A revolution will erupt if billions of euro more in taxpayers’ money is handed over to Anglo Irish Bank, Enda Kenny has warned.

The Fine Gael leader said people can no longer tolerate massive public funding of the nationalised bank as it stands.

Expected record losses at the bank, to be announced later this month, have fuelled speculation it will seek another six billion euro from the Government, on top of the four billion it has already pumped in.

Mr Kenny told Taoiseach Brian Cowen there will be a popular uprising if any such request is given the go-ahead.

“There’ll be revolution on the streets if you do that,” he insisted.

“Whatever case can be made for Allied Irish Bank (AIB), there can be no case made for giving six billion euro more of taxpayers’ money to Anglo Irish Bank.

“This is effectively a dead bank which will not lend any further monies.”

Mr Kenny demanded Anglo be split into a “good bank” and “bad bank” – taking control of the toxic borrowings – before it is given any more help.

The Fine Gael leader also demanded AIB be handed preconditions if it requests further recapitalisation, after the lender went into the red for the first time in its history with pre-tax losses of 2.65 billion euro.

Mr Cowen said Anglo has already asked the European Commission for permission to break up into a “good bank” and “bad bank”, and insisted the Government remains ready to give more cash to banks in an effort to save them.

Source/Full Story: Independent.ie

The European single currency is facing an ‘inevitable break-up’ a leading French bank claimed yesterday.

Strategists at Paris-based Société Générale said that any bailout of the stricken Greek economy would only provide ’sticking plasters’ to cover the deep- seated flaws in the eurozone bloc.

The stark warning came as the euro slipped further on the currency markets and dire growth figures raised the prospect of a ‘double-dip’ recession in the embattled zone.

In a note to investors, SocGen strategist Albert Edwards said: ‘My own view is that there is little “help” that can be offered by the other eurozone nations other than temporary, confidence-giving “sticking plasters” before the ultimate denouement: the break-up of the eurozone.’

‘The euro’s a success’: Peter Mandelson at Downing Street on Thursday

He added: ‘Any “help” given to Greece merely delays the inevitable break-up of the eurozone.’

The alarming claim came a day after European Union leaders promised ‘determined and co-ordinated’ action to shore up Greece’s tattered public finances, but disappointed traders by failing to provide specifics.

Source/Full Story: Mail Online

We’ve been waiting on this one for a while now…

Over the next several years, failed commercial real estate loans could litter American cities with empty stores and office complexes, cause hundreds of bank failures and weaken the economy, a watchdog report says.

Banks face up to $300 billion in losses on loans made for commercial property and development, according to a report released Thursday by the Congressional Oversight Panel. The panel monitors the government’s efforts to stabilize the financial system.

The report says the defaults could lead to reduced lending and cause the eviction of families from rental properties. Bank failures also could contribute to job losses and hurt the economic recovery.

Smaller banks are more vulnerable to the losses than their larger Wall Street counterparts. That’s because commercial real estate makes up a larger portion of their portfolio.

Source/Full Story: Yahoo! News

It could take until November 2018 to get the full story behind the U.S. bailout of insurance giant American International Group (AIG.N) because of an action taken last year by the Securities and Exchange Commission.

In May, the SEC approved a request by AIG to keep secret an exhibit to a year-old regulatory filing that includes some of the details on the most controversial aspect of the AIG bailout: the funneling of tens of billions of dollars to big banks like Societe Generale, Goldman Sachs (GS.N), Deutsche Bank (DBKGn.DE) and Merrill Lynch.

The SEC’s Division of Corporation Finance, in granting AIG’s request for confidential treatment, said the “excluded information” will not be made public until Nov. 25, 2018, according to a copy of the agency’s May 22 order.

The SEC said the insurer had demonstrated the information in the exhibit, called Schedule A, “qualifies as confidential commercial or financial information.”

Source/Full Story:  Reuters

GMAC Inc., the auto and home lender that became majority-owned by the U.S. government last week after a third bailout, may post a loss of more than $10 billion for 2009 as more borrowers defaulted on mortgages.

