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  • 07 Feb 2013 at 12:18 PM

Treasury Set to Let it Ride (On Treasuries?)

When you need more and more money from an ever-larger group of lenders, you can’t let a little thing like the LIBOR scandal stop you. And the Treasury Department (soon to be under new management?) isn’t, insisting that it will offer its first-ever floating-rate bonds within the next year.

But first, it’s got to figure out exactly what they will float on. And none of the options seem like good ones. The first new Treasury product since TIPS is likely to be a big deal, so we can’t have people like those guys on top of the giant Deutsche Bank logo in the North Sea messing around with it. Which leaves us with the two real bad options: Rely on the increasingly unreliable repo rates, or have the Treasury set them itself. Read more »

  • 20 Dec 2012 at 11:01 AM

GM Is Buying Some Stock

One thing to savor about Treasury’s plan to get out of GM is how many corporate-governance hot buttons it gently caresses. “GM will purchase 200 million shares of GM common stock from Treasury at $27.50 per share” translates into news reports as “Treasury is losing a bazillion dollars,” since after all Treasury paid rather more than $27.50 per share originally, but there are other ways to look at it. One is that Treasury seems to have agreed a deal with GM after the 12/18 close at $27.50 for a stock that had closed at $25.49 and hasn’t touched $27 in ten months; i.e. GM overpaid for stock from a favored/nudgy insider by $400mm. Normally, privately negotiated buybacks from favored shareholders at a premium to market prices are criticized. Normally, privately negotiated buybacks from nudgy, “ooh-don’t-buy-a-corporate-jet” activist shareholders are called greenmail.

That doesn’t mean such buybacks aren’t market-pleasing, by the way. Much like Buffett’s recent slightly-above-market buyback, GM’s above-market buyback seems to have boosted the stock. Delightfully part of the boost is accounting-related. From the Journal: Read more »

  • 17 Sep 2012 at 10:49 AM

Let’s Help Treasury Get Out Of GM

I’m pretty sure that there’s one or two or thirty investment bankers currently handholding at the U.S. Treasury and General Motors in their debate over when and at what price Treasury should get rid of its remaining GM shares. I’m also pretty sure that those bankers are fed up with their principals’ childishness. Thus, I guess, this Wall Street Journal article. On the one hand, you’ve got Treasury and its unfamiliarity with the concept of sunk costs:1

Earlier this summer, GM floated a plan with Treasury officials to repurchase 200 million of the roughly 500 million shares the U.S. holds in the auto maker, according to people familiar with the discussions. Under the plan, Treasury would sell the remaining shares through a public stock offering.

But Treasury officials aren’t interested in GM’s offer at the current price and aren’t in a rush to offload shares, according to people familiar with the matter. The biggest reason: A sale now would leave the government with a hefty loss on its investment.

At GM’s Friday share price of $24.14, the U.S. would lose about $15 billion on the GM bailout if it sold its entire stake. While GM stock would need to reach $53 a share for the U.S. to break even, Treasury officials would consider selling at a price in the $30s, people familiar with the government’s thinking have said.

On the other hand, you’ve got, um, this: Read more »

“Make banking boring again” is a favorite reaction to news that JPMorgan was screwing up its VaR modelling of its attempt to get long gamma with improperly delta-hedged tranches of the CDX.NA.IG.9 and, sure, maybe, but don’t tell Treasury:

The U.S. Treasury may pool stakes in small banks bailed out during the financial crisis to entice potential investors as the Obama administration winds down the Troubled Asset Relief Program.

“Some of the investments are smaller and it may not be possible to auction them individually,” Tim Massad, the Treasury Department’s assistant secretary for financial stability, said in an interview. “So one of the things we’re looking at is pooling those investments together.”

You can see how much TARP money remains outstanding at all the wee banks at pages 240-257 here; on a quick look the smallest seems to be the $1.4mm subordinated debentures at Frontier Bancshares of Austin, TX, and there are plenty of other single-digit-millions remaining slugs of preferred or sub debt.* The notion that it would be impossible to sell something at auction for less than $50mm seems weird to me – it’s done all the time by, um, auction houses – but you get the idea: these are subordinated fixed-income instruments of small banks that have run into trouble in the recent past; the risks are significant and the potential rewards – particularly in absolute dollar numbers – may not justify the investment of time and effort to understand and bid on them. Read more »

  • 13 Jul 2011 at 11:08 AM

Sheryl Sandberg for Treasury Secretary?

In New York this week, John Heileman repeats reports that Tim Geithner wants to resign as Treasury Secretary this year after the debt ceiling talks are resolved, and kind of surprisingly gives the nod to Facebook COO Sheryl Sandberg as the most likely successor, adding to talk of her shortlisting from earlier this month. His logic is here, and includes Sandberg’s growing national reputation (especially after this week’s New Yorker profile), her history as chief of staff to Larry Summers at Treasury, and her appeal to the business community without any Wall Street/GE-doesn’t-pay-taxes baggage for the, um, anti-business community.

It’s hard to argue with Sandberg’s timing so far – she joined Google pre-IPO, cashed out after their 2004 IPO, and jumped to Facebook in 2008. So the next sensible new-media thingy would seem to be Twitter, and the Obama administration has that covered as well. Read more »

  • 26 May 2010 at 4:50 PM

Blanche Lincoln’s Derivatives Provision All But Dead Now

Blanche Lincoln’s famed derivatives legislation, which would basically prevent any big bank from ever trading CDS again, has already been chastised by Barney Frank. Now, a senior Treasury official has essentially delivered another blow to the Lincoln legislation.

In a briefing for reporters today, Assistant Treasury Secretary Michael Barr said the derivatives rules were not part of the administration’s four “core objectives” for financial reform. Translation: The Lincoln legislation can die a slow death for all we care. Read more »

  • 21 May 2010 at 1:36 PM

TARP Cost Reduced by $11.4 Billion, Thanks Vikram

The Treasury Department said today it has lowered the projected cost of the Troubled Asset Relief Program by $11.4 billion to $105.4 billion. We’re still in the hole on the auto companies and AIG – and there’s that bailout of Fannie and Freddie – but we’ll take what we can get. Read more »