Obama: Another $750 Billion Needed for Banks

[slipslidingaway]

http://www.calculatedriskblog.com/2009/03/obama-another...

"The following article from the NY Times is based on an exclusive interview Friday with President Obama: Obama Ponders Outreach to Elements of the Taliban. Here are some excerpts:

Mr. Obama indicated that the end was not in sight when it came to the economic crisis and suggested that he expected it could take another $750 billion to address the problem of weak and failing financial institutions beyond the $700 billion already approved..."


Not sure if this is part of the above figure or not.




Fed Says Loan Plan to Start March 25

http://www.bloomberg.com/apps/news?pid=20601087&sid=aRR...

"...The TALF will start by offering $200 billion in loans to hedge funds and other investors aimed at jumpstarting lending to consumers for autos, education and credit cards and to small businesses. The program also will help auto dealers finance the cars on their lots.

Protect the Fed

Treasury is providing $20 billion in capital from the Troubled Asset Relief Program to protect the Fed from losses. Treasury Secretary Timothy Geithner plans to increase the contribution to $100 billion, letting the Fed expand the program to $1 trillion and add other assets such as commercial mortgage- backed securities.

The central bank announced the TALF in November, and said in February the program could be expanded to commercial mortgage- backed securities and private-label residential mortgage-backed securities..."

[Deja Q]

1. Are there provisions should the FDIC becomes insolvent?

[slipslidingaway]

2. Backed by the Federal Government and Federal Reserve...

and they have a printing press.



Recent bill by Dodd to extend loans to FDIC for 500 billion.

I've heard that the hedge funds and private investors want the government to give them a backstop on losses for purchasing some of the toxic assets, that might have something to do with the Dodd bill.

[readmoreoften]

27. Wouldn't that lead to hyperinflation?

To have to repeatedly loan out money?

[slipslidingaway]

36. Well I'm certainly no expert, but some have suggested that could

be an outcome IF things are not managed properly.

[readmoreoften]

60. The problem is that the system is unmanageable. No dig on Obama.

There is so much corruption on Wall Street, I'm certain no one knows how much cash is flowing. If US Treasury bonds were downgraded due to a terrorist attack or a market collapse or China calling in the debt during a deflationary period where the dollar is worth something, or our inability to make a debt payment to China, the world would dump the dollar and we'd see hyperinflation.

There are so many situations our of control...naking shorting being a big one...I think that "managing" the system isn't wholly possible.

[slipslidingaway]

63. Big problems, sure would be nice to see some fresh faces...

and out of the box thinking.

[readmoreoften]

64. I'd appreciate that as well.

I don't trust those who put us here to get us out.

[slipslidingaway]

65. .....

[slipslidingaway]

5. Obama stated during the non SOTU address that our cash is

safe in the bank...funny thing to say I thought.

[leftstreet]

3. When is this 'jumpstarting' going to start exactly?

How have any of these dollars stopped continuing job losses?

I know we're all supposed to get out there and 'borrow' as soon as the banks decide to 'lend,' but what kind of lending happens with 10 brazillion unemployed people? Or for that matter with another 10 brazillion people barely making livable wages.

[slipslidingaway]

7. One could argue that pension plans will be hurt if the system as

we know it is not saved, but that does nothing for people who have lost money in their IRA's or 401 K's.

The whole idea that we can go back to normal when people already have enough debt and do not have the wages is silly.

[dixiegrrrrl]

4. Unbelievbable.

This is still about covering banks losses, not about giving any money/help to taxpayers.
Car loans, credit card debt, student loans were also turned in to derivatives, swaps, which now need covering so the BIG banks don't lose money.
Geithner is Mr. Goldman Sachs, prior to Tresury job.
Buy stock in Goldman..it may be other only thing to make money in all this.
I would be madder, but my blood pressure can't take it.

[slipslidingaway]

11. They did a good job of spreading risk...

a few people on Silicon Investor predicted this mess, too bad they do not work at the Fed or treasury.

[MrSlayer]

6. This is fucking unreal.

Let them fail. Enough with the bailouts.

[slipslidingaway]

12. It's just a rapid bleed of taxpayer dollars...

and still no plan has been released to the public.

[Booster]

8. I know we're all supposed to be behind Mr. Obama during

all of this, but I think this is just going too damn far. There will never be enough money for the banks and on the first go-around, they reportedly bought smaller banks and gave their CEO's millions for bonuses. What makes us think this time will be any different?

[slipslidingaway]

14. Yup...

and someone on a financial channel, who shall remain namesly pointed that out in October.

Volcker said about a month ago that they would need trillions, at least one and maybe up to three or four.

