ANALYSIS – U.S. TARP program less costly, but not less controversial
By Dave Clarke
WASHINGTON, Aug 19 (Reuters) – The government’s $700 billion bailout of the financial system may still be politically toxic, but for those who voted for the program, there is some good news: the taxpayer bill continues to drop.
On Thursday, congressional scorekeepers projected the overall deficit impact of the Troubled Asset Relief Program — or TARP — will be about $66 billion.
ANALYSIS – US taxpayers hit as TARP takes a new turn
By Dan Wilchins and David Lawder
NEW YORK/WASHINGTON, March 3 (Reuters) – A small Midwestern bank has negotiated with the U.S. Treasury for taxpayers to essentially buy the bank’s shares at an above-market-value price, in an unusual transaction reflecting how the government’s bank investments are entering a new phase.
Midwest Banc Holdings Inc agreed to swap $84.8 million of preferred shares it sold to the U.S. government in 2008 for securities that will convert into about $15.5 million of common shares — roughly an 80 percent loss to taxpayers.
To some analysts, the transaction is an outrageous giveaway to an ailing bank, and its investors.
“There’s a lot of funny stuff going on here,” said James Ellman, president at hedge fund Seacliff Capital in San Francisco.
Others say it is a sign of the tough choices the Treasury faces dealing with banks that remain weak despite receiving government capital. In some cases, taxpayers must choose whether to lose 80 percent of their money, or all of it.
A Treasury official told Reuters that the deal is designed to help Midwest Banc Holdings raise private capital, which is the main goal of this phase of the Troubled Asset Relief Program (TARP).
US Treasury to sell warrants to buy Bank of America stock
WASHINGTON, March 1 (Reuters) – The U.S. Treasury Department said on Monday it will auction off 272.17 million warrants to buy stock in Bank of America Corp later this week.
The Treasury said the auction of warrants, which it received in return for pumping taxpayer capital into the company, would be auctioned on March 3, with Deutsche Bank Securities Inc as the sole book-running manager.
The warrant auction will be divided into two groups, the Treasury said.
Bidders will be able to place bids at any price increments of $0.05 for the first group totaling 150.38 million known as “A” warrants at or above the minimum bid price of $7 per warrant.
Bidders will be able to place bids at any price increments of $0.05 for the second group of 121.79 million known as “B” warrants at or above the minimum bid price of $1.50 per warrant.
Bank of America paid back the $45 billion in financial rescue funds, known as the Troubled Asset Relief Program, in December 2009 and was not planning to repurchase its warrants.
The department said Blaylock Robert Van LLC, CastleOak Securities, L.P., Guzman & Company, Loop Capital Markets LLC, M.R. Beal & Company and Toussaint Capital Partners LLC are the co-managers for the offerings.
US bank bailout encourages risky behavior -watchdog
WASHINGTON, Jan 30 (Reuters) – The U.S. taxpayer-funded rescue program set up to save banks from collapse during the financial crisis makes future reckless behavior more likely, the government’s bailout watchdog said in a quarterly report.
A quarterly report to Congress on the $700 billion Troubled Asset Relief Program, or TARP, made available in draft form late on Saturday, said financial firms seen as too big to fail before 2008 have only grown larger as they feasted on subsidies from the bailout program.
“To the extent that institutions were previously incentivized to take reckless risks through a ‘heads I win, tails the government will bail me out’ mentality, the market is more convinced than ever that the government will step in as necessary to save systemically significant institutions,” the report from the Office of the Special Inspector General for the Troubled Asset Relief Program, said.
The office, headed by Neil Barofsky, acts as a watchdog for taxpayers over how TARP money the Treasury Department administers is used.
The report said little has been achieved in terms of correcting underlying problems that helped create the financial crisis.
“Even if TARP saved our financial system from driving off a cliff in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car,” it warned.
The report noted that TARP, which was originally pitched to Congress as a way to help banks by buying toxic or unwanted assets and then, when Congress approved it, turned into a plan for injecting capital into banks, is changing again.
Obama to propose bank fees to recoup bailout funds
By Alister Bull
WASHINGTON, Jan 14 (Reuters) – President Barack Obama on Thursday will propose major U.S. financial firms pay a fee to protect taxpayers from up to $117 billion in losses on a bank bailout that has spurred fury at Wall Street excess.
Obama, whose action comes amid mounting public anger over multi-million dollar bank bonuses while ordinary Americans struggle in the face of 10 percent unemployment, will announce the plan at 11:50 a.m. (1650 GMT), a senior administration official said.
“The fee that is put forward here is in many ways a minimum — a minimum of what is owed back for the rather significant costs that are borne in many aspects by the taxpayers,” the administration official told reporters.
