Bad Bank Plan on Thursday!

what the heck are you talking about?

 

Personally I do believe next week is an up-week. News over the weekend might easily be a catalysis for that. The reason I think so is that there was stronger volume in downbars on friday - meaning to me there was an interest in buying.
On the other hand thing that worries me a lot is a low PUT/CALL ratios all around meaning that the majority are sitting on one side of the boat - and that side is bullish.
Well... we'll see

 

If you don't understand by friday let me know..

 

Talks continue between the Obama administration and financial industry representatives over a plan to further ease the credit crunch, including a so-called 'bad bank' component to buy toxic assets. If progress continues to be made an announcement is likely late next week, according to a source familiar with the discussions.

Talks are taking place again today, following a round Friday when speculation arose that a snag had been hit over the thorny issue of how to price the assets, which the banks would sell at a discounted price to the government entity.




That no longer appears to the case. The talks are said to have yielded agreement that the FDIC would run the bad bank, according to a source. That scenario has been widely speculated, especially since FDIC Chairwoman Sheila Bair has been a leading proponent of the bad bank concept. She had already essentially volunteered to have the banking supervision agency administer the program, which it did 15 year ago with a similar program meant to ease the savings and loan crisis.

"It’s not a 100 percent, but its where they are now," said the industry source, adding that Thursday could be the announcement day.

http://www.cnbc.com/id/28935289

 

Hedge funds gain access to $200bn Fed aid

By Krishna Guha in Washington

Published: December 20 2008 05:01 | Last updated: December 20 2008 05:01

Hedge funds will be allowed to borrow from the Federal Reserve for the first time under a landmark $200bn programme intended to support consumer credit.

The Fed said on Friday it would offer low-cost three-year funding to any US company investing in securitised consumer loans under the Term Asset-backed Securities Loan Facility (TALF). This includes hedge funds, which have never been able to borrow from the US central bank before, although the Fed may not permit hedge funds to use offshore vehicles to conduct the transactions.



The asset-backed securities to be funded under the programme are pools of credit card receivables, automobile loans and student loans.

The idea is to increase the supply of these loans and reduce borrowing rates by ensuring that the companies that make the loans can sell them on to investors who have guaranteed access to low-cost funding from the Fed.

The TALF is a key plank of the unorthodox strategy set out by the Fed last week as it cut interest rates virtually to zero. Washington insiders expect the programme will be dramatically expanded next year with further capital support from Treasury once the Obama administration takes office.

A senior official in the outgoing Bush administration told the Financial Times it could also be broadened to include new commercial and residential mortgage-backed securities.

The Fed thinks risk premiums or “spreads” for consumer loans are much higher than would be justified by likely default rates, even assuming a nasty recession.

It attributes this to a lack of buying interest in the secondary market where the loans are sold on to investors. By making loans to these investors on attractive terms it aims to increase market liquidity.

Making the scheme open to all US companies is a radical departure for the Fed, which normally supports financial market liquidity indirectly by ensuring banks have adequate liquidity to make loans to other investors.

However, the liquidity the Fed is providing to banks is not flowing through to financial markets, because banks are balance-sheet constrained and risk-averse. So it is channelling funds directly to investors.

The scheme is not designed specifically for hedge funds and a wide range of financial institutions are likely to participate.

Nonetheless, Fed officials hope that hedge funds will be among those investors that take advantage of the low-cost finance to drive down spreads.

The loans will be secured only against the securities and not the borrower. However, the Fed will lend slightly less than the value of the securities pledged as collateral. The Treasury has committed $20bn to cover potential losses.

Since the credit crisis erupted, hedge funds have complained that they cannot get the leverage they need to arbitrage away excessive spreads and meet high hurdle rates of return.

“Demand is there for leverage but not supply,” said Sylvan Chackman, head of global equity financing at Merrill Lynch.

In effect, the Fed will now take on the role of prime broker – the lead bank that lends to a hedge fund – for specific assets.

 

A Multi-Pronged Bank Plan
Administration Probably Won't Toughen Pay Restrictions at Healthy Firms
FDIC chief Sheila C. Bair has been pushing for the establishment of a government bank to buy private banks' troubled assets. (By Seth Wenig -- Associated Press)


By David Cho
Washington Post Staff Writer
Saturday, January 31, 2009; Page D01


The Obama administration has finished drafting the central elements of its plan to rescue the financial markets and is gathering feedback from regulators and Wall Street executives, sources familiar with the matter said yesterday.

While some details need to be hammered out, the strategy is likely to be laid out publicly in about a week, the sources said.