[dysfunctional press]

9. fuck that fucking horsehit. the 'democratic dynasty' might not last as long as some had hoped.

he may end up having more in common with jimmy carter than fdr, length of term-wise.

[slipslidingaway]

16. It does hinge on getting this resolved, I know that Obama did not

cause this, but there were many who turned a blind eye to what was taking place.

And Geithner has been in the thick of this since 2003 as head of the NY Federal Reserve Bank.

[dysfunctional press]

31. like it or not, the hot potatoe landed in his lap...

and for the sake of his tenure office AND the populace, he needs to have a more populist less corporatic solution.

for my part, i think that all home mortgages should be nationalized at 3%, for the full principle, with terms extended to as long as necessary.

[Skink]

18. Unless a democratic challenger comes on the scene we can not tolerate the alternative.

[dysfunctional press]

29. we couldn't tolerate one let alone two terms of bushcheneyco- but look what we got.

nt

[ProSense]

20. Or people will stop overreacting. n/t

[dysfunctional press]

32. not bloody likely in this country.

if/when the whole thing collapses- good luck holding the senate and the house in 2010.

[amandabeech]

56. Yup. If we aren't pulling out of this mess by then,

anyone in a marginal district will have a real challenger screaming about ending the bailout.

And some folks in safe districts may find themselves with a real challenger in the primaries backed by a bunch of peasants (aka unemployed folks) with pitchforks who don't give a **()_ what the leadership thinks.

Going in, it looked to me that Obama's weak suite would be economics.

Unfortunately, we're back to, "It's the economy, stupid."

[Fumesucker]

10. Surprise, surprise, surprise..

/Gomer Pyle

The big wheels are gonna' get greased and the little people are gonna' get the shaft, as always.

[slipslidingaway]

17. Unfortunately, guess that old saying about following the money

is true.

[Fumesucker]

22. And the even older one about..

The Golden Rule..

He who has the gold..

[slipslidingaway]

38. Yes ! n/t

[LWolf]

13. I wish that

all the citizens struggling to stay solvent, or to survive, right now were at least equal in priority.

[glinda]

15. I wish they would directly give my husband all of his monies invested and tied up

in his retirement without penalties and taxes instead so we will know we will be ok. I am sick of Banks getting the money. We want OUR money as older folk scared to death about our losses. Screw the Banks.

[slipslidingaway]

19. Me too, while they debate CC rates are high, also why not a tax

on some of the financial products instead of asking the taxpayers to foot the bill.

[LWolf]

25. Good idea.

We foot our own bills, and we foot the bills for those at the top, as well.

My feet are sore.

[slipslidingaway]

34. Wish I could take the credit :) but it has been proposed by

others. Any new proposal for taxpayer dollars should be accompanied by a small fee to pay back the taxpayers, surely they can come up with an idea.

[LWolf]

46. Has it been proposed by anyone who

has a voice, who carries some weight?

[slipslidingaway]

50. Not by anyone who carries weight, key part of your question...

I'll PM you the two examples who come to mind, otherwise there will be posts trying to shoot the messenger.

[LWolf]

53. Thanks for the examples.

This is yet another example of how those outside the mainstream power structure don't carry the weight necessary to affect change.

That's the first change I'd like to achieve.

[slipslidingaway]

55. You're welcome and you are so right about the first change that

needs to take effect.

[ProSense]

21. Here is a link to the transcript:

Obama’s Interview Aboard Air Force One

Unless I missed something. Obama doesn't mention $700 billion.

[slipslidingaway]

33. 750 billion was mentioned in the NY Times article and comes

from the recent budget proposal.

NY Times STORY
http://www.nytimes.com/2009/03/08/us/politics/08obama.h...

"...The budget plan he released last month included a placeholder estimate of $250 billion for additional bank bailouts — an amount that represents the projected long-term cost to taxpayers of a $750 billion infusion into the financial sector — and in the interview Mr. Obama indicated that those figures were what he was likely to seek from Congress..."


NY Times TRANSCRIPT
http://www.nytimes.com/2009/03/08/us/politics/08obama-t...

"Q. Can you envision allowing a major institution to fail? Can you say with certainty that you won’t need to ask Congress for any more money beyond the $250 billion placeholder in your budget.

A. I am absolutely committed to making sure that our financial system is stable. And so I think people can be assured that we’ll do whatever is required to keep that from happening. For example, that would mean preventing institutions that could cause systemic risks to the system being just left on their own. We’re going to make sure that the financial system is stabilized and in terms of the resources that are involved. We think the $250 billion placeholder is a pretty good estimate. We have no reason to revise that estimate that’s in the budget..."


http://www.bloomberg.com/apps/news?pid=20601087&sid=aqc...