The levy will recoup losses from a $700 billion taxpayer rescue of U.S. banks called the Troubled Asset Relief Program, or TARP, conceived in 2008 by Obama’s predecessor, George W. Bush, at the height of the global financial panic.
Forged after the collapse of U.S. investment bank Lehman Brothers and multi-billion dollar rescue of insurance giant American International Group <AIG.N>, TARP helped stem the crisis by injecting public capital into the biggest U.S. banks and convincing investors no others would be allowed to fail.
The action, together with massive monetary and fiscal policy stimulus from the government and Federal Reserve, was unable to deflect the country’s worst recession since the Great Depression, which has pushed unemployment to a 26-year high.
Obama to announce TARP fee on banks on Thursday
(Updates with background, adds byline)
By Alister Bull
WASHINGTON, Jan 12 (Reuters) – President Barack Obama will announce plans on Thursday to raise up to $120 billion from major U.S. financial firms to cover expected losses from a taxpayer-funded bank bailout, a senior administration official said on Tuesday.
Obama’s announcement will come as U.S. unemployment is stuck in double digits and public anger is growing over big bonuses that some financial firms are poised to resume paying, barely a year after the height of the global financial crisis that made the bailout necessary.
The Obama administration official said the amount of money raised from the fees would not exceed $120 billion since this was the higher end of conservative estimates of the cost of the Troubled Asset Relief Program, or TARP.
U.S. Treasury officials expect TARP losses to be much lower than that sum, and over the course of years the fee will pay back any costs of the $700 billion taxpayer bailout, the administration official said.
TARP was created by President George W. Bush’s administration to shore up the financial system during the financial meltdown, which plunged the United States into the worst recession in 70 years and has pushed unemployment to 10 percent.
This is all and good, but what will it do for the small business and individuals who still cannot get loans to run their business or start one up? When are we going to see some of this trickel down money?
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.
U.S. delays its $5 billion Citi sale after weak pricing
By Dan Wilchins and David Lawder
NEW YORK/WASHINGTON, Dec 16 (Reuters) – The U.S. Treasury delayed a plan to sell its $5 billion of Citigroup Inc shares after a stock offering by the bank attracted weak demand and priced at a much lower-than-expected $3.15 a share.
The bank sold $20 billion of stock and convertible bonds to repay funds it owes to the government so it can avoid the executive compensation restrictions that came with multiple U.S. bailouts.
But raising that capital came at a steep cost to shareholders, whose shares are worth 20 percent less than their closing level on Friday, before the bank announced its plan for repaying funds to the government.
“It’s a terrific deal for Citigroup’s managers, who can get paid more, and a terrible deal for shareholders. The company paid a huge price for this capital,” said Sean Egan, principal at ratings agency Egan-Jones Ratings.
Citigroup was the third major U.S. bank to launch a multibillion-dollar share sale in December and the multitude of share sales likely dampened demand, analysts said.
“Buyers are in control of the process now,” said Blake Howells, director of research at Becker Capital Management in Portland, Oregon.
Wells Fargo sells $10.65 billion in stock to exit TARP
NEW YORK, Dec 15 (Reuters) – Wells Fargo & Co sold $10.65 billion in stock on Tuesday, raising funds to help repay a $25 billion bailout received from the U.S. government last year.
Wells Fargo and Citigroup Inc — which expects to raise $20 billion on Wednesday to help repay its bailout money — were the last of the largest banks to repay the funds, which were forced on banks amid the height of the financial crisis last year.
Citi to raise $20 billion in capital to repay U.S.
By Dan Wilchins
NEW YORK, Dec 14 (Reuters) – Citigroup laid out a plan to repay the money it owes the U.S. government, including issuing about $20 billion of capital, as the bank looks to end the executive pay restrictions that came with the funds.
The deal will begin to dissolve what has been a troubled relationship between Citigroup and the government, which bailed out the bank with three rescues last year and this year but also pressured it to sell businesses and remove executives.
The transaction is also a sign of a shift in the financial crisis, as regulators worry less about injecting capital into banks to stabilize them and more about properly monitoring banks to prevent the next crisis.
Under the deal, Citigroup will sell immediately $17 billion of common stock and about $3.5 billion of securities that turn into common shares in three years. Early next year, the bank may sell more than $4 billion of additional securities.
The government will stop guaranteeing a pool of toxic Citigroup assets against excessive losses, and will sell the nearly $30 billion of Citi shares it owns over the next year. Up to $5 billion of the shares will be sold alongside the bank’s share sale this week.
(Click here for a FACTBOX detailing the deal’s terms)
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