Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
Courthouse News Service – President Obama’s plan to overhaul financial regulations, to prevent a repeat of the country’s credit and banking catastrophe, is laid out in a "nearly final" 85-page document the president is expected to reveal today.
Among other things, the president proposes creating a National Bank Supervisor to oversee all federally chartered banks; strengthening capital requirements for banks; requiring hedge funds and other private pools of capital to register with the SEC; and regulating derivatives, including credit default swaps.
The plan would give the Federal Reserve more authority over large financial institutions that could threaten the financial system, and give the Federal Deposit Insurance Corp. greater power to seize and break up such institutions.
The document proposes five "key objectives;" 1. Promote robust supervision and regulation of financial firms; 2. Establish comprehensive supervision and regulation of financial markets 3. Protect consumers and investors from financial abuse; 4. Improve tools for managing financial crises; and 5. Raise international regulatory standards and improve international cooperation.
The first objective of the plan calls for "new authority for the Federal Reserve to supervise all firms that could pose a threat to financial stability, even those that do not own banks."
New York (HedgeCo.Net) – President Obama met with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner on Friday, after which he told reporters there are “glimmers of hope across the economy.”
The meeting, which was also attended by Sheila Bair from the Federal Deposit Insurance Corp. and Mary Schapiro, head of the Securities and Exchange Commission, focused on topics like home-owner refinancing, stabilizing the banks, increasing jobs, and the new “stress tests” being administered to companies by the government.
The test are being conducted on the 19 largest U.S. banks to see whether they would hold up or crumble amidst worsening economic conditions. The results are expected to be released the end of this month. Banks that do not fare so well may get additional taxpayer funded assistance.
“We have always been very cautious about prognosticating, and that’s not going to change,” the President told reporters after the meeting.
Obama pointed to several reasons why he felt the economy is showing signs of hope, mainly the nearly $800 billion stimulus package plus an increase in loans to small business owners and more options of homeowner refinancing. He added that the administration will be unveiling additional programs over the next several weeks, though he didn’t get into details.
“We’re starting to see progress, and if we stick with it, if we don’t flinch in the face of difficulties, then I feel absolutely convinced that we’re going to get this economy back on track.”
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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Reuters – Sheila Bair, chairman of the Federal Deposit Insurance Corp, is in New York on Friday to meet with hedge funds, private equity funds and pension groups to promote the government’s plan to cleanse banks’ balance sheets of toxic assets, a source familiar with the meeting said on Friday.
Bair has said she would like all types of investors to participate in the Public-Private Investment Partnership PPIP.L, including private equity groups and individual investors.
New York (HedgeCo.Net) – The Obama administration has unveiled its much anticipated program aimed at clearing toxic assets from the books of U.S. banks and finding a middle ground between inaction and nationalization. By financing the purchase of up to $1 trillion in illiquid real estate assets, the government is hoping that its Public-Private Investment Program will revive the lending process while helping to jumpstart the economy.
“This will allow banks to clean up their balance sheets,” Treasury Secretary Timothy Geithner said. “There is no doubt the government is taking risk. You cannot solve a financial crisis without the government assuming risk.”
The plan entails using up to $100 billion in the Troubled Asset Relief Program funds along with additional capital from private investors to “generate $500 billion in purchasing power to buy legacy assets with the potential to expand to $1 trillion over time,” according to a statement released by the Treasury.
Under the plan, the “Legacy Securities Program” would be instilled to protect private investors’ or hedge funds’ purchase of the assets by using money from half of the original funds. The Treasury would match any private capital that is raised for the purchases dollar for dollar.
The Federal Deposit Insurance Corporation would oversee a facet of the plan called the “Legacy Loans Program,” which is expected to garner interest among many private investors. With this program, the treasury would pony up half of the capital to purchase a bundle of loans while the rest of the cash would come from private investors or hedge funds. The FDIC would then guarantee financing of up to six times the original price, then auction off the loans.
In addition, private-sector purchasers would determine the value of these assets so as to quell any fears that the government might be overpaying for the loans.
