TARP Repayments

[scaredyclassic]

so, uhh, what happened to all those toxic mortgages?

[ucodegen]

Bank of America raised $19 billion of new equity. It paid the government $45 billion of TARP funds back. To make up the difference, it borrowed $26 billion of new funds from the Fed (at a subsidized rate, no less).

Please show where the new funds are being borrowed. I am seeing it come from sale of existing assets. Considering that LIBOR is 1%, it is very hard to subsidize below that. LIBOR is the rate at which banks borrow from each other. The fed was charging 3.5%. I have checked their SEC filings and saw no such reference to the new source of funds.

But aren’t taxpayers better off now that Bank of America has paid us back?

Not if you thought the control and pay restrictions TARP provided were a good thing.

This is the primary reason why I don’t like BofA from getting out from under a TARP restriction on executive pay. I like getting out from under it due to the warrants and interest rate charged.

If an executive was truly worth the pay being demanded, he would try to negotiate the pay to be nearly 100% in options for a few years, with strike price at current stock price when awarded and vest date 5 years from award with 20% vest increments from award date… no underwater repricing allowed.

If the guy was good, he would be able to get the company back on its feet within that time.. otherwise they are not worth the millions the executives are asking…

[ucodegen]

Bank of America raised $19 billion of new equity. It paid the government $45 billion of TARP funds back. To make up the difference, it borrowed $26 billion of new funds from the Fed (at a subsidized rate, no less).

Please show where the new funds are being borrowed. I am seeing it come from sale of existing assets. Considering that LIBOR is 1%, it is very hard to subsidize below that. LIBOR is the rate at which banks borrow from each other. The fed was charging 3.5%. I have checked their SEC filings and saw no such reference to the new source of funds.

But aren’t taxpayers better off now that Bank of America has paid us back?

Not if you thought the control and pay restrictions TARP provided were a good thing.

This is the primary reason why I don’t like BofA from getting out from under a TARP restriction on executive pay. I like getting out from under it due to the warrants and interest rate charged.

If an executive was truly worth the pay being demanded, he would try to negotiate the pay to be nearly 100% in options for a few years, with strike price at current stock price when awarded and vest date 5 years from award with 20% vest increments from award date… no underwater repricing allowed.

If the guy was good, he would be able to get the company back on its feet within that time.. otherwise they are not worth the millions the executives are asking…

[ucodegen]

Bank of America raised $19 billion of new equity. It paid the government $45 billion of TARP funds back. To make up the difference, it borrowed $26 billion of new funds from the Fed (at a subsidized rate, no less).

Please show where the new funds are being borrowed. I am seeing it come from sale of existing assets. Considering that LIBOR is 1%, it is very hard to subsidize below that. LIBOR is the rate at which banks borrow from each other. The fed was charging 3.5%. I have checked their SEC filings and saw no such reference to the new source of funds.

But aren’t taxpayers better off now that Bank of America has paid us back?

Not if you thought the control and pay restrictions TARP provided were a good thing.

This is the primary reason why I don’t like BofA from getting out from under a TARP restriction on executive pay. I like getting out from under it due to the warrants and interest rate charged.

If an executive was truly worth the pay being demanded, he would try to negotiate the pay to be nearly 100% in options for a few years, with strike price at current stock price when awarded and vest date 5 years from award with 20% vest increments from award date… no underwater repricing allowed.

If the guy was good, he would be able to get the company back on its feet within that time.. otherwise they are not worth the millions the executives are asking…

[ucodegen]

Bank of America raised $19 billion of new equity. It paid the government $45 billion of TARP funds back. To make up the difference, it borrowed $26 billion of new funds from the Fed (at a subsidized rate, no less).

Please show where the new funds are being borrowed. I am seeing it come from sale of existing assets. Considering that LIBOR is 1%, it is very hard to subsidize below that. LIBOR is the rate at which banks borrow from each other. The fed was charging 3.5%. I have checked their SEC filings and saw no such reference to the new source of funds.

But aren’t taxpayers better off now that Bank of America has paid us back?

Not if you thought the control and pay restrictions TARP provided were a good thing.

This is the primary reason why I don’t like BofA from getting out from under a TARP restriction on executive pay. I like getting out from under it due to the warrants and interest rate charged.

If an executive was truly worth the pay being demanded, he would try to negotiate the pay to be nearly 100% in options for a few years, with strike price at current stock price when awarded and vest date 5 years from award with 20% vest increments from award date… no underwater repricing allowed.

If the guy was good, he would be able to get the company back on its feet within that time.. otherwise they are not worth the millions the executives are asking…

[ucodegen]

Bank of America raised $19 billion of new equity. It paid the government $45 billion of TARP funds back. To make up the difference, it borrowed $26 billion of new funds from the Fed (at a subsidized rate, no less).

Please show where the new funds are being borrowed. I am seeing it come from sale of existing assets. Considering that LIBOR is 1%, it is very hard to subsidize below that. LIBOR is the rate at which banks borrow from each other. The fed was charging 3.5%. I have checked their SEC filings and saw no such reference to the new source of funds.

