TARP Repayments

[jpinpb]

From my perspective, it is easy to pay back money if you’re not reporting a loss on your books. The accounting rules are assisting their “profits” and the banks are just kicking the can for whatever reason, intentional or not, and not foreclosing, therefore no losses occurring. Heck, they’re now not even bothering to file NODs while people live for free in homes.

Remember, the government somewhat insisted they take the money or not come back later for help. The banks were kinda obligated to take it. Nothing said they could not give it back whenever suited them. Wasn’t that a nice display and show?

[sdrealtor]

Thanx dave. I’m just a layperson in these matters and wonder where the truth lies. I’m sure plenty others do also.

[sdrealtor]

Thanx dave. I’m just a layperson in these matters and wonder where the truth lies. I’m sure plenty others do also.

[sdrealtor]

Thanx dave. I’m just a layperson in these matters and wonder where the truth lies. I’m sure plenty others do also.

[sdrealtor]

Thanx dave. I’m just a layperson in these matters and wonder where the truth lies. I’m sure plenty others do also.

[sdrealtor]

Thanx dave. I’m just a layperson in these matters and wonder where the truth lies. I’m sure plenty others do also.

[ucodegen]

So what does all this add up to? Are they really paying it back? Was the program a success? Yet to be seen? Is this just PR nonsense?

Yes they are really paying it back. It is a qualified success. What caused a lot of the problems was that the capitalization ratios went bad. Due to some of the loan choices that the banks made as well as low capitalization ratios to start with.. the banks were in jeopardy though not necessary insolvent.

CEO’s and execs want their bonuses…I’m being serious…

That is only part of it. As part of the TARP loan, there were warrants against the common stock. The warrants had decreasing strike prices. The warrants are like options but in this case, the option strike price or price that it becomes ‘in the money’ decreases as time goes by. BofA’s strike price on their TARP warrants were going to be ‘in-the-money’ this upcoming year. The effect of the warrant would be that the Bank would have to hand over some of its common stock on request by the gov (gov then owning part of the Bank).

One of the other problems was the interest rate being charged on TARP funds. The rate was different for different Banks. I don’t know what Goldman had for their interest rate on TARP funds, but I suspect it was lower than the rest if not 0. BofA has to pay 3.5% on TARP money (about $405Mil per quarter) Freddie and Fannie have to pay about 10% on their TARP loan (which amounts to over $1Billion per quarter.. each.). These are not currently competitive rates. LIBOR is currently 1.03%. You could say that the Fed was playing loan shark.. they set needed capitalization ratios, and charge banks higher than standard interest rates on the money the Fed lent to cover the needed capitalization. It is costing the Fed 0.5% interest on Treasuries it used to fund TARP… neat spread (0.5% to 10% on nearly 100Bil)

Much of the losses that were recently declared by banks were for increasing their loss reserve. Freddie and Fannie now have over $40Bil in loss reserves.

[ucodegen]

So what does all this add up to? Are they really paying it back? Was the program a success? Yet to be seen? Is this just PR nonsense?

Yes they are really paying it back. It is a qualified success. What caused a lot of the problems was that the capitalization ratios went bad. Due to some of the loan choices that the banks made as well as low capitalization ratios to start with.. the banks were in jeopardy though not necessary insolvent.

CEO’s and execs want their bonuses…I’m being serious…

That is only part of it. As part of the TARP loan, there were warrants against the common stock. The warrants had decreasing strike prices. The warrants are like options but in this case, the option strike price or price that it becomes ‘in the money’ decreases as time goes by. BofA’s strike price on their TARP warrants were going to be ‘in-the-money’ this upcoming year. The effect of the warrant would be that the Bank would have to hand over some of its common stock on request by the gov (gov then owning part of the Bank).