"President Barack Obama’s administration will seek congressional approval for as much as $750 billion in new aid to bolster U.S. financial institutions if it is needed, White House budget director Peter Orszag said..."


http://www.propublica.org/article/obama-admins-budget-g...

"...The Obama administration's proposed budget today <2> (pdf) provides at least the clarity of an actual number: $750 billion. That's how much it cites as a guesstimate of the funds needed "for further efforts to stabilize the financial system." (See the full excerpt below.) The government should get about two-thirds of that investment back, today's blueprint says, meaning that the real cost would only be about $250 billion..."


Thanks for the transcript link, Obama has not asked for the money yet, although that is what they anticipate via the budget proposal. I agree that the headline should have made that point.

We think the $250 billion placeholder is a pretty good estimate. We have no reason to revise that estimate that’s in the budget..."

[RC]

23. Let'em Fail! Then the healthy banks can buy up the assets.

At the very, very least, nationalize the failed banks and jail the upper management for their crimes. I know it is a new concept of jailing the rich, but it has to be done to stop downward spiral.

[slipslidingaway]

35. Instead the larger firms are buying the smaller banks and

becoming even bigger, I really do not like to see the consolidation of money into fewer hands.

[Diclotican]

24. slipslidingaway

slipslidingaway

I just wonder.. Where would all this money came from?.. Not even the US mint can just print all this money without reason can it?.. Can the US mint just print its way out of the horrible mess US are in?..

It looks like the US banks is in some black hole where you just put in more and more money, and it just - poof goone... Where are all this money taking away too?. It could not just disappear can it?.. Are the money burned?.. Or what? Can some with some insight into this tell me, in plain terms as I might understand it better where all this billions are going?.. I might be for dumb to understand it, but if you some explain it to me I might get a grip of it...

It is a afoul lot of money been given away...

Diclotican

[slipslidingaway]

37. We can print money as long as there are willing buyers of our

debt and although we are over extended, others countries could be in even worse shape.

Here is where some of the went, but exactly who is the ultimate beneficiary is hard to say...I know it is not me.




http://www.talkingpointsmemo.com/archives/2009/03/now_w...

Now We're Getting Somewhere
Just out from the Journal (sub.req.) ...

"The beneficiaries of the government's bailout of American International Group Inc. include at least two dozen U.S. and foreign financial institutions that have been paid roughly $50 billion since the Federal Reserve first extended aid to the insurance giant.
Among those institutions are Goldman Sachs Group Inc. and Germany's Deutsche Bank AG, each of which received roughly $6 billion in payments between mid-September and December 2008, according to a confidential document and people familiar with the matter.


The gist of the rest of the piece is that, as many have surmised, European banks had a disproportionate exposure to AIG's potential collapse.

And just to be clear, the named institutions and even the few specific dollar amounts are broadly in line with what people expected. The only difference being that this report appears to be based on actual documentation of where the money went rather than informed speculation."

[Mr. Hyde]

43. Our problem is rooted in excessive consumer debt. I don't see how creating more debt will help

I think they're trying to reverse deflationary trends by printing more money but these recent deflationary trends aren't related to money supply, they're related to lack of consumer purchasing power which is a result of excessive consumer debt (among other things now). They need to help the consumer reduce his/her debt load, not help give him more debt. That's like throwing a cinder block to a drowning man. I think they should let consumers draw money out of their IRAs tax/penalty free to pay down debt. For that matter, why not allow consumers to apply a sizable portion of their pre-tax income towards debt reduction? That's a life vest.

[slipslidingaway]

47. Great points....

"I think they're trying to reverse deflationary trends by printing more money but these recent deflationary trends aren't related to money supply, they're related to lack of consumer purchasing power which is a result of excessive consumer debt (among other things now). They need to help the consumer reduce his/her debt load, not help give him more debt. That's like throwing a cinder block to a drowning man."

We keep hearing that the banks need to start lending to consumers again, although as you stated I do not see that as a major problem. Over consumption, a large part financed by debt, high costs of health care / education and wages which have not kept pace are all contributors.

"why not allow consumers to apply a sizable portion of their pre-tax income towards debt reduction? That's a life vest."