But aren’t taxpayers better off now that Bank of America has paid us back?

Not if you thought the control and pay restrictions TARP provided were a good thing.

This is the primary reason why I don’t like BofA from getting out from under a TARP restriction on executive pay. I like getting out from under it due to the warrants and interest rate charged.

If an executive was truly worth the pay being demanded, he would try to negotiate the pay to be nearly 100% in options for a few years, with strike price at current stock price when awarded and vest date 5 years from award with 20% vest increments from award date… no underwater repricing allowed.

If the guy was good, he would be able to get the company back on its feet within that time.. otherwise they are not worth the millions the executives are asking…

[analyst]

[quote=sdrealtor]

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?[/quote]

Summary of events:

1. Treasury Secretary Paulson proposes that Congress authorize $700 billion to buy devalued MBS, with the condition that he not be accountable to anybody for his disposition of the funds.

2. Congress responds “Hell no!”.

3. Paulson says the sky is falling.

4. Congress appropriates the money with completely insufficient controls.

5. Paulson figures out that:
a. MBS owners don’t want to sell low,
b. Treasury doesn’t want to buy high,
c. $700 billion is totally insufficient to handle the magnitude of the problem.

6. Paulson and Bernanke privately agree that the $700 billion will be “invested” in certain organizations to defuse the liquidity crisis, while the Federal Reserve will print money in massive quantities to handle the bigger problem (insolvency of all the large financial organizations).

7. Federal Reserve easy money and MBS purchases, along with relaxed accounting rules, return the large banks to “solvency” and “profitability”.

8. Banks are now able to convince somebody to buy new issues of stock.

9. TARP money is repaid.

To the people running the show, #8 is the definition of success (not of TARP, but of Treasury/Federal Reserve Plan B).

It remains to be seen what consequences arise from the massive Federal Reserve money printing. To the short-term thinkers in government, any such consequences are tomorrow’s problems. (Maybe some magic will happen.)

[analyst]

[quote=sdrealtor]

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?[/quote]

Summary of events:

1. Treasury Secretary Paulson proposes that Congress authorize $700 billion to buy devalued MBS, with the condition that he not be accountable to anybody for his disposition of the funds.

2. Congress responds “Hell no!”.

3. Paulson says the sky is falling.

4. Congress appropriates the money with completely insufficient controls.

5. Paulson figures out that:
a. MBS owners don’t want to sell low,
b. Treasury doesn’t want to buy high,
c. $700 billion is totally insufficient to handle the magnitude of the problem.

6. Paulson and Bernanke privately agree that the $700 billion will be “invested” in certain organizations to defuse the liquidity crisis, while the Federal Reserve will print money in massive quantities to handle the bigger problem (insolvency of all the large financial organizations).

7. Federal Reserve easy money and MBS purchases, along with relaxed accounting rules, return the large banks to “solvency” and “profitability”.

8. Banks are now able to convince somebody to buy new issues of stock.

9. TARP money is repaid.

To the people running the show, #8 is the definition of success (not of TARP, but of Treasury/Federal Reserve Plan B).

It remains to be seen what consequences arise from the massive Federal Reserve money printing. To the short-term thinkers in government, any such consequences are tomorrow’s problems. (Maybe some magic will happen.)

[analyst]

[quote=sdrealtor]

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?[/quote]

Summary of events:

1. Treasury Secretary Paulson proposes that Congress authorize $700 billion to buy devalued MBS, with the condition that he not be accountable to anybody for his disposition of the funds.

2. Congress responds “Hell no!”.

3. Paulson says the sky is falling.

4. Congress appropriates the money with completely insufficient controls.

5. Paulson figures out that:
a. MBS owners don’t want to sell low,
b. Treasury doesn’t want to buy high,
c. $700 billion is totally insufficient to handle the magnitude of the problem.

6. Paulson and Bernanke privately agree that the $700 billion will be “invested” in certain organizations to defuse the liquidity crisis, while the Federal Reserve will print money in massive quantities to handle the bigger problem (insolvency of all the large financial organizations).

7. Federal Reserve easy money and MBS purchases, along with relaxed accounting rules, return the large banks to “solvency” and “profitability”.

8. Banks are now able to convince somebody to buy new issues of stock.

9. TARP money is repaid.

To the people running the show, #8 is the definition of success (not of TARP, but of Treasury/Federal Reserve Plan B).

It remains to be seen what consequences arise from the massive Federal Reserve money printing. To the short-term thinkers in government, any such consequences are tomorrow’s problems. (Maybe some magic will happen.)

[analyst]

[quote=sdrealtor]

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?[/quote]

Summary of events:

1. Treasury Secretary Paulson proposes that Congress authorize $700 billion to buy devalued MBS, with the condition that he not be accountable to anybody for his disposition of the funds.