GMAC, based in Detroit, said yesterday that it expects to report a fourth-quarter loss of about $5 billion. Both the quarterly and annual losses would be records for the primary lender for General Motors Co. and Chrysler Group LLC dealers.

The company received a $3.79 billion infusion from the Treasury Department on Dec. 30. The U.S. earmarked about $13.5 billion for GMAC in two previous capital infusions and now controls a 56 percent stake. If the government converts preferred shares to common equity, it would own more than 70 percent of GMAC, the lender said during a conference call.

“I think for the taxpayer it’s going to be a loss,” said Christopher Whalen, managing director of Torrance, California- based Institutional Risk Analytics. “Who is going to buy this? What is the compelling business model that wants us to have this company continue to exist?”

Source/Full Story:  Bloomberg.com

President Barack Obama wants smaller community banks to have greater access to the government’s $700 billion financial rescue fund as the administration refocuses the bailout money on small businesses and homeowners and winds down programs aimed at big banks.

Obama on Wednesday plans to announce a package of initiatives designed to increase lending, including a request that Congress increase caps for existing Small Business Administration loans, the administration said.

The new effort comes as the administration is under pressure from liberals to shift the massive bailout fund’s spending away from big financial institutions and toward reducing foreclosures and creating jobs. But it also comes as Republicans press Obama to end the rescue program and use bank repayments to reduce the national debt.

An administration official said the Treasury Department intends wind down and terminate bailout programs launched at the height of the financial crisis to stabilize Wall Street and aid the struggling auto industry.

The official, speaking on the condition of anonymity because the details had not yet been made public, said the $218 billion Capital Purchase Program would effectively conclude at the end of the year. The program has been a central element of the bailout program, infusing banks with government money in exchange for preferred stock.

The administration also plans to cap two programs at levels below initial projections. One program designed to rid big banks of their bad assets will spend $30 billion instead of $75 billion, and another that supports a Federal Reserve effort to ease bank credit will top off at $30 billion instead of $80 billion. An initiative aimed at banks — the Capital Assistance Program — had no applicants and will also end, the official said.

Source/Full Story: FOXNews.com

President Barack Obama has “tremendous confidence” in Timothy Geithner, the US Treasury Secretary, even though he has spoken to executives from Citigroup, Goldman Sachs and other banks more than 80 times in his first seven months in office, the President’s spokesman Robert Gibbs said last night

A Freedom of Information request by Associated Press revealed that Mr Geithner had spoken most often to Lloyd Blankfein, having met or spoken to the chief executive of Goldman Sachs more than 15 times between January and July – a revelation likely to fuel conspiracy theorists who believe that the bank has an undue influence on Government policy.

Associated Press speculated that Mr Geithner’s closeness to the banks could be considered inappropriate given that his department oversaw the sector’s bailout with billions of dollars of taxpayers’ funds and plays a role in the banks’ regulation.

Mr Gibbs said: “Secretary Geithner is somebody who has helped steer the financial sector back to stability and has worked on a range of issues and will be heavily involved in regulatory reform as we go forward.”

Citigroup was the bank that had the most communication overall with the Treasury Secretary, usually via chairman Richard Parsons or chief executive Vikram Pandit.

The Government has a 34 per cent stake in Citigroup, which it bailout out with $45 billion, although President Obama has insisted that he does not want to take a hand in running the business.

Jamie Dimon, JPMorgan Chase’s chief executive, talked regularly to Mr Geithner, as did Larry Fink, chief executive of BlackRock, the fund manager that runs one of the Treasury’s public-private funds set up to buy toxic credit assets.

Bank of America, however, did not talk regularly to the Treasury Secretary, despite holding $45 billion in bailout funds. The bank is the subject of numerous investigations into its Government-sponsored takeover of Merrill Lynch last year.

Source/Full Story:  Times Online
Technorati Tags: Timothy Geithner, Lloyd Blankfein, Goldman Sachs

A government watchdog says federal officials weren’t entirely honest with the public about the health of the first 9 financial firms that got federal bailouts, according to a report released Monday.

Bailout special inspector general Neil Barofsky says in an audit that Treasury Department officials painted an overly rosy picture, creating “unrealistic expectations,” when they called the first bailout banks “healthy” institutions that would be able to lend more with government help.