If we can bail out the banks who made risky purchases, then we can bail out consumers who overextended themselves or who went broke trying to pay for an illness. Maybe those who managed to keep themselves out of debt might need a tax credit as a reward???




http://contraryinvestor.com/2007archives/moaug07.htm

"...A while back now, we penned a discussion questioning just what the baby boom generation was going to do for money/liquidity as they entered retirement years. Our observation at the time in reviewing household balance sheets was that households held plenty of real estate and qualified plan assets (profit sharing, IRA, 401(k)), but very little in the way of cash. We questioned for how much longer would households, and especially the baby boomers, be able to continue leveraging up as retirement years for the boomers were fast approaching. And lastly, we pointed to the fact that throughout a good portion of their adult lives, the boomers had learned to embrace asset inflation for their “savings” activity, evidenced by appreciation in stocks and real estate, and the lack of traditional savings as would be calculated by the savings rate...


...Although we believe each individual chart tells its own story, our main point in this discussion is that collectively, these relationships represent multi-year or multi-decade trend breaks for now. They are now occurring in simultaneous fashion. Just a coincidence? We think not. Moreover, we suggest an important need for continual monitoring as these trends quite similarly hug trends in powerful demographic changes. Could it really be that as the boomers push near and into retirement, what has been their dramatic impact on asset inflation through continual expansion in household leverage is changing? We believe this is indeed the primary question and message to continue to monitor in these relationships. As we’ve suggested many a time, the credit cycle is the key. And this is a slice of the broader credit cycle as it applies to households. Households key to longer-term consumption trends important to both the US domestic and many a foreign exporting economy..."

[slipslidingaway]

48. And welcome to DU....

[Diclotican]

45. slipslidingaway

slipslidingaway

This is scary, for both the US and for the rest of the world... Becouse sooner or later it wil stop when government stop suporting your debt creation worldwide.. I know China, Japan and EU do have a lot of US debt, but sooner or later the debt would be troublesome for this parts of the world, if not US was to start paying it back then... But as a old saying goes.. if you owe the bank 10.000 dollar you have a problem, but if you owe the bank 100.000.000 dollar, then the bank have a problem.. And that is maybe the case here?.. And becouse the US dollar are been used all over the planet, it is more easy to just print money, and let it print, than if you was say kirgistan?...

Anyway, I am not a ekspert on this, and at the look at things, I seriouse dubt that even "eksperts" on this know how to fix this.. I fear it have been out of controll for a long time now, and when it implode..... I hope I am not around when it does...

Diclotican

[slipslidingaway]

49. I believe that is why some people do not see a quick recovery

we need to produce, save and reduce our debt first.

[Diclotican]

52. slipslidingaway

slipslidingaway

I agree, but how you do that, when a nation own more to other than they can produce?.. Or do not have the infrastructure they once had.. As the US once did.. It is not that easy to rebuild what is been shipped over to China, and if US was to send the industry back do you do not believe the government of China would seize everything they can get their hands on, to save their own people from mass employment?..

It is always Wise to save, and to reduce the debt first, and then get a recovery...

Diclotican

[slipslidingaway]

54. Agree it is not an easy or painless task....

we need to manufacture products...and not just financial products.

[Diclotican]

59. slipslidingaway

slipslidingaway

I agree, that US need to manufacture products, not just financial products.. But for the moment, it looks like most of your manufactures is not in US.. But in China and other places.. And the industry you still have, are on life suport for the most part.. The only industry who for the moments look imune, is ironic enough the weapon industry...

Diclotican

[slipslidingaway]

62. True and our health care and education systems are not

helping to advance new industries.

[Diclotican]

68. slipslidingaway

slipslidingaway

True, and I can not, for the whole of my life understand why anyone would rather die of illness who are treatable then to have a single payer system, or a health care who are "free".. Are they afraid of what Will be shown if everyone regardless of their "status" in the country can get proper health care.. I know many in Europe was afraid of what become of the world, if we got health care for everyone - in the 1700 and 1800s that is.. Today I believe most people is comfortable with the health care they are given, and it is paid for the most part by taxes.. Off course a "free"health care system in the US would give you a slight increase of taxes to pay for it all.. But it will not be that bad.. And I have to say, it is dam good to have a doc and a hospital bed when your body is not in shape anymore.. Have been hospitalized twice in 4 year now, and it was good to be in able hands when I was not in any shape myself.. And I was not ruined by the experience either...

Education is important.. at all levels, from the pre-school to university.. US do have some good university, but the rest of the system are little to doubt when it came to education.. The use of Education was that who was given USA a edge compared to most country in the world after WW2.. I for one can not understand why the right wingers of this world have not understand THAT yet.. The republicans, and democratic party's of old got it, why can not specially the republicans got that now? Or have the ideology coming in the way of rational thinking in many republicans mind?

Diclotica

[amandabeech]

57. If it actually makes the 24/7 newsmachine, or at least the evening news,

that a large percentage of the money is going to Europe, especially to the cheese-eating French, things could get ugly.

