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    Daily Digest – Apr 22

    by Davos

    Wednesday, April 22, 2009, 2:50 PM

  • Senator Feinstein’s husband cashes in on crisis
  • Inspector General Barofksy on TARP
  • Leading Economic Indicators (March, Chart)
  • Current Events Form Future Trends (Video)
  • Geithner Testifies
  • IMF: Global Losses may hit $4.1 Trillion
  • SIGTARP, Quarterly (PDF)
  • Can Banks Pass Fed Stress Tests? Video
  • Pirates (Cartoon)
  • Housing Starts 1959 to Present (Chart, Oh boy!)
  • The Branded Herd (Covel’s Movie)
  • Stress Test Leaks

Economy

Senator Feinstein’s husband cashes in on crisis

On the day the new Congress convened this year, Sen. Dianne Feinstein introduced legislation to route $25 billion in taxpayer money to a government agency that had just awarded her husband’s real estate firm a lucrative contract to sell foreclosed properties at compensation rates higher than the industry norms.

Mrs. Feinstein’s intervention on behalf of the Federal Deposit Insurance Corp. was unusual: the California Democrat isn’t a member of the Senate Committee on Banking, Housing and Urban Affairs with jurisdiction over FDIC; and the agency is supposed to operate from money it raises from bank-paid insurance payments – not direct federal dollars.

Documents reviewed by The Washington Times show Mrs. Feinstein first offered Oct. 30 to help the FDIC secure money for its effort to stem the rise of home foreclosures. Her letter was sent just days before the agency determined that CB Richard Ellis Group (CBRE) – the commercial real estate firm that her husband Richard Blum heads as board chairman – had won the competitive bidding for a contract to sell foreclosed properties that FDIC had inherited from failed banks.

About the same time of the contract award, Mr. Blum’s private investment firm reported to the Securities and Exchange Commission that it and related affiliates had purchased more than 10 million new shares in CBRE. The shares were purchased for the going price of $3.77; CBRE’s stock closed Monday at $5.14.

Inspector General Barofksy on TARP

From the WSJ: TARP Watchdog Urges Better Oversight

A report by the TARP watchdog said the Treasury should take steps to better manage its financial-rescue effort so that taxpayer dollars are safeguarded and programs are more fraud-resistant, accountable and transparent.

And on the potential for gaming the PPIP:

"The significant Government-financed leverage presents a great incentive for collusion between the buyer and seller of the asset, or the buyer and other buyers, whereby, once again, the taxpayer takes a significant loss while others profit," [the report said]

This is the second quarterly report to Congress on the $700 billion TARP.

From the LA Times: Inspector general cites potential flaws in bank bailout, urges Treasury to adopt safeguards. An excerpt on the PPIP:

"The sheer size of the program … is so large and the leverage being provided to the private equity participants so beneficial, that the taxpayer risk is many times that of the private parties, thereby potentially skewing the economic incentives," the report states.

This is harsh criticism of the PPIP (well deserved in my view). And a pretty critical report of the overall handling of the TARP.

Leading Economic Indicators (March, Chart)

Current Events Form Future Trends (Video)

Geithner Testifies

From the WaPo: Geithner Faces Oversight Grilling

Treasury Secretary Tim Geithner is testifying before a congressional oversight committee headed by Elizabeth Warren, the overseer of the bailout, underway right now.

Warren is setting the tone of the hearing, telling Geithner that Americans are "angry" at how the bailout has been administered so far, by both Geithner and his predecessor, Hank Paulson.

"People want to see action in terms that make sense to them," Warren said, is Geithner nodded solemnly.

Here is the text of the letter describing the bailout.

IMF: Global Losses may hit $4.1 Trillion

From Bloomberg: IMF Says Global Losses From Credit Crisis May Hit $4.1

Worldwide losses tied to rotten loans and securitized assets may reach $4.1 trillion by the end of 2010 as the recession and credit crisis exact a higher toll on financial institutions, the International Monetary Fund said.

Banks will shoulder about 61 percent of the writedowns, with insurers, pension funds and other nonbanks assuming the rest … The fund projected losses of $2.7 trillion at U.S. financial institutions, an increase from its estimates of $2.2 trillion in January and $1.4 trillion in October.

The $4.1 trillion estimate is the first by the IMF to include loans and securities originating in Europe and Japan. …

The report said U.S. bank losses at the end last year totaled $510 billion. Additional writedowns of $550 billion are expected through 2010. The projections exclude government-sponsored enterprises.

SIGTARP, Quarterly (PDF)

Can Banks Pass Fed Stress Tests? Video

Pirates (Cartoon)

Housing Starts 1959 to Present (Chart, Oh boy!)

The Branded Herd (Covel’s Movie **** Stars on his latest book "Trend Following")

Stress Test Leaks

The government’s "stress tests" of 19 large U.S. banks take a harsher view of loans than of other troubled assets, according to a Federal Reserve document.

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