from MacroScope:
Spitzer: NY Fed “an absolute sinkhole”
To say former New York Governor Eliot Spitzer is no fan of the Federal Reserve Bank of New York would be an understatement.
After arguing financial regulatory reform proposals being discussed in Washington fall short, he said:
"One institution needs to be completely overhauled: The New York Fed," he said.
At a panel in New York, Spitzer lambasted the New York Fed as "an absolute sinkhole when it comes to what went on over the past ten years."
"There wasn't a single person there who knew what was going on because this was all one club," Spitzer said. "Every member of that club wanted to protect what was going on," he said.
"The New York Fed has failed heartily and something has to be done about it," he said.
The New York Fed was at the center of the Fed's crisis management efforts, and has come under fire for decisions made in the bailout of insurer American International Group and the failure of Lehman Brothers.
Former UBS chairman willing to give evidence-report
ZURICH, March 9 (Reuters) – Former UBS <UBS.N><UBSN.VX> chairman Marcel Ospel is willing to give evidence to a parliamentary committee into the Swiss government’s bailout of the bank during the financial crisis, daily Blick reported on Tuesday. (more…)
BREAKINGVIEWS-Paris, Berlin might find Greek bailout profitable
– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –
By Pierre Briancon
PARIS, March 1 (Reuters Breakingviews) – Forget for a moment the headline-grabbing numbers and the political and financial drama, which supposedly includes a European Union Greek bailout worth tens of billion of euros. It now appears that the French and German governments are working on a scheme that would end up costing much less, and may be profitable, if coupled as planned with a tough Greek deficit reduction.
It goes like this. France and Germany first make sure that their own banks keep taking on Greek bonds. This will help Athens raise the 45 billion-odd euros ($61 billion) it still needs this year, about half in April and May. To nudge their private-sector banks in that direction, the two governments won’t rely only on the traditional, friendly but firm political pressure. They will also dangle financial guarantees from state-owned financial powerhouses, Germany’s KfW and France’s Caisse des Depots (CDC).
German and French banks together hold between a quarter and a third of Greece’s 300 million euros of foreign debt, according to some estimates. They would keep their share, but the joint action would also serve as a catalyst, with other euro zone members expected to pitch in according to their economic weight.
Announcing such a plan would by itself do a lot to cool the crisis — rumours that it was in the works shrank Greek bond spreads on Monday. The use of state-owned financial institutions would bow to the letter — if not the spirit — of EU treaties prohibiting direct bailouts by member states.
For the commercial banks buying Greek debt, which are still borrowing from the European Central Bank at near-zero rates, a handsome profit could be in store. Greek yields are likely to remain higher than the cost of the guarantee. Still, the fees for writing sovereign credit insurance would provide KfW, CDC and their peers with a gain, while investors who have gone short on Greece could end up with losses.
Euro zone holds intensive talks on Greek rescue
By Matthias Sobolewski and Renee Maltezou
BERLIN/ATHENS, Feb 10 (Reuters) – Euro zone countries held intensive talks on Wednesday on a possible rescue for Greece, whose debt crisis has shaken the entire currency union, as civil servants staged the first big strike against Athens’ austerity plans.
Financial markets gave Greece some respite as investors hoped that other European governments would help Athens to head off a possible default on its debt repayments.
Finance ministers of the 16 countries that share the common European currency scheduled a video conference for Wednesday to discuss the issue, a European Commission spokesman said.
However, EU law offers no clear procedure for staging the first bailout of a euro zone country in the currency’s 11-year history.
One possibility was for individual countries to offer bilateral aid and Germany, one of the few whose finances are in anything like a fit state to do so, might take a leading role. This could sidestep rules which restrict financial rescues at an EU or euro zone level.
In Berlin, sources in the coalition government said a deal on which countries would help Greece, and by how much, could be reached on the sidelines of an EU leaders’ summit on Thursday.
European governments agree to help Greece – source
By Matthias Sobolewski
BERLIN, Feb 9 (Reuters) – European governments have agreed in principle to help heavily indebted Greece, a senior German coalition source said on Tuesday, in what would be the first rescue of a euro zone member in the currency’s 11-year history.
“The decision on help for Greece has been taken in principle within the euro zone,” said a source in the German coalition government who has knowledge of the negotiations.
Various options were under consideration and no final decision had been taken but the most likely possibility was to offer “bilateral help,” the source said.
The comments were the strongest signal so far that European Union economic heavyweight Germany may be ready to step in to stave off a crisis of confidence in the 16-nation currency bloc that has roiled markets around the globe.
German government spokesman Ulrich Wilhelm called reports that a decision had already in effect been taken “unfounded,” but the newspaper Financial Times Deutschland also said Germany was preparing an aid package for Greece.
The Wall Street Journal said Germany was considering taking a lead role in a plan with its European Union partners to offer Greece and other euro zone countries loan guarantees in an effort to calm market fears of a debt default.
ECB says can’t bail out Greece, sees contagion risk
By Boris Groendahl and Terhi Kinnunen
VIENNA/HELSINKI, Feb 9 (Reuters) – Greece must get its own house in order itself as the European Central Bank cannot bail it out, two ECB policymakers reiterated on Tuesday.
“Greece, being a euro country, is under the regime of euro regulations, and so the main policy approach is of course that they have to solve the problems themselves,” ECB Governing Council member Ewald Nowotny said in an interview.