One of the other problems was the interest rate being charged on TARP funds. The rate was different for different Banks. I don’t know what Goldman had for their interest rate on TARP funds, but I suspect it was lower than the rest if not 0. BofA has to pay 3.5% on TARP money (about $405Mil per quarter) Freddie and Fannie have to pay about 10% on their TARP loan (which amounts to over $1Billion per quarter.. each.). These are not currently competitive rates. LIBOR is currently 1.03%. You could say that the Fed was playing loan shark.. they set needed capitalization ratios, and charge banks higher than standard interest rates on the money the Fed lent to cover the needed capitalization. It is costing the Fed 0.5% interest on Treasuries it used to fund TARP… neat spread (0.5% to 10% on nearly 100Bil)

Much of the losses that were recently declared by banks were for increasing their loss reserve. Freddie and Fannie now have over $40Bil in loss reserves.

[ucodegen]

So what does all this add up to? Are they really paying it back? Was the program a success? Yet to be seen? Is this just PR nonsense?

Yes they are really paying it back. It is a qualified success. What caused a lot of the problems was that the capitalization ratios went bad. Due to some of the loan choices that the banks made as well as low capitalization ratios to start with.. the banks were in jeopardy though not necessary insolvent.

CEO’s and execs want their bonuses…I’m being serious…

That is only part of it. As part of the TARP loan, there were warrants against the common stock. The warrants had decreasing strike prices. The warrants are like options but in this case, the option strike price or price that it becomes ‘in the money’ decreases as time goes by. BofA’s strike price on their TARP warrants were going to be ‘in-the-money’ this upcoming year. The effect of the warrant would be that the Bank would have to hand over some of its common stock on request by the gov (gov then owning part of the Bank).

One of the other problems was the interest rate being charged on TARP funds. The rate was different for different Banks. I don’t know what Goldman had for their interest rate on TARP funds, but I suspect it was lower than the rest if not 0. BofA has to pay 3.5% on TARP money (about $405Mil per quarter) Freddie and Fannie have to pay about 10% on their TARP loan (which amounts to over $1Billion per quarter.. each.). These are not currently competitive rates. LIBOR is currently 1.03%. You could say that the Fed was playing loan shark.. they set needed capitalization ratios, and charge banks higher than standard interest rates on the money the Fed lent to cover the needed capitalization. It is costing the Fed 0.5% interest on Treasuries it used to fund TARP… neat spread (0.5% to 10% on nearly 100Bil)

Much of the losses that were recently declared by banks were for increasing their loss reserve. Freddie and Fannie now have over $40Bil in loss reserves.

[ucodegen]

So what does all this add up to? Are they really paying it back? Was the program a success? Yet to be seen? Is this just PR nonsense?

Yes they are really paying it back. It is a qualified success. What caused a lot of the problems was that the capitalization ratios went bad. Due to some of the loan choices that the banks made as well as low capitalization ratios to start with.. the banks were in jeopardy though not necessary insolvent.

CEO’s and execs want their bonuses…I’m being serious…

That is only part of it. As part of the TARP loan, there were warrants against the common stock. The warrants had decreasing strike prices. The warrants are like options but in this case, the option strike price or price that it becomes ‘in the money’ decreases as time goes by. BofA’s strike price on their TARP warrants were going to be ‘in-the-money’ this upcoming year. The effect of the warrant would be that the Bank would have to hand over some of its common stock on request by the gov (gov then owning part of the Bank).

One of the other problems was the interest rate being charged on TARP funds. The rate was different for different Banks. I don’t know what Goldman had for their interest rate on TARP funds, but I suspect it was lower than the rest if not 0. BofA has to pay 3.5% on TARP money (about $405Mil per quarter) Freddie and Fannie have to pay about 10% on their TARP loan (which amounts to over $1Billion per quarter.. each.). These are not currently competitive rates. LIBOR is currently 1.03%. You could say that the Fed was playing loan shark.. they set needed capitalization ratios, and charge banks higher than standard interest rates on the money the Fed lent to cover the needed capitalization. It is costing the Fed 0.5% interest on Treasuries it used to fund TARP… neat spread (0.5% to 10% on nearly 100Bil)

Much of the losses that were recently declared by banks were for increasing their loss reserve. Freddie and Fannie now have over $40Bil in loss reserves.

