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West Palm Beach (HedgeCo.net) – President Barack Obama’s $838 billion stimulus plan was approved by the U.S. Senate as part of a plan of action the Senate hopes will revive the collapsing US economy.
$100 billion is to be alotted to hedge funds or other investors, giving them incentive to purchase so-called toxic assets. President Obama welcomed the 61-37 vote as "good news. It’s a good start."
Outlining a few details of how the administration would spend the remaining $350 billion of the $700 billion bank bailout program, Treasury Secretary Timothy Geithner separately announced a new public-private partnership to help strengthen banks.
"Critical parts of our financial system are damaged," Geithner said. "The financial system is working against recovery and that’s the dangerous dynamic we need to change."
In a related government commitment of financial support, the Federal Reserve broadened a program designed to boost resources for consumer credit and small business loans – from $200 billion up to $1 trillion. Additionally, Obama has campaigned to include funds for school construction in the bill.
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New York (HedgeCo.Net) – Financial institutions that have received generous assistance from Congress may be forced to restrict executive compensation and their dividends, if Barack Obama and his new Treasury have their way.
“Those receiving exceptional assistance will be subject to tough but sensible conditions that limit executive compensation until taxpayer money is paid back,” said Larry Summers, who Obama chose to head the White House National Economic Council. He also said they would ban dividend payments beyond the minimum amounts while putting limits on stock buybacks.
Obama has expressed his disappointment with the current administration and the lax oversight in doling out the first $350 billion of the bailout, along with failing to focus on areas like housing and consumer credit. Summers tackled the subject in a letter to Congress yesterday that outlined the issues Obama supports in distributing the other half of the $700 billion Troubled Asset Relief Program.
Summers told Congress that the President-elect believes there has been “too little transparency and accountability,” among the financial institutions. In addition, Obama believes the executives acted irresponsibly and did not provide enough support for small-businesses owners. Small businesses and community banks are where more of the money needs to be directed, Obama says.
In addition, he wants to provide help to struggling homeowners in order to avoid foreclosure, along with providing enhanced oversight of the relief program which includes public accounting to see how the money is being spent.
The House of Representatives will vote on a proposal this week that include some of the restrictions outlined by Summers.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
FierceFinance – The government is committed to keeping the wheels of consumer credit greased. To that end, it has launched a $200 billion effort to support the market for consumer receivables.
The Fed announced it will "offer low-cost three-year funding to any U.S. company investing in securitized consumer loans under the Term Asset-backed Securities Loan Facility (TALF)," reports the Financial Times.
"This includes hedge funds, which have never been able to borrow from the U.S. central bank before." The TALF will likely be expanded to cover mortgage-backed securities next year. We’ll have to see if this really adds liquidity to the secondary markets.
domain-B – Hedge funds will be allowed to borrow from the Federal Reserve for the first time under a landmark $200-billion programme intended to support consumer credit.
The new programme is aimed at injecting credit for consumers and small businesses including auto loans and credit cards will be launched in February.
The Fed said on Friday it would offer low-cost three-year funding to any US company investing in securitised consumer loans under the Term Asset-backed Securities Loan Facility (TALF). This includes hedge funds, which have never been able to borrow from the US central bank before.
The New York Fed will offer loans under the TALF on a monthly basis. On a fixed day each month, borrowers will be able to borrow by means of one or more loans by indicating for each loan the eligible collateral, the desired amount, the desired interest rate format — fixed or floating.
