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Ratigan Dissects TARP Repayments
Nothing too secret here: banks are willing to wager the systemic stability so they can get another bonus payment before everything hits the fan next year. What happens when (not if) TARP is needed again? Well, these banks will have to nationalized, or else there will be a revolution. And these banks know this, so they would rather cash in at least one more bonus after which who the hell cares.
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Dylan--your a patroit dude...
+1000.
+1000000
He wasn't always that way...he was just as bad as Steve L on that clown show CNBC. For years if a guest brought up a problem with securitization, he would publically write them off as kooks.
Yup he tried to go along for a long time. But everyone knew he was going to fold and follow his conciousness.
<What happens when (not if) TARP is needed again? Well, these banks will have to nationalized>
I strongly disagree with that one. We have agreed to cover $300 billion in losses from Citi, so guarantees are on the table. We've done direct injections of capital into several banks and could do it again. And that is just for starters on things the government can do besides a new round of TARP if needed.
How about lowering capital adequacy ratios? How about direct government (Fed) purchases of bank debt?
When the next need for a bailout arises, we won't do TARP2 because we wouldn't have to, there are still many many ways taxpayers can support the banks.
We have agreed to cover $300 billion in losses from Citi, so guarantees are on the table.
I heard a news report yesterday that said Citi and the government are in talks for those guarantees to be removed, along with the government selling its 36% equity stake, as part of Citi fully existing TARP.
How about direct government (Fed) purchases of bank debt?
wasn't that the original purpose of TARP
I once had an uncle, whom was very bright and clever. He was basically set for life as his career was skyrocketing. He also had a compulsive gambling problem. He got into so much losses, that his wife and kids left him as people were hunting him down to repay his debt. He begged everybody for help including my father, whom, soft hearted and all, caved in and gave him money to repay his debt. Little did we know that fcker used the money to gamble again and blew it all. He had the audacity to come back for a second time. My father, feeling its his obligation to help his brother, was going to sell our house so he can give more money but common sense in my mother, me and my sister prevented that. This fcker was about to ruin another family for his own mistakes. Anyhow, my uncle is like the banks. They never learn and dont deserve a second chance.
you left out "or there will be a revolution"
count me in
What you are missing is the 2 ton gorilla in the room. That gorilla being the SIV's. All this nonesense in the media that balance sheets are repaired with the drop in the bucket capital to date...don't be complacent. That off balance sheet nuclear material will come to the fore. And is not enough currency printed in globe to pay that monster off.
Contrary to Ratigan's comment, Wells Fargo wasn't under the restrictions of the pay czar because they weren't deemed to have received "extraordinary" support from TARP. They only took the first wave of funding. Of course that ignores the various ongoing federal subsidies to all the large banks.
WFC's CEO had to do a 180 on his statements in September that WFC would repay TARP out of earnings in a shareholder friendly way, i.e. no dilution from new shares. Once Citi was out of TARP that left WFC as the only large bank in and that would have been an embarrassment to WFC management which claims they are different and special and more conservative than the other banks.
To those active in the corporate bond markets, how are the bonds of the major banks trading? I'd think the TARP repayments should negatively impact prices of bank bonds and preferred stocks as the government is no longer invested in bank equity that is subordinated to bonds, except in the case of the government's Citi shares which it now intends to gradually sell. The chances of another TARP seem to be virtually nil as Congress knows they'd face public lynch mobs. Should we have another banking crisis, it is now more likely that bank creditors will have to bear the burden of restructuring as they should have done in 2008. It seems to me that the government umbrella PIMCO used to reference with its advice to invest in senior debt of banks has been removed.
Always enjoy his commentary. How is it they still allow him on the air ;)
They did have to move him off of CNBC....
jbcorwin - he seems to be pushing a windfall profits tax. That could be why.
tax the banksters, tax the populace, tax every damn-body. I think the bankers should be tried, not taxed.
Unfortunately, only about 33 people watch him. American's aren't ready for reality. Only when everything collapses will they be asking what happened.
They foolishly believe the man behind the curtain has everything under control.........
Wonder if they Borrowed the Money to repay the Tarp from the Discount Window? Probably put up all of their Government Bonds as collateral.
Just moving the pea under another shell.
Do I understand this correctly? The banks have been dumping their assets into the Fed and get $$ in return that they park as reserves which shores up their capital base and makes them look good (ok, better than before?) on their balance sheets. Now they raise a little more money to pay back TARP and ostensibly get back to their bonus days. What happens to the assets bought up by the Fed? Shouldn't the banks be required to resolve those assets (by buying them back or whatever) before they line up for their bonuses?
Why would they buy back worthless toxic filth that they didnt want in the first place? Especially when they sold them at a generous taxpayer premium. Looks like the banks' balance sheet may become healthier than the government's is right now and once the second shoe drop, we, the people, may have to beg the banks to help us out because our government is incompetent.
That seems to be the more likely way it'll play out, rather than the 'panic selling' that stopped in March.
Then they can award themselves another round of even bigger bonuses and call themselves heroes at the same time.
The next Congress will be Republican and they'll vote for a great big tax cut for them too.
