Who said the 111th Congress has never accomplished anything? Today, major parts of the Credit Card Act of 2009 take effect. Enacted last May with great fanfare, the legislation restricts rate increases on existing balances, requires promotional rates to last at least six months, limits over-limit fees, mandates 45 days notice before certain terms of service can be changed, and imposes a host of other requirements intended to help credit card users. So should consumers be celebrating? Maybe not quite yet. As it turns out, the legislation ran smack dab …
The Congressional Oversight Panel (COP), the watchdog board created by Congress to oversee the TARP program, yesterday issued the equivalent of a severe weather warning for commercial real estate markets. Like the residential market before it, the markets for retail, apartment, and other business properties are facing a wave of defaults which, says the panel, “would trigger economic damage that could touch the lives of nearly every American.” The numbers are grim. According to the COP, over the next four years $1.4 trillion in commercial real estate loans will come …
In an unusually harsh report released yesterday, the government’s Special Inspector General for TARP blasted the bailout program, charging that it has not only failed to meet its goals, but that — absent change — it may have made things worse. Among other things, Inspector General Neil Barofsky concluded that because of the bailouts, the market is “more convinced than ever that the Government will step in as necessary to save significantly significant institutions.” This, he says, creates a moral hazard, through what he calls a “heads I win; tails, …
Forget the war on terrorism, the war on drugs, even the war on poverty. President Obama seems to have declared a new war, a war on banks. It was launched last week with the proposal of a “bank tax,” supposedly meant to get TARP bailout money back to taxpayers (although it would leave out firms such as General Motors that actually owe most of the money). It continued yesterday with the President’s proposal of new bank regulations — limiting what banks can invest in as well as limiting to total …
According to a Reuters report, French economy minister Christine Lagarde today applauded President Obama’s call for more regulation of the U.S. financial sector. “I am delighted that [the] president of the United States is following our lead,” she added. In a possibly related story, the Dow Jones yesterday dropped by 213 points, the largest one day drop since last October.
Facing rising populist anger over his administration’s billion-dollar bailouts, President Barack Obama proposed a $117 billion tax over the next 12 years on financial companies with assets of more than $50 billion. “We want our money back, and we’re going to get it,” the President said. The President is half right. Taxpayers are going to get their money back from the banks that received bailout money … but don’t expect to see any of the money the Obama administration poured into General Motors and Chrysler at the behest of their …
It is fun and politically profitable to attack banks and bankers, especially in the wake of a bailout program estimated to have cost American taxpayers some $150 billion. Given this, the plan floated yesterday by the Obama Administration to charge a “fee” (read tax) on financial institutions to cover losses under the TARP program is understandable. That doesn’t make it sensible. The plan will do nothing to force those responsible for much of TARP’s losses — primarily AIG, General Motors, and Chrysler – to reimburse the Treasury one cent. That …
Interpreting statements of Federal Reserve Chairmen has long been considered a high art form. During Alan Greenspan’s time, journalists and financial analysts made huge efforts to understand his cryptic comments on the economy, with the result that a few sentences could spawn literally pages of analysis designed to “explain” the possible contents of Greenspan’s comments. Most of that analysis was incorrect. Now, journalists and especially headline writers are attempting to apply the same techniques to Ben Bernanke’s comments. The most widely quoted sentence contained in a scholarly paper he delivered …
While most of us were at home waiting for Santa and his reindeer to arrive, a gift arrived for mortgage giants Fannie Mae and Freddie Mac, as the Obama Administration lifted caps on how much bailout money they can receive from the U.S. Treasury. The old limits for the firms, both of which are under federal conservatorship, had been set at $200 billion each, though all concerned understood these were fictions. The new limits are… well, there are no new limits (which might be scored as a gain for transparency, …
A late end-of-year entry for the 2009 Claude Raines Award goes to a study just released by two economists at the University of Michigan finding that banks with political connections were more likely to get TARP funds than those without them. “Our results show that political connections play an important role in a firm’s access to capital,” said Denis Sosyura, who — along with Ran Duchin — authored the study. It’s a stunningly unsurprising result. Just imagine: politics affecting who gets federal bailout money. Who would have guessed? When you …