In finalizing the plan, officials have made a policy decision that could dismay lawmakers. The administration is likely to refrain from imposing tougher restrictions on executive compensation at most firms receiving government aid but instead retain looser requirements initially included in the Treasury's $700 billion rescue program, a source familiar with the deliberations said. Officials are concerned that harsh limits could discourage some firms from asking for aid.

The administration envisions a range of initiatives to jump-start the consumer credit markets, provide aid to struggling homeowners, and motivate banks to increase lending. The plan will also offer banks more capital and buffer them against losses on portfolios of "toxic" assets, backed by failing mortgages and other troubled loans.

Earlier this week, Treasury Secretary Timothy F. Geithner met with Federal Reserve Chairman Ben S. Bernanke, Federal Deposit Insurance Corp. Chairman Sheila C. Bair and Comptroller of the Currency John C. Dugan to discuss the plan, a source said. They met again yesterday. Administration officials have also begun to talk to Wall Street executives to receive input on how the government might relieve banks of troubled assets, the source added.

Several sources said Bair has been aggressively pushing for months for the government to use federal rescue funds to set up a government bank that would buy up the distressed assets. Such an institution would lessen the burden on her agency, which insures deposits at failing banks up to $250,000.



During the savings-and-loan crisis of the late 1980s and early 1990s, the federal government took a similar approach and established the Resolution Trust Corp. to wind down failing institutions. The effort cost taxpayers about $125 billion.

But Geithner told lawmakers this month that to address the current crisis, a government "bad bank" would be "enormously complicated to get right," and he raised concerns about its cost.

The scope of the toxic asset problem has reached $2 trillion, by the conservative estimates of banking analysts. The Treasury Department, however, has only about $320 billion left in the rescue program.

Geithner and other senior members of Obama's economic team are unlikely to pin their hopes on a single solution such as the Resolution Trust Corp. to solve the worsening crisis, sources said. Instead they prefer a more nuanced approach so they can apply specific fixes tailored to the host of problems facing the financial system.

Establishing a bad bank could be done in conjunction with offering banks federal guarantees that would absorb losses yet to be declared from the assets on their balance sheets, the sources said, speaking on condition of anonymity because the plan has not been announced yet. Treasury officials offered such guarantees during the multibillion-dollar rescues of Citigroup in November and Bank of America a few weeks ago.

Insuring losses is a safer bet than establishing a bad bank because the former requires the government to spend money only if assets continue to fall in value. But the proposal may be less effective in restarting the credit markets that buy and sell these assets, one of the sources said.

With either approach, the government may have to offer more capital to financial firms than has been provided so far. But the terms would be different than those required by the Bush administration, the source said. One idea under consideration is to offer money to financial firms in the form of bonds or preferred shares that convert into common stock over time. The aim would be to encourage banks to pay back the government more quickly before the conversion happens.

Treasury officials also have been considering for months whether to require institutions to match any federal aid with private capital. But they are concerned that banks may have a hard time raising money from private markets.

Obama's officials have said they will clearly lay out the conditions for any government investment. While relatively healthy firms are unlikely to face stiff restrictions on executive compensation, companies that need more dramatic government assistance would face more punitive terms, a source said.

Under the original rescue program approved by Congress in October, executives at financial firms for the first time faced federal limits on their multimillion-dollar pay packages. But those restrictions were unlikely to significantly reduce executive pay, analysts and banks said at the time.

The law largely focused on banning "golden parachute" payments to departing executives under certain circumstances. But most banks participating in the Treasury's capital purchase program were permitted to offer senior managers severance packages worth up to three times their average annual earnings. That amounts to a very large sum in most cases, the analysts said.

 

Nothing like selling our children's and grand children's souls for a little pop in the market!

WOOOOOHOOOOOO we are great peeps!


Who's soul can we sell next?

 

The Obama administration and financial industry representatives Saturday discussed a range of measures to ease the credit crunch, including a so-called 'bad bank' component to buy toxic assets.

CNBC.com has now learned that the administration is considering three options for institutions: a) a bad bank, b) more capital injections into institutions and c) a so-called "ring fence" concept, in which the government uses a combination of guarantees and insurance to cover bad assets within an institution without technically removing them from the balance sheet.

The plan could entail using one or a combination of the options, according to a source familiar with the discussions.




At the same time, the administration is considering another set of measures for homeowners, including tax breaks, interest rate subsidies, additional purchases of GSE debt--as the Federal Reserve has done recently--and even direct assistance, the source said. It is unclear exactly what the latter would entail.

If progress continues to be made an announcement is likely late next week, according to the source.

http://www.cnbc.com//id/28952103?__source=yahoo|headline|quote|text|&par=yahoo

 

Dude you give these losers at cnbc too much credit for moving the market.

 

Delayed again:

http://money.cnn.com/2009/01/31/news/economy/rescue_package_delay/index.htm?postversion=2009013115