Paulson and Bernanke appear before committee

Paulson and Bernanke appear before committee

Obama = Bush with a healthy sun-tan.

Is b-a-d...
:eek:
Paulson: Crisis of the century
WASHINGTON (AP) — November 20, 2008: Treasury Secretary says the current financial crisis is rare, but warns against harsh regulations.

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Treasury Secretary Henry Paulson called the financial crisis now plaguing the world economy a “once or twice” in a 100 years event, even as he warned Thursday against imposing too-strict regulations to prevent a repeat calamity.

Paulson’s remarks follow pledges by world leaders attending last week’s emergency economic summit to begin an overhaul of the world’s financial regulatory system. With the next summit slated for the spring, the work on fleshing out details for the Herculean task will fall to the incoming administration of President-elect Barack Obama and his new Treasury secretary.

Paulson, whose boss President George W. Bush leaves office on Jan. 20, acknowledged that the financial crisis was caused by many factors including “government inaction and mistaken actions, outdated U.S. and global financial regulatory systems, and by the excessive risk-taking of financial institutions."

Still, he cautioned against the U.S. and other countries developing a too-onerous regulatory response. “If we do not correctly diagnose the causes, and instead act in haste to implement more rather than better regulations, we can do long-term harm," Paulson said in a speech in Simi Valley, Calif.

[url:
http://money.cnn.com/2008/11/20/news/economy/paulson.ap/index.htm[/url]

See also:

Financials need at least $1-1.2 trillion: analyst
Thu Nov 20, 2008 - The U.S. financial system still needs at least $1 trillion to $1.2 trillion of tangible common equity to restore confidence and improve liquidity in the credit markets, Friedman Billings Ramsey analyst Paul Miller said.

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However, veteran banking analyst Richard Bove contradicted the idea of raising tangible common equity as a measure to improve liquidity. “There seems to be no discernable reason why tangible common equity is a relevant indicator of anything other than market participants think it should be," Bove said in a note to clients.

“If a bank is to be liquidated and its businesses sold off, those businesses associated with the intangibles are likely to bring a much higher price than the businesses backed by tangible assets," he wrote in a note on Thursday. “In sum, the whole furor of tangible common equity makes no sense to me."

However, FBR’s Miller said in his note dated November 19 that the only solution for the global crisis was injections of true tangible common equity. “Debt or TARP capital is not true capital. Long-term debt financing is not the solution."

More [url:
http://www.reuters.com/article/wtMostRead/idUSTRE4AJ1GV20081120[/url]

Squabblin' over TARP...
:mad:
TARP Turf War Could Further Hurt Economy
Dec. 5, 2008 - Bush and Obama Disagree Over TARP Priorities

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There is a growing disagreement over how and whether to use the remaining $350 billion in the Congressional bailout bill. Some economists fear the disputes could delay or disrupt action on the increasingly urgent economic meltdown. “We may get some elements of gridlock until Jan. 20," said Martin Baily, former chairman of President Bill Clinton’s Council of Economic Advisers, referring to the day President-elect Obama takes office. With the financial markets already rattled, “This doesn’t help," Baily said. Citing the “pretty amazing” November job loss numbers that were announced today, the worst monthly figures since 1974, Baily added, “The way things are going, it would be good to do things as soon as possible."

But over the past few days, Obama, outgoing Treasury Secretary Henry Paulson and the leaders of Congress have all spelled out different priorities for the money. Paulson has already spent or pledged nearly half of the $700 billion in the emergency fund dubbed TARP, for Troubled Asset Relief Program. Paulson initially said he intended to leave the second $350 billion for Obama to use in the long-running effort to stabilize the economy. This week, however, Paulson indicated he may ask Congress to release the money to help recapitalize banks and to create a cheap mortgage program for people buying new homes. That money would not be available, however, to families in danger of losing their homes. Obama on Wednesday said a priority for the TARP cash should be to stem the avalanche of foreclosures by helping homeowners already struggling with mortgages.