2. Congress responds “Hell no!”.

3. Paulson says the sky is falling.

4. Congress appropriates the money with completely insufficient controls.

5. Paulson figures out that:
a. MBS owners don’t want to sell low,
b. Treasury doesn’t want to buy high,
c. $700 billion is totally insufficient to handle the magnitude of the problem.

6. Paulson and Bernanke privately agree that the $700 billion will be “invested” in certain organizations to defuse the liquidity crisis, while the Federal Reserve will print money in massive quantities to handle the bigger problem (insolvency of all the large financial organizations).

7. Federal Reserve easy money and MBS purchases, along with relaxed accounting rules, return the large banks to “solvency” and “profitability”.

8. Banks are now able to convince somebody to buy new issues of stock.

9. TARP money is repaid.

To the people running the show, #8 is the definition of success (not of TARP, but of Treasury/Federal Reserve Plan B).

It remains to be seen what consequences arise from the massive Federal Reserve money printing. To the short-term thinkers in government, any such consequences are tomorrow’s problems. (Maybe some magic will happen.)

[analyst]

[quote=sdrealtor]

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?[/quote]

Summary of events:

1. Treasury Secretary Paulson proposes that Congress authorize $700 billion to buy devalued MBS, with the condition that he not be accountable to anybody for his disposition of the funds.

2. Congress responds “Hell no!”.

3. Paulson says the sky is falling.

4. Congress appropriates the money with completely insufficient controls.

5. Paulson figures out that:
a. MBS owners don’t want to sell low,
b. Treasury doesn’t want to buy high,
c. $700 billion is totally insufficient to handle the magnitude of the problem.

6. Paulson and Bernanke privately agree that the $700 billion will be “invested” in certain organizations to defuse the liquidity crisis, while the Federal Reserve will print money in massive quantities to handle the bigger problem (insolvency of all the large financial organizations).

7. Federal Reserve easy money and MBS purchases, along with relaxed accounting rules, return the large banks to “solvency” and “profitability”.

8. Banks are now able to convince somebody to buy new issues of stock.

9. TARP money is repaid.

To the people running the show, #8 is the definition of success (not of TARP, but of Treasury/Federal Reserve Plan B).

It remains to be seen what consequences arise from the massive Federal Reserve money printing. To the short-term thinkers in government, any such consequences are tomorrow’s problems. (Maybe some magic will happen.)

[CA renter]

[quote=scaredycat]so, uhh, what happened to all those toxic mortgages?[/quote]

IMHO, some have been sold off in bulk, some have been foreclosed and auctioned to flippers or back to bene and put on the open market. Many have been refi’d into GSE and FHA loans (foreclosures coming soon to a neighborhood near you — but now the taxpayers are explicitly on the hook). Some have been modified with much lower interest rates and some with reduced principal balances.

Last but not least, I believe some are still sitting there on various balance sheets getting worse day by day, but they are not being written-down because the current echo bubble is masking the real prices of the collateral, and if they are in the process of being modified they might not have to be written down (anyone have any definite info on that?).

Just MHO.

[CA renter]

[quote=scaredycat]so, uhh, what happened to all those toxic mortgages?[/quote]

IMHO, some have been sold off in bulk, some have been foreclosed and auctioned to flippers or back to bene and put on the open market. Many have been refi’d into GSE and FHA loans (foreclosures coming soon to a neighborhood near you — but now the taxpayers are explicitly on the hook). Some have been modified with much lower interest rates and some with reduced principal balances.

Last but not least, I believe some are still sitting there on various balance sheets getting worse day by day, but they are not being written-down because the current echo bubble is masking the real prices of the collateral, and if they are in the process of being modified they might not have to be written down (anyone have any definite info on that?).

Just MHO.

[CA renter]

[quote=scaredycat]so, uhh, what happened to all those toxic mortgages?[/quote]

IMHO, some have been sold off in bulk, some have been foreclosed and auctioned to flippers or back to bene and put on the open market. Many have been refi’d into GSE and FHA loans (foreclosures coming soon to a neighborhood near you — but now the taxpayers are explicitly on the hook). Some have been modified with much lower interest rates and some with reduced principal balances.

Last but not least, I believe some are still sitting there on various balance sheets getting worse day by day, but they are not being written-down because the current echo bubble is masking the real prices of the collateral, and if they are in the process of being modified they might not have to be written down (anyone have any definite info on that?).

Just MHO.

[CA renter]

[quote=scaredycat]so, uhh, what happened to all those toxic mortgages?[/quote]

IMHO, some have been sold off in bulk, some have been foreclosed and auctioned to flippers or back to bene and put on the open market. Many have been refi’d into GSE and FHA loans (foreclosures coming soon to a neighborhood near you — but now the taxpayers are explicitly on the hook). Some have been modified with much lower interest rates and some with reduced principal balances.

Last but not least, I believe some are still sitting there on various balance sheets getting worse day by day, but they are not being written-down because the current echo bubble is masking the real prices of the collateral, and if they are in the process of being modified they might not have to be written down (anyone have any definite info on that?).

Just MHO.

[Author]

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