“It is not our intent to suggest that government officials should make public their concerns over the financial health of individual institutions, but rather that government officials should be particularly careful, even in a time of crisis, of describing their actions (and the rationales for such actions) in an accurate manner,” the report stated.

Treasury appeared to disagree with the assessment of the Special Inspector General of the Troubled Asset Relief Program (SigTARP), saying “people may differ” on the phrasing of the original bailout announcements.

“Any review of the announcements must be considered in light of the unprecedented circumstances in which they were made,” wrote TARP chief Herb Allison in response to the SigTARP report.

Source/Full Story: money.cnn.com
Technorati Tags: Treasury Department, Neil Barofsky, TARP

The Federal Deposit Insurance Corp. is weighing several costly — and never-before-used — options as it struggles to shore up the dwindling fund that insures bank deposits.

The agency is considering borrowing billions from healthy banks. Alternatively, it may impose a special fee on the banking industry.

Each option carries risk: Drawing money from healthy banks would take dollars out of the private sector, making that money unavailable for investment in the weak economy. But charging the whole industry a fee to replenish the fund could push weaker banks toward failure.

A third option — borrowing from the Treasury — is politically unpalatable, since it would resemble another taxpayer-financed bailout.

A fourth option would be to have banks pay their regular insurance premiums early. But this idea wouldn’t solve the fund’s long-term cash needs.

“The bottom line is, there’s no good solution,” said Jaret Seiberg, an analyst with the research firm Concept Capital. “This is a fight over which option is least bad.”

The FDIC is expected to propose a solution, possibly combining two or more of the options, at a board meeting next week.

Source/Full Story: Yahoo! Finance
Technorati Tags: FDIC

A new study from Cars.com sheds light on the absurdity of thinking cars have a “nationality.”

When you consider that even a post-bailout GM will expand its use of foreign labor, it shouldn’t be that hard to understand how an “American” car isn’t really so, just because its maker was founded in Detroit.

And more generally, there seems to be little reason to think that American cars are really more American in any metrics that matter: Namely, labor and parts inputs.

According to the new survey, the most American car in America is the Toyota Camry, containing the highest percentage of American inputs, even surpassing the Ford F-150. Actually, Toyota utterly dominates the top 10 list, with a Honda thrown in for good measure.

Now some might object to this, saying that even though these cars are “made-in-America”, the value still flows overseas, but really, even that’s not right. Toyota still pays taxes in America. Its stock is traded in the US, and is no doubt owned by individual retail accounts and mutual funds.

If you insist on coming up with some definition of “American” that limits that moniker to the Big Three, we suppose it’s this: Only Chrysler, Ford and GM have the political clout to win a bailout if needed. We really can’t imagine Toyota or Honda receiving so much political support. Of course, this is a circular definition that still doesn’t say much, but it’s the best you can do.

Source/Full Story: businessinsider.com

Bank stress tests should be repeated if the U.S. unemployment rate rises beyond levels assumed by regulators in a recent round of examinations that provided relief to markets, according to a report released by a bailout watchdog panel on Tuesday.

The Congressional Oversight Panel said in the report that the stress tests should also be repeated periodically as long as banks continue to hold “appreciable amounts” of toxic assets.

The monthly report from the panel, led by Harvard Law School Professor Elizabeth Warren, said the stress tests, ordered by the U.S. Treasury Department for the top 19 U.S. bank holding companies, used a risk-modeling approach that on the whole was “reasonable and conservative.”

But the panel noted that it is impossible for an outside party to replicate the loss projections that form the core of the tests.

It noted, however, that the “more adverse scenario” assumption for the U.S. unemployment rate in the tests for the has nearly been met so far in 2009. The May unemployment rate of 9.4 percent pushed the average for the year to 8.5 percent, not far from the 8.9 percent assumed.

“We recommend that Treasury publicly track the status of its stress test macro-economic assumptions (unemployment, GDP, and housing prices) and repeat the stress test if the adverse scenario assumptions have been exceeded,” the panel said.