“The deteriorating assets in the financial markets are rooted in the deterioration of people being able to pay their mortgages and stay in their homes," Obama said. “We’ve got to start helping homeowners, in a serious way, prevent foreclosures." President George W. Bush made clear today that his administration is keep its focus on financial institutions, rather than struggling homeowners. “We are focusing on the root causes of the economic downturn in order to return our economy to health," the president said in a White House statement. “The most urgent issue facing the economy is the problem in the credit markets. Businesses and consumers need access to credit at affordable rates to spend an invest. And so we’re working to stabilize the markets and make credit more affordable and available."

More [url:
http://abcnews.go.com/Politics/Economy/story?id=6401266&page=1[/url]

No more bailout money till mortgage adjustments...
:cool:
Frank Says Mortgage Renegotiations 'a Must' if Treasury Wants More Bailout Money
Monday, December 08, 2008 Washington – Rep. Barney Frank (D-Mass.) told CNSNews.com Monday that if the Treasury Department wants a second $350 billion installment of financial bailout money, it will have to come up with a foreclosure modification plan; one that must include “principal write-downs” — or reductions in the original amount of the mortgages.

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“I have been insisting that they do a renegotiation plan, but I have not heard yet what they plan to do,” Frank said. Frank, who is chairman of the House Financial Services Committee, said he would not give a cost estimate for such a plan, but did say it would need to be included if Treasury wants any more bailout money.

“They’re not going to get the $350 (billion) unless they get very serious about foreclosure modification and show us that we’re going to get some lending out of the banks,” he added. “They (Treasury) would have to make clear that they are going to do substantial foreclosure relief and that they have a plan to make the banks lend out money that they’ve already been given through the Capital Purchase (Program).”

Frank also called for principal reductions as part of any foreclosure-mitigation effort, telling reporters that they would be an essential part of any federal plan. “The more the better,” Frank said. “Principle reduction is a big part of it. When you reduce the principle, you give people an incentive not to re-default, that’s why I think that’s important.”

He also said that Congress will wait for the Obama administration to be sworn in before embarking on any legislation forcing loan renegotiations. “How long will I wait, I’ll tell you that that’s a very simple answer — Jan. 21,” Frank said. “There is simply no capacity (for action). George Bush is still the president of the United States until Jan. 20, so there is no capacity because you wouldn’t get two-thirds on a bill as long as Bush is president.”

Frank blamed the lack of foreclosure modification on President Bush as well, saying there was ample legal authority for the administration to take action. “I don’t think you need legislation,” Frank said. “There is plenty of legal authority to do foreclosure modification — Paulson and Bush won’t use it. There is no need to legislate that.”

[url:
http://www.cnsnews.com/public/content/article.aspx?RsrcID=40482[/url]

It ain’t gettin' any better any time soon...
:eek:
Banking on another bad year in '09
December 22, 2008: Rising loan losses, the threat of more regulation and tougher competition adds up to another year of poor profits for banks.

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Bankers are counting down the days until they officially close the book on a terrible 2008. Too bad the outlook for 2009 is just as dismal. It may seem hard to imagine how 2009 can be worse than this year for the industry. Governments around the globe were forced to institute massive bailout programs.

Citigroup lost more and more money as the credit crisis gained momentum and needed a more than $300 billion backstop from the government to keep it afloat. IndyMac and Washington Mutual both failed. Investment bank Lehman Brothers went bankrupt. And investors lost tons of money in bank stocks. Through late December, the Standard & Poor’s banking index and the regional bank-focused KBW Bank Index had both lost more than half their value in 2008.

Credit remains the big story

Banks this year suffered largely due to troubles with mortgages. With few signs of an imminent turnaround in housing, bad home loans are likely to remain front and center for the industry in 2009. But they’re likely to face more problems with other types of loans as well. Many banks have already experienced a significant deterioration in the health of their credit cards and home equity loan portfolios, and are bracing for those troubles to become even worse. In addition, problems in commercial real estate and business loans are starting to surface as well. “There is loan quality deterioration across a number of sectors," said Tanya Azarchs, veteran industry analyst and managing director for Standard & Poor’s. “It is not just the consumer anymore."