Lately I've noticed the bells of closure ringing loudly. TARP money paid back? Check. Financial Reform Legislation passed? Check. Health care bill done? Umm, not yet so I'll check it, but in pencil. Reports of economy on the mend? Check and double check! General consensus that, but for the usual knucklehead, tin hat, fringe element bunch of Zero Hedge type crybaby crowd, all are in accord that the Great Panic of 2008 is over, thanks to the generosity of the American taxpayer and the courage and vision of a few leaders, Ben, Hank, Tim and Larry, and who can forget Mr. "War=Peace" himself. Now, it's just a matter of time before we are back to where we were. Yesiree, all is right with the world.
When does the animated version come out? The Christmas release calendar is already crowded.
And they have tens of trillions in gross notional derivatives.
At any time this can blow up as well. - These huge payments filter around, and the profit/loss is on the margin. When things are stable the inflows and outflows balance each other out for the most part, with the profit funding the great scheme even further. As well as provide the excess liquidity, from which the market became dependent on (and fueled most of our expansion) of the past ~22 years.
-50 trillion range gross notional derivatives per major bank
If you have 50 billion going out, and 51 billion coming in from your derivatives, you make 1 billion profit, even though you really incurred a total of 50 billion loss on one side and a gain of 51 billion on the other.
Why do you think Citi needed over 300 billion in TARP? That wasn't faulty loans.
Someone's derivatives didn't pay out, and (to use the earlier example) that was 0 billion coming in and 50 billion coming out.
As you can see, when the derivatives game breaks, it trumps ALL other economic deals (sub-prime, CRE, etc) by 100, 1000, or more.
It's going to be funny to see these big bankers begging for more money, after tarp is repaid, and the derivatives game blows up again. Which it can when any one of the derivatives participants goes belly up.
How long can any company go when it can lose hundreds of billions at the drop of a hat, and with no government staving off collapse, tens of trillions? None.
The sad thing is no one realizes that all the bailout, was really just a margin call payment of a few days/weeks of the derivatives game breaking slightly. Anyone want to care to guess what happens WHEN it fully breaks?
Then remember there's ~1.4 quadrillion of these floating around.
If only 99% of America could grasp even the simple analogy he gave, our country would have a chance.
Dylan Ratigan for Pres.
+610 Trillion. But he'd probably get whacked like JFK did after gutting the Fed.
I like Dylan, a real patriot. He is the first American on TV that has readily admitted that the Brits and the French are taking somewhat of a leadership role here in regards to stopping some of the cash flowing to these pigs.
Not bad for "socialists"......
Torched!
Dylan makes me proud to be an American.
send the bankers back to hell
A motley fool.
How is TARP going to be needed again? For what institutions? Specifically?
It is political suicide to utter the words "TARP bailout" in the context of addressing big bank insolvency.
We are beyond too big to fail. Like CIT these big banks will not be nationalized, they will be escorted through bankruptcy court by a very accommodating FDIC. FDIC is the new TARP. Bankruptcy is now part of the process.
With Goldman and JPM shored up with reserves to weather the storm, there can be no real systemic risk. Well at least as defined by the FED.
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Not sure if Dylan reads ZH or not, if he did he may think about the bigger picture, that the Obama administration and the FED are in collusion with the big banks, and well have to be. Primary dealers, FRBNY and the Government are codependent on each other, and have been for a long time.
Ask Obama who is going to fund his expansion into Afghanistan and we will say the american people. But, what he really means is the FED taxing the people through money creation. You see this is the only way to guarantee that you can pay for something, it has to be backed by the FED's power to create money. For a debtor nation like the US, it's just that simple.
In the piece Dylan talks about the Bank's American express card at the FED, but the FED is in league with the politicians and the administration.
So Dylan who is the real bad guy here? The big banks or our federal government? Take a closer look at what is happening if you dare, the agenda will become all to clear, and it is not all that well hidden.
Mark Beck
+1 Mark pick up a copy of Sheldon Wolin's Democracy Inc. It is blowing me away. Things are happening politically that are unnerving to say the least. Maybe Marx was right and the state does wither away - but The People are not in charge of what is left.
In the piece Dylan talks about the Bank's American express card at the FED, but the FED is in league with the politicians and the administration.
I suspect that the fed holds the position of primacy in those relationships.
Thanks to all the paybacks the Obama administration has a huge slush fund for his pet projects with a token amount for debt repayment. No wonder the dems in Congress and the administration put pressure on the fat cats. Both sides are benefiting here.
I, for one, am glad that TARP was repaid.
When the next crisis hits, the banks will be in trouble and regulators/ governments will have no option but to take drastic action.
Ratigan pummels Perlmutter.
http://economicedge.blogspot.com/2009/12/dylan-ratigan-grills-rep-ed-perlmutter.html
Wow, it wasn't even a fair fight. But then again, Ratigan Could have taken him with half his brain cells iced.
Thanks for posting that AM
Wow!
We will see either massive taxes or clawback. This time they won't get away with it.
Under the original TARP (well 2nd version), weren't taxpayers supposed to get the capital gain from the sale of the preferred shares? Did we not buy the preferred shares at a very discounted price? WTF? Had anyone made an interest payment on those preferreds over the last 2 or 3 months as the equity market soared and no one gave a shit?
TARP = no bonus for current year and 50% bonus for the year following payback
Is Ratigan just some sort of useful pressure release valve? I mean, he's right, but is anyone listening? I mean, I figure Lloyd turns Ratigan on if there is nothing good on Comedy Central, and he needs a few laughs. At our expense - you betcha! (wink)