[ucodegen]

So what does all this add up to? Are they really paying it back? Was the program a success? Yet to be seen? Is this just PR nonsense?

Yes they are really paying it back. It is a qualified success. What caused a lot of the problems was that the capitalization ratios went bad. Due to some of the loan choices that the banks made as well as low capitalization ratios to start with.. the banks were in jeopardy though not necessary insolvent.

CEO’s and execs want their bonuses…I’m being serious…

That is only part of it. As part of the TARP loan, there were warrants against the common stock. The warrants had decreasing strike prices. The warrants are like options but in this case, the option strike price or price that it becomes ‘in the money’ decreases as time goes by. BofA’s strike price on their TARP warrants were going to be ‘in-the-money’ this upcoming year. The effect of the warrant would be that the Bank would have to hand over some of its common stock on request by the gov (gov then owning part of the Bank).

One of the other problems was the interest rate being charged on TARP funds. The rate was different for different Banks. I don’t know what Goldman had for their interest rate on TARP funds, but I suspect it was lower than the rest if not 0. BofA has to pay 3.5% on TARP money (about $405Mil per quarter) Freddie and Fannie have to pay about 10% on their TARP loan (which amounts to over $1Billion per quarter.. each.). These are not currently competitive rates. LIBOR is currently 1.03%. You could say that the Fed was playing loan shark.. they set needed capitalization ratios, and charge banks higher than standard interest rates on the money the Fed lent to cover the needed capitalization. It is costing the Fed 0.5% interest on Treasuries it used to fund TARP… neat spread (0.5% to 10% on nearly 100Bil)

Much of the losses that were recently declared by banks were for increasing their loss reserve. Freddie and Fannie now have over $40Bil in loss reserves.

[patientrenter]

[quote=sdrealtor]Thanx dave. I’m just a layperson in these matters and wonder where the truth lies. I’m sure plenty others do also.[/quote]

The TARP money was necessary to paper over bank insolvency as the price of assets, and the bank loans against the assets, dropped back closer to pre-bubble values. The price of assets, especially MBS assets, is now being supported back at bubble levels by other, less visible, govt programs (like the $1.2 trillion in Fed purchases of MBS), and so most of the TARP is no longer needed. It’s a shell game, and the pea got moved to the other shell. Most of the bailout is no longer to be found under the TARP shell.

[patientrenter]

[quote=sdrealtor]Thanx dave. I’m just a layperson in these matters and wonder where the truth lies. I’m sure plenty others do also.[/quote]

The TARP money was necessary to paper over bank insolvency as the price of assets, and the bank loans against the assets, dropped back closer to pre-bubble values. The price of assets, especially MBS assets, is now being supported back at bubble levels by other, less visible, govt programs (like the $1.2 trillion in Fed purchases of MBS), and so most of the TARP is no longer needed. It’s a shell game, and the pea got moved to the other shell. Most of the bailout is no longer to be found under the TARP shell.

[patientrenter]

[quote=sdrealtor]Thanx dave. I’m just a layperson in these matters and wonder where the truth lies. I’m sure plenty others do also.[/quote]

The TARP money was necessary to paper over bank insolvency as the price of assets, and the bank loans against the assets, dropped back closer to pre-bubble values. The price of assets, especially MBS assets, is now being supported back at bubble levels by other, less visible, govt programs (like the $1.2 trillion in Fed purchases of MBS), and so most of the TARP is no longer needed. It’s a shell game, and the pea got moved to the other shell. Most of the bailout is no longer to be found under the TARP shell.

[patientrenter]

[quote=sdrealtor]Thanx dave. I’m just a layperson in these matters and wonder where the truth lies. I’m sure plenty others do also.[/quote]

The TARP money was necessary to paper over bank insolvency as the price of assets, and the bank loans against the assets, dropped back closer to pre-bubble values. The price of assets, especially MBS assets, is now being supported back at bubble levels by other, less visible, govt programs (like the $1.2 trillion in Fed purchases of MBS), and so most of the TARP is no longer needed. It’s a shell game, and the pea got moved to the other shell. Most of the bailout is no longer to be found under the TARP shell.

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