More [url:
http://money.cnn.com/2008/12/22/news/companies/banks_2009/index.htm[/url]

Some perspective on the housing crisis...
:confused:
The White House Hits Times Article on Mortgage Crisis
December 22, 2008, The White House has accused The New York Times of “irresponsible reporting,” “gross negligence’’ and giving “kid glove treatment to Congress’’ in the wake of an article in Sunday’s newspaper that examined President Bush’s home ownership initiative and his free-market philosophy as contributing factors to the current financial crisis.

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“Our concern with the article yesterday was that it had a narrow focus, and that was to simply blame the housing crisis and the resulting financial crisis on this administration’s push for homeownership,’’ Tony Fratto, the deputy press secretary, told reporters on Monday. “And that is about as myopic as you can get, and unsophisticated as you can get.’’ Mr. Fratto’s remarks followed an unusual two-pronged broadside delivered by the White House on Sunday, when Press Secretary Dana Perino issued a formal statement in which she accused The Times story of relying “on hindsight with blinders on and one eye closed.’’ The White House followed with a lengthy critique of the story called “Setting the Record Straight.”

The 4,800 word story, headlined “White House Philosophy Stoked Mortgage Bonfire,’’ was the latest installment in a series called The Reckoning, which has examined the causes of the financial crisis from many angles. Previous installments have examined the role of lawmakers like Senator Charles E. Schumer of New York, a Democrat, and Phil Gramm, a Republican former senator from Texas; and have looked at other leading figures, including Henry Cisneros, housing secretary to Bill Clinton; Daniel Mudd, the former chief of the government-sponsored mortgage giant Fannie Mae; and Alan Greenspan, the former chairman of the Federal Reserve.

In reporting the story about President Bush, a team of three Times reporters set out to determine what the administration did well, and what it might have done better, in the run-up and response to the crisis. The result was a look at Mr. Bush’s housing policies, his de-regulatory agenda and his intense effort to persuade Congress to strengthen regulation of Fannie Mae and its sister company, Freddie Mac. “The piece that has driven the White House spokesmen to such a show of apoplexy was based on on-the-record interviews with dozens of current and former officials of the current administration,’’ the executive editor of The Times, Bill Keller, said in a statement. “It is part of an ongoing series that examines in depth the accountability of numerous players in the economic meltdown, including Congress, rating agencies, brokerage houses and the Fed. The series is available in full on our Web site, nytimes.com.”

[url=http://thecaucus.blogs.nytimes.com/2008/12/22/the-white-house-hits-times-article-on-mortgage-crisis/:
MORE[/url]

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White House Philosophy Stoked Mortgage Bonfire
December 20, 2008 - “We can put light where there’s darkness, and hope where there’s despondency in this country. And part of it is working together as a nation to encourage folks to own their own home.” — President Bush, Oct. 15, 2002

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WASHINGTON — The global financial system was teetering on the edge of collapse when President Bush and his economics team huddled in the Roosevelt Room of the White House for a briefing that, in the words of one participant, “scared the hell out of everybody.” It was Sept. 18. Lehman Brothers had just gone belly-up, overwhelmed by toxic mortgages. Bank of America had swallowed Merrill Lynch in a hastily arranged sale. Two days earlier, Mr. Bush had agreed to pump $85 billion into the failing insurance giant American International Group.

The president listened as Ben S. Bernanke, chairman of the Federal Reserve, laid out the latest terrifying news: The credit markets, gripped by panic, had frozen overnight, and banks were refusing to lend money. Then his Treasury secretary, Henry M. Paulson Jr., told him that to stave off disaster, he would have to sign off on the biggest government bailout in history. Mr. Bush, according to several people in the room, paused for a single, stunned moment to take it all in. “How,” he wondered aloud, “did we get here?”

Eight years after arriving in Washington vowing to spread the dream of homeownership, Mr. Bush is leaving office, as he himself said recently, “faced with the prospect of a global meltdown” with roots in the housing sector he so ardently championed. There are plenty of culprits, like lenders who peddled easy credit, consumers who took on mortgages they could not afford and Wall Street chieftains who loaded up on mortgage-backed securities without regard to the risk.

More [url:
http://www.nytimes.com/2008/12/21/business/21admin.html?_r=1[/url]