“The ECB have a clear mandate … we have a clear no-bailout clause,” Nowotny said in an interview with FT Alphaville, a blog published by the Financial Times newspaper.
Fellow Governing Council member Erkki Liikanen told Finnish broadcaster YLE: “We wait and trust that Greece will carry out those actions it announced last week.”
“It is very important that we follow the stability pact guidelines and that all countries get their debt under control. Otherwise rates will rise and it will make paying back debt more difficult,” Liikanen said.
Nowotny added that speculation driven by hedge funds played a role in the slump of Greek and other peripheral euro zone debt, and that there should be efforts to curb those actions.
BREAKINGVIEWS – Is Conan O’Brien a $40 million bailout recipient?
– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –
By Rolfe Winkler
NEW YORK, Jan 19 (Reuters Breakingviews) – Conan O’Brien is expected to receive $40 million for leaving NBC, the media unit of General Electric, itself among the largest recipients of taxpayer help. While it would be a stretch to compare the American late-night talk show host to a Goldman Sachs or Citigroup banker, he’s only a few steps removed.
Though it wasn’t a recipient of direct aid from the Troubled Asset Relief Program, GE availed itself of perhaps an equally important bailout facility, the Temporary Liquidity Guarantee Program overseen by the Federal Deposit Insurance Corp.
Participants in the scheme were able to issue debt with a government guarantee, receiving explicit taxpayer backing in the event of default. Though GE was just one of 88 firms with outstanding Uncle Sam backed debt as of October 31, its $60 billion of issuance accounted for nearly a fifth of the $315 billion total.
Unlike some of the banks that received direct equity injections from the government, GE can argue it is exempt from the same scrutiny over compensation that has bedeviled financial companies including Citigroup, Goldman and American International Group.
But without the FDIC’s largesse, the group’s troubled financial arm, GE Capital, would have struggled to fund its $650 billion balance sheet. That, in turn, could have forced its parent to liquidate assets, starting with NBC. In a truly worst-case scenario, GE might have even had to seek protection from its creditors.
Bernanke seeks government audit of Fed’s AIG bailout
WASHINGTON, Jan 19 (Reuters) – U.S. Federal Reserve chairman Ben Bernanke on Tuesday asked a government auditor to review the Fed’s actions in bailing out American International Group Inc in 2008, as controversy persisted over the central bank’s role in extending billions in credit to the insurer.
Bernanke, in a letter to Acting Comptroller General Gene Dodaro, said the Fed would make available to the Government Accountability Office all documents and personnel necessary to conduct the review.
U.S. lawmakers force issue on Fed role in AIG bailout
By Glenn Somerville
WASHINGTON, Jan 12 (Reuters) – U.S. lawmakers moved on Tuesday to force release of documents that may show whether the New York Federal Reserve pressured insurer AIG to limit discussions about payments to banks when current Treasury Secretary Geithner led the New York Fed.
The Democrat who heads the House of Representatives Oversight Committee, Rep. Edolphus Towns of New York, issued the subpoena to the New York Fed saying it “will provide the committee with documents that will shed light on how and why taxpayer dollars were used for a backdoor bailout.”
Congressional ire was fanned by the refusal of the inspector general for the government’s bailout fund, the Troubled Asset relief Program or TARP, to release material on AIG’s payments to banks because the Federal Reserve asked them not to make them available to the public.
“Just when you think that these outrageous abuses of taxpayers’ trust can’t get any worse, they do,” Republican Rep. Roy Blunt of Missouri said, adding “Secretary Geithner’s New York Fed deliberately counseled AIG to muddy the waters and sit on information the taxpayers deserved to know relating to the disbursement of billions of dollars in bailout funds.”
Geithner headed the New York Fed until being nominated in late 2008 by President Obama to become Treasury Secretary. Lawmakers are waiting for Treasury to say whether Geithner will testify on the AIG issue next week.
Separately on Tuesday, Republican Senator Jim Bunning of Kentucky, a member of the Senate Banking Committee, said an email exchange released last Thursday showing the New York Fed advised American International Group Inc to withhold information about derivatives counterparties from its Securities and Exchange Commission (SEC) filings raised serious issues.
Obama, New York law chief Cuomo target Wall Street bonuses
By Caren Bohan and Jonathan Stempel
WASHINGTON/NEW YORK, Jan 11 (Reuters) – The White House and and New York’s top prosecutor attacked excessive Wall Street bonuses, as the nation’s biggest banks prepare to hand out awards critics say were made possible by taxpayer bailouts.
A senior U.S. official also confirmed President Barack Obama is considering a fee on financial services firms as part of the fiscal 2011 budget he will unveil in February.
The proposal reflects tougher approach the White House is taking toward Wall Street as it faces rising political heat over its support for the $700 billion financial bailout begun in the Bush administration.
Amid reports of some bank payouts that could average hundreds of thousands of dollars each, White House spokesman Robert Gibbs said some Wall Street executives “continue not to get it” when it comes to big bonuses at bailed-out companies.
Meanwhile, New York Attorney General Andrew Cuomo asked the first eight banks to receive bailout money under the government’s much-maligned Troubled Asset Relief Program to turn over data on expected bonus payouts in 2009.
These banks are Bank of America Corp, Bank of New York Mellon Corp, Citigroup Inc, Goldman Sachs Group Inc, JPMorgan Chase & Co, Morgan Stanley, State Street Corp and Wells Fargo & Co.
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