The Wall St. Journal is reporting that JPMorgan is planning to raise $5 billion in capital to rid themselves of TARP once and for all. Does the House of Dimon get out from underneath the government’s paws or not? Discuss.
TARP
Some nice suggestions from Donald Marron to end the tyranny of the TARP, but we despair that they shall ever come to pass.
Treasury should give up on negotiated sales and simply auction the warrants it received through its TARP investments. Auctioning the warrants will:
* Enhance the transparency of the process (since no one can accuse Treasury of playing favorites in the auction);
* Ensure that taxpayers get a fair return on their investment (since the warrants will be sold at their real market value);
* Allow banks, if they choose, to preserve needed capital (if investors purchase the warrants, banks won’t have to use up any of their scarce capital); and
* Free banks from the nuisance of government involvement (since banks get free of TARP even if private investors end up purchasing the warrants).
The reality is that the TARP has been far more useful to the Treasury and the Administration in general as a cudgel than as a stimulus and bank support program. Donald’s first and last points are, in fact, bugs, not features to a Treasury that, for example, negotiates the results of stress tests with its regulatees. Of course, it would be interesting if The Big Guy financed minimum pricing limits on the warrants.
[Donald Marron via Alea]
Can you imagine the urgency with which Goldman will now seek to emerge from under the TARP?
UBS AG, the Swiss bank which received government assistance, will stick to a policy of paying market wages after being criticized for raising salaries at its investment bank, Chief Executive Officer Oswald Gruebel told employees.
“We have to pay our employees in line with the market,” Gruebel said in an internal memo to staff today. “We will stick to this stance, even if it is criticized in the emotional debate over salaries.”
UBS is boosting salaries for senior bankers at its investment bank by an average of 50 percent to stem defections, three people with knowledge of the matter said earlier this month. The bank cut its bonus pool by 78 percent in January after amassing the biggest loss in Swiss corporate history in 2008 and turning to the Swiss government for help.
Our favorite part has to be “UBS AG, the Swiss bank which received government assistance.” Which government, how much assistance and when received seem details that either escaped the notice of Elena Logutenkova and Ambereen Choudhury, or didn’t seem to matter that much when it came time to email the copy editor and head out for a 90 minute Frappuccino.™ We can’t say we blame them much. Pointing an ugly finger at banks that have “received government assistance” is a full time job. But, be that as it may, UBS is the place to be. Obviously. Well, there is the little matter of all those Eastern European mortgages denominated in Swiss Franc, but… that’s for later.
UBS Will Stick to Market-Level Salaries, Gruebel Tells Staff [Bloomberg]
It should come as no surprise that what we have been pointing out all along- that the larger TARP recipients were strong-armed and the process was amateur hourish- is less than just a speculation anymore. *Duh* Not even to mention the imperial asston of arbitrary involved in deciding amounts required to “assure stability.” ($25, no, how about $10 billion to Goldman… we bet Bald does the New York Time crossword puzzle with a pen too. Now that we think of it, we don’t see Lloyd’s initials next to any of these handwritten corrections).
This should entirely change the tenor of discussions, and give the lie to the farce that was demonization of TARP participants by the likes of Barney Frank. Think for a minute how off the wall it is to repeat something like “Don’t like it? Don’t take government money” given the current offer-you-can’t-refuse “revelations.” Again, this should change the tenor of the discussion. But, of course, it probably won’t.
Finance is a convenient scapegoat for the political class. The conspicuous excess with which we have all comported ourselves (shamelessly in some cases) invites scrutiny when the boom times end. Not to mention the fact that the complexity of the business invites simple answers to difficult questions like: “How did you people fuck this up so badly?” In this context it should be unsurprising that the general public and its high school economics education feels qualified to assert that Greenspan’s self-defense arguments are bunk. How is it you expect to be immune from the scrutiny of the financially illiterate? (As an aside, do we think that constituency is concentrated more heavily in the backyard of Barney Frank, Barbara Boxer or Maxine Waters?)
Judicial Watch, the public interest group that investigates and prosecutes government corruption, announced today that it forced the Obama administration to release documents about the October 13, 2008, Treasury Department meeting that coerced major banks to allow the government to take $250 billion equity stakes. Among the other news, the documents confirm former Treasury Secretary Hank Paulson told the CEOs of nine major banks that they had no choice but to allow the government to take equity stakes in their institutions. The documents show Obama Treasury Secretary Tim Geithner, FDIC Chairman Shelia Blair, and Fed Chairman Ben Bernanke co-hosted the meeting with Paulson.
Judicial Watch Forces Release of Bank Bailout Documents [Judicial Watch via Clusterstock]
The Safecracker is in your little banks, cracking your safes. That is, Tim “The Safecracker” Geithner has apparently greenlighted the stampede of smaller banks that heretofore have unfairly been unable to avail themselves of sufficient government scrutiny and micromanagement. The changes will allow smaller institutions significant access to performance excuses and shareholder sympathy come quarterly report time and provide significant political cover for dismal results and the departure of senior talent that was edging out the door already.
Banks with assets of less than $500 million will be able to apply for capital injections from the Treasury’s financial rescue package, Treasury Secretary Timothy Geithner told a gathering of community bankers on Wednesday. Treasury has roughly $109.6 billion in funds left in its bank bailout package. However, Geithner said he expects to use funds repaid from large investment banks, in part, to pay for the new capital injections for smaller public and private community banks.
Asked about the prospects of TARP involvement, one regional bank CEO quipped “Why should regulatory uncertainty, contempt of Congress and political risk be just for the big guys in New York?”
Geithner: Small banks can apply for TARP funds [Marketwatch]
Some discussion yesterday (You’re Not So Tough After All Safecracker) caused us to wonder who exactly had put the provision that seems to forbid Tim “The Safecracker” Geithner from imposing conditions on the repayment of TARP funds.
A series of amendments to what was then H.R. 384, the “TARP Reform and Accountability Act of 2009″ were offered to the rules committee on January 14th. That bill was eventually consolidated into a large mass of amendments and voted into the final bill which was passed in the house on January 28th. The Senate bill was passed on February 10th. Obama signed the bill on February 17th.
The “No Impediment” section of the bill was in the amendment packaged offered on January 14th, amendment #43, to be specific, was offered by Frank, Barney (D-MA).
Suck it, Timmy.
“So thank you for the loan, we’ll just pay this back now and do away with these compensation requirements…” Cindy had brought a copy of the regulations to ceremonially tear up for the occasion. Thin smiles began to emerge, a glimmer of hope, then faded instantly when Tim interrupted.
“Yeah, not so fast.”
“What?”
“Yeah, aren’t you forgetting something?”
“Wha- what do you mean? I have the check right here. It’s a cashier’s check even, like you asked for. It is signed in the right place. The amount is right there…” The amount was quite visible to everyone in the room, it having overlapped into two rows because of all the zeros.
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