Some critics are weary that the program’s success relies exclusively on the action of private investors to step up to the plate. The Fed’s new program to revive consumer credit, called the Term Asset-Backed Securities Loan Facility, or TALF, was a disappointment as far as popularity was concerned, with just 19 large hedge funds and other firms showing interest. Out of the $200 billion offered, only $4.7 billion in requests for loans came in.
Another reason cited for the lack of big-money interest in the programs is the mess that unfolded after AIG handed out $165 billion in employee bonuses. A near unanimous vote in the House to tax those bonuses 90 percent may have stifled public outcry, but it did little to put to rest investor’s uncertainty regarding the government’s conflicting actions.
Former President Bush declined to buy the toxic securities in November. No banks have agreed as of yet to sell their illiquid assets.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com
Bloomberg – The Obama administration will announce details of a plan today to expand the $700 billion rescue of the financial system that will rely on enticing private investors to buy the troubled assets clogging banks’ balance sheets.
Treasury Secretary Timothy Geithner, who will unveil the Public Private Investment Program today, has crafted an approach using up to $100 billion of bailout money to spur investment funds to purchase — and banks to unload — the illiquid securities and loans that have caused credit to dry up. The Treasury, Federal Reserve and the Federal Deposit Insurance Corp. will all play a role alongside private investors in aiming to buy between $500 billion and $1 trillion of troubled assets.
“By providing a market for these assets that does not now exist, this program will help improve asset values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets,” Geithner said in an op-ed piece published in today’s Wall Street Journal. “The ability to sell assets to this fund will make it easier for banks to raise private capital.”
Bloomberg – Bank of America Corp., the largest U.S. bank by assets, received a $138 billion emergency lifeline from the government to support its acquisition of Merrill Lynch & Co. and prevent the global financial crisis from deepening.
The U.S. will invest $20 billion in Bank of America and guarantee $118 billion of assets “as part of its commitment to support financial-market stability,” the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement shortly after midnight in Washington.
Saudi Gazette – A seven-member investor group including billionaire George Soros and Dell Inc. founder Michael Dell have agreed to purchase failed lender IndyMac Bank, one of the largest casualties of the housing bust, for $13.9 billion.
IndyMac, which specialized in loans made with little down payment or proof of assets, was seized by the government in July after a run on the bank as the US housing market collapsed.
The Federal Deposit Insurance Corp. said Friday that a holding company led by Steven Mnuchin, co-chief executive of private equity firm Dune Capital Management, agreed to buy IndyMac in a deal reached Wednesday.
The investors have formed a partnership, called IMB Management Holdings LP, that includes Dell’s investment firm, MSD Capital.
New York (HedgeCo.Net) – Several hedge fund firms led by J.C. Flowers & Co., are closing in on a deal to purchase the assets of IndyMac, the failed mortgage lender, as of Sunday.
The group of firms, which also include Paulson & Co. and Dune Capital Management, would buy the bank’s 33 branches, along with its $176 billion loan-servicing portfolio and its reverse-mortgage unit.
The IndyMac Bank unit was seized by regulators in July after clients moved to withdrawal $1.3 billion in cash in little over a week. The result was one of the worst U.S. bank failures in history, from a firm who managed $32 billion in assets.
Paulson & Co. is a New York-based hedge fund run by famed manager John Paulson. In the midst of one of the worst years for hedge funds to date, Paulson’s funds have managed to reap consistent returns.
Dune Capital Management is a New York-based private equity firm, founded in 2004 by ex-Goldman employees Steven Mnuchin and Daniel Niedich.
J.C. Flowers & Co., another New York-based firm, was founded in 2001 by billionaire J. Christopher Flowers, also formerly of Goldman. In 2007, the company was close to purchasing loan servicer Sallie Mae for $25 billion.
The Federal Deposit Insurance Corp is being advised on the sale by Barclays Capital and Deutsche Bank. A deal is expected to be finalized by the end of this year.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