Source/Full Story: Reuters

JPMorgan Chase & Co and several other banks eager to escape the restrictions and stigma linked to government bailout funds may get the chance to do so in the next few weeks.

Regulators are talking to big banks that want to repay funds received under the government’s $700 billion Troubled Asset Relief Program, or TARP, a Federal Reserve official said on Tuesday.

No announcements on returning funds will come until around June 8, the official added. The Fed official spoke on condition of anonymity because the application process is continuing.

Earlier on Tuesday, JPMorgan Chief Executive James Dimon told shareholders he expects regulators will let a few strong banks repay TARP funds within weeks.

Dimon made it clear that he was eager to escape strict regulations on compensation and other areas for TARP participants. In particular, he called restrictions under the program on banks hiring foreign-born workers “a complete and utter disgrace.”

Similar concerns have been voiced by other TARP recipients Goldman Sachs Group Inc, and Morgan Stanley, which like JPMorgan recently submitted applications seeking permission to repay TARP funds, people familiar with the situation told Reuters.

“It’s not going to be a big deal stock-price wise, but it is a huge deal competitively that they can use to their advantage,” said Greg Donaldson, director of portfolio strategy at Donaldson Capital Management in Evansville, Indiana.

Repaying the government funds will “take the handcuffs off the management of these companies,” agreed Brad Hintz, analyst with Sanford C Bernstein in New York.

Source/Full Story: Reuters

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.”

The announcement is a major test for Geithner, whose first speech on the financial rescue Feb. 10 offered so few details that it triggered a sell-off in financial stocks. Adding to the pressure on the administration is an unprecedented wave of populist anger over the rescue thus far, following the revelation that employees of American International Group Inc. got $165 million in bonuses after the insurer received taxpayer funds.

Source: Bloomberg.com

The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year.

Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.

The payments to A.I.G.’s financial products unit are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation. Mr. Geithner last week pressured A.I.G. to cut the $9.6 million going to the top 50 executives in half and tie the rest to performance.

The payment of so much money at a company at the heart of the financial collapse that sent the broader economy into a tailspin almost certainly will fuel a popular backlash against the government’s efforts to prop up Wall Street. Past bonuses already have prompted President Obama and Congress to impose tough rules on corporate executive compensation at firms bailed out with taxpayer money.

A.I.G., nearly 80 percent of which is now owned by the government, defended its bonuses, arguing that they were promised last year before the crisis and cannot be legally canceled. In a letter to Mr. Geithner, Edward M. Liddy, the government-appointed chairman of A.I.G., said at least some bonuses were needed to keep the most skilled executives.

“We cannot attract and retain the best and the brightest talent to lead and staff the A.I.G. businesses — which are now being operated principally on behalf of American taxpayers — if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury,” he wrote Mr. Geithner on Saturday.

Source: NYTimes

A relentless sell-off in the stock market Monday blew through barriers that would have been unthinkable just weeks ago, and investors warned there was no reason to believe buyers will return anytime soon.

AP – People walk to work in the snow as they pass the flag-draped New York Stock Exchange Monday, March …

The Dow Jones industrial average plummeted below 7,000 at the opening bell and kept driving lower all day, finishing at 6,763 — a loss of nearly 300 points. Each of the 30 stocks in the index lost value for the day.

And the Standard & Poor’s 500 stock index, a much broader measure of the market’s health, dipped below the psychologically important 700 level before closing just above it. It hadn’t traded below 700 since October 1996.

Investors were worried anew about the stability of the financial system after insurer American International Group posted a staggering $62 billion loss for the fourth quarter, the biggest in U.S. corporate history — and accepted an expanded bailout from the government.

But beyond daily headlines, Wall Street seems to have given up the search for a reason to believe that the worst is over and the time is ripe to buy again.

“As bad as things are, they can still get worse, and get a lot worse,” said Bill Strazzullo, chief market strategist for Bell Curve Trading, who said he believes the Dow might fall to 5,000 and the S&P to 500.

The Dow’s descent has been breathtaking. It took only 14 trading sessions for the average to fall from above 8,000 to below 7,000. For the year, the Dow has lost 23 percent of its value.

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