Results tagged “tarp”

Goldman Sachs, a recipient of billions of dollars in government bailout money, has built up $16 billion in its bonus pool so far this year, according to the Post. This is on track to be the largest year for bonuses ever. In unrelated news, the national unemployment rate is still above 10%.

Some good news about the billion dollar bailouts the federal government made last year. The NY Times reports, "The profits, collected from eight of the biggest banks that have fully repaid their obligations to the government, come to about $4 billion, or the equivalent of about 15 percent annually, according to calculations compiled for The New York Times." Still, the Times adds, "These early returns are by no means a full accounting of the huge financial rescue undertaken by the federal government last year to stabilize teetering banks and other companies. The government still faces potentially huge long-term losses from its bailouts of the insurance giant American International Group, the mortgage finance companies Fannie Mae and Freddie Mac, and the automakers General Motors and Chrysler. The Treasury Department could also take a hit from its guarantees on billions of dollars of toxic mortgages."

Goldman Sachs, which repaid a $10 billion TARP loan to the U.S. government, announced second quarter profits of $3.44 billion, which beat analysts' expectations. The NY Times says, "The results continue a robust turnaround for the firm since it rode out the final tumultuous months of last year with the aid of a federal rescue... [The bank] said in the first six months of 2009 it had set aside $11.4 billion for compensation and benefits. Analysts said this was up 33 percent from a year earlier and was enough to pay each employee $386,429 for the first half of this year." Bloomberg News notes that the firm is "reverting to a business model analysts deemed irretrievably broken after a crisis of confidence in Wall Street raised borrowing costs and led to the collapse of Lehman Brothers Holdings Inc. While rivals have pared risks, Goldman Sachs has increased them."

The government has approved 10 banks to repay TARP bailout funds, which would total about $68 billion. While the Treasury Department has not indicated which banks are included, the NY Times reports they are American Express, Bank of New York Mellon, the BB&T Corporation, Capital One Financial, JPMorgan Chase, the State Street Corporation, US Bancorp, Morgan Stanley, Northern Trust, and Goldman Sachs. Many of the banks passed the stress test (Northern Trust is a holding company and did not have to undergo the stress test. Bloomberg News notes this will "reduc[e]officials’ authority to intervene in everything from lending and hiring strategies to compensation policies." Treasury Secretary Timothy Geithner said, "These repayments are an encouraging sign of financial repair, but we still have work to do."

Feel better, American taxpayers: Citigroup, which received $45 billion in bailout money, has reported a first quarter profit of $1.6 billion. However, Dealbook reports, "The earnings were helped by an accounting change that allowed the bank to post a one-time gain of $2.5 billion... Under the rule, companies are allowed to record any declines in the market value of their debt as an unrealized gain." ( You may remember that besides a $20 billion infusion from the government in November, it was only in February when the U.S. increased its stake in Citi to about 36%.) Some analysts are still worried about the financial firm's ability to retain top executives as well as their credit-default swaps. Citi's stock is up in pre-market trading.

The heads of U.S. banks who have received a combined $135 billion in Troubled Asset Relief Program funds were in the firing line of the House Financial Services Committee. When the executives were somewhat apologetic for the credit collapse—Morgan Stanley's John Mack said, "We are sorry for it. I am especially sorry for what's happened to shareholders [and the American public]. Clearly, as an industry, we have accountability and we're taking responsibility. I'll take responsibility for my firm."—many members of Congress took the Festivus-approach, by airing grievances.

President Obama, who called Wall Street's bonuses "the height of irresponsibility", and Treasury Secretary Timothy Geithner announced that executive compensation at banks receiving TARP (Troubled Asset Relief Protection) funds should be capped at $500,000. Obama said, “In order to restore our financial system, we’ve got to restore trust. And in order to restore trust, we’ve got to make certain that taxpayer funds are not subsidizing excessive compensation packages on Wall Street," while Geithner added, "There is a deep sense across the country that those who are not responsible for this crisis are bearing a greater burden than those who were." Which is why Goldman Sachs is eager to pay Uncle Sam back for the money the firm received. Goldman CEO David Viniar said, "We’d be under less scrutiny and under less pressure," plus, "It would send a very good signal" if they repaid it. Hey, by all means, pay it back!

After the NY Post's outraged article on how CitiGroup was buying a $50 million corporate jet, politicians joined the chorus over how the banking giant is not really thinking straight. President Obama's press secretary Robert Gibbs said the president "doesn't believe [business jets are the] best use of money." Especially when CitiGroup is getting $45 billion in TARP funds, right?

Fired Merrill Lynch CEO John Thain is going on the offensive, claiming that Bank of America knew that he and other ML execs were giving out $15 billion in bonuses, not to mention BoA knew Merrill was losing $15 billion during the 4th quarter. But did BoA, which announced it was taking over Merrill in September, know about his $1 million office decorating account? Oh, Thain claims that was a mistake. Clusterstock has the leaked memo Thain sent to ML employees—"We were completely transparent with Bank of America. They learned about these losses when we did."—and CNBC will broadcast an interview with Thain at 4:15 p.m. BoA, which is getting $45 billion in TARP money, tells CNBC that Thain and Merrill's "compensation committee made the decision on the amount and timing of year-end compensation. We had no legal right to challenge it."

The $350 billion second half of the federal government bank bailout—aka TARP (Troubled Asset Relief Program)—funding was released by the Senate. According to the Wall Street Jounral, President-elect Barack Obama intends to "spend $50 billion to $100 billion on a 'sweeping' foreclosure-prevention effort" as well as "impose tougher restrictions on banks that receive government aid, including requirements on banks to lend money, increased restrictions on executive compensation and curtailed dividend payments for some firms."

Banking giant Citigroup announced its fifth straight quarterly loss—this time, it's $8.29 billion—and described plans to restructure. The NY Times reports, "Citigroup confirmed that it would divide, for management purposes, into two separate businesses — Citicorp and Citi Holdings," and the company's statement read, "We are setting out a clear road map to restore profitability and enable us to focus on maximizing the value of Citi." CEO Vikram Pandit added, "Our results continued to be depressed by an unprecedented dislocation in capital markets and a weak economy."

While the White House signaled it would be ready to step in and help the auto industry after the Senate failed to pass a $14 billion bailout package for the Big Three, President Bush told reporters, "We're not quite ready to announce that yet." And when asked he would use money from the TARP (the earlier $700 billion financial industry) bailout, he added, "I signaled that that's a possibility." Stock futures are, according to CNBC, "uncertain...amid a dismal manufacturing report and" auto bailout anxiety. Still, lawmakers believe there will be relief for Detroit; Sen. Bob Corker says the Treasury Dept. was talking to automakers over the weekend.

The White House signaled it might use TARP money (the earlier $700 billion bailout) to help out the Big Three. White House spokeswoman Dana Perino said, "Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms. However, given the current weakened state of the U.S. economy, we will consider other options if necessary — including use of the TARP program — to prevent a collapse of troubled automakers.” The Treasury Department also signaled it could help prop up the automakers, and that helped the Dow, Nasdaq and S&P 500 stay in positive territory. Also interesting: CNBC has a chart showing not just the one-day and one-week changes for stock market but the year-to-date change, too: The Dow is off by 35% for the year.