[shireen]

26. financial institutions are the new terrorists

we should fight a new kind of war on terror, against the assholes on wall street. i hate them. i really really hate them for what they've done to this country.

[slipslidingaway]

39. And do not forget those who were blind to this disaster :( n/t

[Individualist]

28. That makes me think of the saying about throwing good money after bad.

[slipslidingaway]

40. This never should have been allowed to happen. n/t

[bottomtheweaver]

30. "$200 billion in loans to hedge funds," more hundreds of billions to KBR

to electrocute US service personnel in Iraq, but we can't afford to keep Medicare going. Yeah that makes sense.

[slipslidingaway]

41. U.S. to Invite The Wealthy To Invest in The Bailout

This should be interesting to watch, thanks for noticing the second article.



http://www.washingtonpost.com/wp-dyn/content/article/20...


"The initiative to revive the consumer lending business, outlined by officials this week, offers these wealthy investors a new chance to make sizable profits -- but, thanks to the government, without the risk of massive losses.

The idea is to entice them to put their huge cash piles to work to stimulate the financial system. They would be invited to buy up recently issued, highly rated securities. These securities finance consumer lending, such as credit cards and student and auto loans.

The program, which could involve the government lending nearly $1 trillion to these investors, exceeds the size of every other federal effort to address the crisis so far. The initiative's approach could be the model for future federal efforts to aid the credit markets, sources familiar with government planning said. Officials call this strategy a "public-private partnership," but in essence the government is offering good deals to private investors to draw them into its rescue efforts...

The Treasury Department and Federal Reserve will continue to lean on these private investors as officials expand their aid to more segments of the lending markets each month, moving from consumer credit possibly on to commercial mortgages and financial derivatives, the sources said. But there is vigorous debate between the Treasury and the Fed and within them over how the program should evolve and at what speed.

This approach will culminate in a separate program that aims to relieve banks of toxic assets, backed by distressed loans, that are clogging the firms' balance sheets, sources said. This second initiative, which officials are hoping to unveil in the coming weeks, is also expected to reach at least $1 trillion. It may create multiple investment funds, financed by wealthy investors with matching dollars from the Treasury and loans from the Fed, to buy toxic assets, sources said..."

[amandabeech]

58. This plan socializes risk and privatizes profit, just like everything else.

Its purpose is to revive the still unregulated "shadow banking system" with the same greedy players whose crimes against the taxpayer go back to the 1980s.

Moral hazard does not even begin to suggest the risk that further enabling these criminals will be for the future.

These guys keep giving us golden swirlies.

What does Obama not understand?

What was in the coffee in the faculty lounge at Univ. of Chicago?

[slipslidingaway]

61. In a few years we'll probabbly hear about the profits that were

made by some of these investors, wonder if there will be a provision to give back a small percentage if profits exceed a certain amount...of course that is hard to track.

[amandabeech]

66. I hope that we hear soon enough to complain to the people who

came up with this plan.

This is good money after bad.

Perhaps Obama should forget about cap and trade and a major health care overhaul for the moment.

The economy is in serious trouble and his team is looking for the troublemakers to solve the problem.

I keep thinking that I'm really missing something.

Obama's a smart guy. Supposedly, he has smart men and women around him.

Krugman seems to have had it with the econ team already. Roubini, Stiglitz and James Galbraith are not looking at this favorably.

My favorite indicator the is Gergenometer. I attempt to read David Gergen's mood on AC 360 every time he's on, which is 3 out of 5 evenings, at least. I see Gergen as the moderate's moderate who's worked or with everyone and seen everything. I'm to the left of him, but if he is visibly shaken, then I think that it's time to worry. I thought that he nearly broke down over Obama's handling of the economy a couple of nights after Obama's sort-of State of the Union. Gergen's not an economist, but if he's about to lose it, then so are a lot of reasonable, very smart people.

And me, I'm no dummy either. I've been looking for a new FDR for a couple of years now. I'm waiting for Obama to admit to smoking, put the cigarette in a holder, smile and stick out his chin. I'd feel a lot better.

P.S. On a totally different front, marshall law in Ciudad Juarez. Another mess that could blow up on Obama's watch.

[slipslidingaway]

42. See reply #33 for more detail...

Link

http://www.democraticunderground.com/discuss/duboard.ph...

[rollingrock]

44. Obama seems to be a big believer in trickle down economics

Meet the new boss...same as the old boss.

[slipslidingaway]

51. Hopefully not, but right now it appears that way...

doing the same things as before.

I would really like them to propose a small tax on those who trade in the some of these products, we need to fund the bailouts with something other than taxpayer dollars.

[amandabeech]

67. Sounds good to me.

New York State used to raise money with a small transaction tax.