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Politics : President Barack Obama -- Ignore unavailable to you. Want to Upgrade?

To: ChinuSFO who wrote (45635)	11/23/2008 3:09:01 PM
From: tejek	Respond to of 149317

U.S. banks put bailout money where it's safe: The vault By Gretchen Morgenson Published: November 23, 2008 So goes the old saw about bankers: They loan you an umbrella when the sun is shining, only to ask for it back when it rains. But with the U.S. economy and markets in a world of hurt, the nation's banks were supposed to stow their self-interest and help start lending again. When the Troubled Asset Relief Program of the U.S. Treasury Department handed over $125 billion in taxpayer money to nine banks a month ago, they were supposed to lend to small businesses, home buyers and other worthy borrowers to keep the economy's gears in motion. At the time, the Federal Reserve Board and three bank regulatory agencies said: "The agencies expect all banking organizations to fulfill their fundamental role in the economy as intermediaries of credit to businesses, consumers and other creditworthy borrowers." Alas, that admonition wasn't accompanied by any real requirements to lend. When the U.S. Treasury gave taxpayer billions to the banks, it attached no strings. So is it any surprise that lending is tight? Reports from institutional and individual borrowers across the United States indicate this. Nervous lenders are demanding that even healthy loans be paid back. Banks and other financial institutions, meanwhile, are reducing exposures to borrowers and doing whatever they can to discourage the assumption of further debt. Borrowers I have heard from don't want to get into trouble with their lenders by speaking publicly about their experiences. As a result, they will remain nameless. But their stories are all the same. The problem is, unless the U.S. government puts serious pressure on banks to start lending, the value of assets used as collateral will fall as individuals and institutions everywhere are forced to sell. "Every bit of leverage is being pulled," said Robert Smith, chairman of Smith Affiliated Capital, an investment management firm. "The brokerage firms are pulling in their lines and so are the banks. At the same time, there is nobody putting one cent of capital into positions. The name of the game, the stated goal of TARP, was to make loans. Regulators are inside these firms. Why is this not happening?" A commercial real estate borrower in Texas who owns properties financed by GE Capital said his lender was tightening the screws - despite the fact that all of his loans were current and his properties robust. He said GE Capital had told him that when his loan came due, there would be no negotiation; it must be paid off in full or foreclosure proceedings would begin. But while GE Capital is among the banks playing tough with some borrowers, it is tapping funds through the Federal Reserve Bank of New York, which makes it easier for the company to finance its operations at low cost. A General Electric spokesman said that because of the current downturn the company needed to give extra scrutiny to certain loans but that it was on track to lend $50 billion this quarter, down from $80 billion in the same quarter last year. "We are being extra careful to avoid any potential future losses," said Russell Wilkerson, the GE spokesman. "But fundamentally we have continued to do a lot of lending." And, he added, the company has not received any money from TARP. Last week, Bank of America announced that it would spend $7 billion to increase its stake in China Construction Bank - just weeks after receiving $15 billion from taxpayers. Why, when the nation needs access to loans in the worst way, did Bank of America choose to deploy $7 billion overseas? Robert Stickler, a Bank of America spokesman, said that no TARP money had been used to increase its Chinese bank stake and that the bank had planned the investment and set aside money for it months earlier. "A lot of banks have cut back their lending, but at Bank of America we are making every good loan we can make," he said. "There is a recession out there, and that does reduce the opportunity to make good loans." Indeed, with so many swooning assets on their books, it is easy to see why banks are inclined to hoard capital. And the Treasury's decision not to buy toxic mortgage assets with TARP money after it said it would do so has produced paper losses for the banks that hold these securities. The value of those securities rose when TARP was announced but fell significantly when the mortgage purchase program was abandoned. "It was a waste of money to put $25 billion into Citibank when within days the value of its underlying mortgages fell because TARP decided against buying distressed mortgages," said Jonathon Trugman, founder of Pendulum Capital Management, a hedge fund. "The uncertainty that Treasury has introduced with TARP has cost investors far more in declining stock and bond prices than the $700 billion that the program received from Congress." 1 \| 2 Next Page iht.com

To: ChinuSFO who wrote (45635)	11/23/2008 3:15:27 PM
From: koan	Respond to of 149317

Ah, I never thought that stimulous idea was worth much. But I am also still confused as to how we can do much of anything that will work with massive declining revenues, huge deficits and two intractable wars. Adn I find it amazing how the right wingnuts are pinning this depression on the dems and government and too much regulation. Talk about nutso thinking. I have yet to find one who rightwinger e.g. CATO institute that can or wil face reality. Well, at least the people can see how their voting for bush and right wingers the last eight years has put his country in deep peril.