberg. These loans were leveraged many times over as they were packaged and repackaged into Mortgaged Backed Securities (MBS), Collaterallized Debt Obligations (CDOs) and these investment instruments were then the objects upon which wagers or side bets in the amount trillions of dollars were made. The window at which these wagers were made was the Credit Default Swaps (CDS) window where Over-The-Counter bets and side bets were made. After reaching a peak asset value of 62 trillion dollars in 2007 which is estimated to be more than the Gross Domestic Product of … (0 comments)
financial bailout: What is a subprime loan and what is Alternative A paper?
- 11/18/08 08:34 AM
The housing market as well as the broader economy has been destabilized by the extension of loans to homeowners with poor credit history and to homeowners with above average credit ratings who were never required to provide verification of income. Without assigning blame it is important to acknowledge that this practive was one of the leading causes in record numbers of foreclosures, declining home values, the freezing of the credit market, and in rising job losses. There is no shortage of opinions as to who is at fault and who should be blamed. However, to understand what the "Experts" and the partisan politicians are saying we need to know … (0 comments)
financial bailout: Homeownership 1999 to 2006 Boom to Bust
- 11/15/08 10:17 AM
I went to the US govt. census site to investigate the changes in the Homeownership rates from 1968 to the present, 2008. Since we just completed the 3rd Qtr for 2008 I looked at the 3rd Qtr findings. From 1968 to 1978 looking at the 3rd Qtr it was at 64.6 +/- .6 percent. From 1979 to 1983 looking at the 3rd Qtr it was at 65.8 +/- .2 percent. From 1984 to 1998 looking at the 3rd Qtr it was at 64.4 +/_ .4 percent. From 1999 to 2006 looking at the 3rd Qtr it was at 68.0 +/- 1.0 … (0 comments)
financial bailout: Credit Default Swaps have made a bad situation worse
- 11/14/08 05:01 PM
It is my understanding that investor demand for collateralized mortgage obligations (CMO's) and collateralized debt obligations (CDO's) which are backed by the value of mortgage loans created a need for more mortgage loans. The investment firms that were producing the CMOs and CDOs exerted demand pressures on the mortgage lender's to relax their underwriting standards in order to write more mortgage loans to address the market demand for CMOs and CDOs. Subprime mortgages and loose underwriting criteria subsequently produced mortgage loans that were at high risk of default. These high risk loans became part of the next generation of CMOs and CDOs … (0 comments)
financial bailout: When a homeowner wants to renegotiate their mortgage who do they contact?
- 11/13/08 05:33 AM
As I understand it, most residential mortgages are resold into the secondary mortgage market to recapitalize local and regional lenders. The original lender is recapitalized by the sale of the mortgage into the secondary market so they have more money to lend. Additionally, the original lender has the opportunity to make money by charging fees to service the loan for the new owners. In the secondary mortgage market the original loans are purchased and sold. Subsequently specialized investment firms will group together many loans and sell grouped loans as securities or bonds. They market these products as collaterized mortgage obligations (CMO's) … (0 comments)
financial bailout: Housing Inventory is at record HIGH - Demand is a record LOW
- 11/12/08 03:47 AM
The govt needs to develop a plan of action with milestones to reduce the inventory of homes on the market and to stop the decline of prices. In targeted areas the govt can buy up homes at the low end of the market. In some areas where the older homes are delapidated, not up to building code & zoning standards, and not energy efficient the govt can employ construction workers to tear down these properties and create economic zones for future re-development and/or for community gardens. In other areas where there is high unemployment and a need for low income housing the govt. could … (0 comments)
financial bailout: Lender's concerns in a declining market
- 11/08/08 08:00 AM
With declining property values it is no mystery why lenders are reluctant to lend. Some housing markets like Stockton, CA have already experienced declines in property values up to 40%. A 20% decline in the last 12 months has occurred in more than a few metropolitan markets and there are forecasts that some of these markets may see another 20% decline in property values. So if you are a lender you are seeing the value of the property used to secure your loan decline rapidly to a point that is inadequate to secure your loan and manage your risk. Let's look … (0 comments)
financial bailout: Govt purchase of toxic homes
- 11/07/08 04:58 PM
The current economic crisis may require a solution greater in scope than the FDR's New Deal. Perhaps one part of this program could be purchasing older homes that were Built with asbestos materials, Painted with lead paint, Non-compliant with current building codes, and Have no historic value. The govt could then perform an environmental cleanup on these residential lots to remove an older, toxic structure, and replace it with a new affordable 'green home' that is energy efficient. From a Broker in Bandon, Port Orford, & Gold Beach Oregon … (0 comments)
financial bailout: Govt Bailout - $250 million purchase of bank stocks
- 11/07/08 04:43 PM
The govt has been slow to provide a clear explanation of their objectives in this bailout, once again the govt is delinquent in developing the proper regulatory controls needed to ensure the objectives are accomplished in an acceptable manner that properly manages the associated risks; and the govt. failed to define specific criteria by which it will measure the success of it actions. Banks buying other banks before they fail will prevent the added burden on the FDIC of another bank failure. It also prevents further asset declines in the purchased institution and shores up the market. Banks lending money to businesses and consumers can increase … (0 comments)
financial bailout: NAR Housing Market Facts 1st Qtr 2008
- 11/07/08 07:33 AM
Over the past 30 years, home values have risen more than 6 percent annually. 60 percent of the average homeowner's wealth comes from their home. Homeowners benefit from the power of leverage. At an annual appreciation rate of 5 percent, a 10 percent down payment on a home will return 94 percent after 3 years. After 5 years, the rate of return increases to 225 percent, and after 10 years, 623 percent. At present we are in a declining housing market and homeowners are losing equity. A 5 percent decline in the market value of a $200,000 home would wipe out the homeowners … (0 comments)
financial bailout: Brainstorming on how the govt can stabilize the housing market
- 11/06/08 04:16 PM
Here are a few of my ideas. The govt. could make a bid to buy foreclosed properties at 60% of the amount of the 1st mortgage with the contingency that the Bank that owns the property has 60 days to accept and close on the govt.s offer or a higher offer. After 60 days the govt.'s offer expires and no subsequent offers will be made by the govt. The govt. could buy up distressed properties within a commuting distance from military bases and use them for military housing. schools and make them available for teachers and school employees hospitals and make them available for hospital … (0 comments)
So, do IRS decisions (the IRS is a bureau of the Dept. of Treasurey) that function as change to tax laws carry the same weight as law? Yes, they do.
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