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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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Bloomberg – Treasury Secretary Timothy Geithner said he’s prepared to oust executives and directors at banks that require “exceptional” assistance from the U.S. government.
“If in the future, banks need exceptional assistance in order to get through this, then we will make sure that assistance comes,” while ensuring taxpayers are protected, Geithner said yesterday in an interview on the CBS “Face the Nation” program. “Where that requires a change in management and the board, then we will do that.”
Fort Worth Business Press – The rescue of the American financial system proposed by Treasury Secretary Timothy Geithner is, in all but name, a gigantic hedge fund. The government would lend vast sums to private investors to enable them to buy loss-ridden assets at discounts from banks with the prospect of making sizable profits. If that’s not a hedge fund, what would be? The hope is that the $14 trillion U.S. banking system would expand lending if it could get rid of many of the lousy securities and loans already on its books.
Almost everyone thinks a healthier banking system is necessary for a sustained economic recovery. Can the Geithner plan work?
New York (HedgeCo.Net) – If Treasury Secretary Timothy Geithner gets his way, hedge funds and private equity firms will be placed under the supervision of the federal government.
“Over the past 18 months, we have faced the most severe global financial crisis in generations,” Geithner said at the House Financial Services Committee hearing on Thursday, adding that “comprehensive reform” is required. “Not modest repairs at the margin, but new rules of the game.”
Geithner supports a mandatory requirement for hedge funds and other large money management firms to register with the Securities and Exchange Commission, an issue that has been at the forefront of political debate recently. Hedge funds would also have to keep the SEC updated on their trades and strategies.
A systemic risk regulator would be imposed that could force these firms to raise capital or halt borrowing. The regulator may also seize hedge funds or other non-bank entities if they felt it was necessary, though it was unclear which agencies would be responsible for handling that task.
“You don’t want to vest in any single institution such broad powers,” he explained.
The Obama administration has been vocal about their desire to regulate the $1 trillion hedge fund industry. After two massive hedge funds within Bear Stearns collapsed in the summer of 2007, eventually leading to the demise of the bank, many members of Congress started supporting regulation with the notion that hedge funds have a direct impact on our economy.
Also backing the argument was the monumental damage caused by credit default swaps and the lack of regulation behind them, as was the case with American International Group.
“The days when a major insurance company could bet the house on credit default swaps with no one watching and no credible backing to protect the company or taxpayers much end,” Geithner added, referring to the AIG debacle.
Under the proposed regulation, the market on which these credit default swaps and other derivatives would be regulated for the first time.
The SEC has tried previously to impose a registration requirement on hedge funds, only to have it overturned by a federal appeals court in 2006.
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
EasyBourse.com – The U.S. and Germany are going "in the same direction" ahead of next week’s G20 summit, a spokesman for Chancellor Angela Merkel said Friday amid reports of rifts between Europe and the U.S.
There are "no points of contention here between us and the U.S. government. For both of us, and our position has been made clear for some time, regulation of financial markets is the focus of the meeting," the spokesman said after Merkel and U.S. President Barack Obama held a video conference Thursday.
"The proposals that (U.S. Treasury Secretary) Timothy Geithner has put on the table when it comes to regulation of certain players – hedge funds and others – show that we are proceeding together in the same direction," spokesman Ulrich Wilhelm told a regular press briefing.
In Obama’s first trip to Europe since being elected, the Group of 20 summit on April 2 – which brings together major industrialized and developing nations – takes place against the backdrop of the worst financial crisis in decades.
Houston Chronicle – Treasury Secretary Timothy Geithner will ask Congress to bring large hedge funds, private-equity firms and derivatives markets under federal supervision for the first time as part of a revamp of U.S. financial rules.
The Treasury chief will present his proposed framework at a House Financial Services Committee hearing in Washington today. Under the new so-called rules of the road, the government would get powers to seize and wind down any financial company big enough to destabilize the banking system.
The Obama administration is counting on public anger over the taxpayer-financed rescues of American International Group Inc., Bear Stearns Cos. and other firms to help it win approval for the changes, which could be the most sweeping since the 1930s. Policy makers want to improve the oversight of the financial system now rather than wait until the crisis is over, administration officials said on condition of anonymity.
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.”
New York (HedgeCo.Net) – As the national outrage over bonuses paid to AIG execs reaches epic proportions, U.S. Treasury Secretary Timothy Geithner promised the government will recoup the $165 million that was shelled out using bailout money.
“We will impose on AIG a contractual commitment to pay the Treasury from the operations of the company the amount of retention rewards just paid,” Geithner wrote, after claiming it would be difficult to physically take back the bonuses. “In addition, we will deduct from the $30 billion in assistance an amount equal to the amount of those payments.”
Arguing that the U.S. government essentially owns a majority of the failed insurance giant, Chairman of the House Financial Services Committee Barney Frank said, “I think the time has to exercise our ownership rights, and then say, as owner, ‘No, I’m not paying you the bonus. You didn’t perform. You didn’t live up to this contract.’”
House Speaker Nancy Pelosi agreed, saying she would urge members to draft legislation this week that could recoup frivolous spending from taxpayer-funded aid.
“Most appallingly, while millions of Americans struggle through this economy, those who have received the largest measure of taxpayer assistance from the Treasury Department have shown no restraint,” Pelosi said.
New York Senator Charles Schumer warned that if those bonuses were not returned to their “rightful owners,” then Congress would pass laws to tax those bonuses “at a very high rate.” Senate Finance Committee members agreed, proposing taxes as high as 70 percent on those payments.
While disdain over the issue may have caused Barack Obama to act swiftly, the nearly decimated public opinion on bailouts may pose a problem for institutions seeking government funds going forward. AIG has so far received $173 billion of taxpayer-funded federal assistance.
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 – Treasury Secretary Timothy Geithner’s financial-rescue plan may be doomed if he doesn’t offer low-cost loans to hedge funds and other investors to help them buy toxic assets weighing down bank balance sheets.
Creating a “bad bank” or “aggregator bank” that would use federal funds to acquire and warehouse the assets, as some have proposed, would be costly for taxpayers and require too much government interference, say two experts on distressed securities who have pitched an alternative plan to officials.
John Ryding, chief economist at RDQ Economics LLC in New York, and Matt Chasin, chief operating officer of Sorin Capital Management LLC, a Stamford, Connecticut-based hedge fund that manages about $1 billion, say the Treasury Department should provide loans at commercial rates to investors for up to 50 percent of the purchase price of securities. The financing would be for as long as the maturities of the assets being acquired.
Reuters – President Barack Obama has decided to launch a government task force for restructuring the struggling U.S. auto industry instead of naming a "car czar" with sweeping powers, a senior administration official said on Sunday.
Obama is appointing Treasury Secretary Timothy Geithner as his "designee" for overseeing auto bailout loans and as co-head of the new high-level panel together with White House economic adviser Lawrence Summers, the official said.
But Obama, who took office on January 20 and last week won congressional approval of a $787 billion economic stimulus program, has dropped the idea of having a single appointee empowered to handle the politically sensitive task of revamping America’s once-mighty auto sector.
"There is no ‘car czar,’" the official said, speaking on condition of anonymity.
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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