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untanglingwebs
El Supremo
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I watched CNN and MSNBC all day yesterday and was surprised to see ABC WJRT TV 12 downplay the significance of the additions to the Spending Bill that would maintain government to September 30, 2015.
Big Banks manipulated a repeal of part of the Dodd-Frank that may put taxpayers on the hook again for gambling on risky derivatives. The provision did not go though the regular process and was never debated publicly. Oddly, no one is admitting to adding this provision into the bill, although it is agreed that Citibank lobbyists wrote much of the language. Bank exec Jamie Dimon, JP Morgan , was said to have been calling congress members for their support of the provision. Democrats that supported the provision were heavily supported by the finance industry.
Pensions for many, including truckers, ay see their pensions reduced by possibly as much as 30%.
Democrats are saying they had to agree to the bill in order to ensure hundreds of spending provisions they supported. Fear of the new wave of GOP politicians next year made many fearful. About 60% of the discretionary funding is for the military , so forget about infrastructure improvements. Also a $22 million provision that would have given addition suicide prevention resources to returning veterans may
be lost. Tom Coburn (D-Oklahoma)is indicating he will use the Senate Rule allowing a single Senator to withhold consent to stop HR 5059 , the Clay Hunt Suicide Bill. Clay Hunt was a veteran with PTSD who committed suicide. |
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Sat Dec 13, 2014 10:39 am |
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untanglingwebs
El Supremo
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http://www.nytimes.com/2014/12/12/us/congress-spending-bill.html
House Narrowly Passes Bill to Avoid Shutdown; $1.1 Trillion in Spending
By ASHLEY PARKER and ROBERT PEARDEC. 11, 2014
Speaker John A. Boehner before the vote. Some Republicans said Mr. Boehner had not taken a strong enough stance against the president’s immigration action. Credit Stephen Crowley/The New York Times
WASHINGTON — The House narrowly passed a $1.1 trillion spending package on Thursday that would fund most government operations for the fiscal year after a rancorous debate that reflected the new power held by Republicans and the disarray among Democrats in the aftermath of the midterm elections.
The accord was reached just hours before the midnight deadline, in a 219-206 vote, amid the last-minute brinkmanship and bickering that has come to mark one of Congress’s most polarized — and least productive — eras. The legislation now heads to the Senate, which is expected to pass it in the coming days.
The split in the Democratic Party dramatically burst into view when Representative Nancy Pelosi, the minority leader and one of President Obama’s most loyal supporters, broke with the administration over a provision in the bill that would roll back regulation of the Dodd-Frank Act, which Ms. Pelosi said was a giveaway to big banks whose practices helped fuel the Great Recession. She spoke on the House floor in the early afternoon, expressing her strong opposition to the bill.
Minority Leader Nancy Pelosi, on her way to the House floor Thursday night, had urged Democrats to oppose the legislation. Credit Stephen Crowley/The New York Times
Mr. Obama and Vice President Joseph R. Biden Jr. were pressed to make a furious round of phone calls to try to persuade wavering Democrats, while House Speaker John A. Boehner worked to get more Republican votes.
The public support of the sweeping spending bill by the White House — which came just as Ms. Pelosi was making her speech on the House floor opposing it — was a rare public break with the minority leader and infuriated many of her loyalists.
In a more than three-hour, closed-door meeting of House Democrats on Thursday night, many of the party’s more liberal members tried to rally support against the bill. The moment, they said, was one of conscience, and a chance for Democrats to demonstrate their allegiance with the middle class.
“We’ve got to stand up for principle at some point, or they’re going to kick us even more next year when they have a bigger majority,” said Representative Peter A. DeFazio, Democrat of Oregon. “They know we will stand our ground on principle in the future and not roll us so easily again.”
In an emergency gathering, Democrats also expressed anger at Denis R. McDonough, the White House chief of staff, at what they saw as the president’s undercutting of Ms. Pelosi and other progressives by coming out in support of the deal so early in the day. But Ms. Pelosi ultimately gave her members the freedom to vote how they wanted. “I’m giving you the leverage to do what you have to do,” she said. “We have enough votes to show them never to do this again.”
The Dirksen Senate Office Building, left, on Thursday night as Congress considered a $1.1 trillion spending bill. The measure faced last-minute opposition. Credit Stephen Crowley/The New York Times
The final vote was a blow to Ms. Pelosi, the liberal wing of the party and Senator Elizabeth Warren, Democrat of Massachusetts, who led the charge against the Dodd-Frank rollback. Mr. Boehner built a coalition of 162 Republicans and 57 Democrats, a rare achievement for a Congress that has often operated along strict party lines. Congress also passed a two-day funding measure to give the Senate time to pass the legislation.
With an opportunity to return to a more conventional legislative process — funding the government for a fiscal year rather than for months at a time — Republican leaders had thought they had sufficient bipartisan support to pass the bill. The adopted measure funds the government through Sept. 30, 2015.
But an early sign of the headwinds facing the legislation came around noon, when the deal barely cleared a procedural hurdle to allow a vote. In several tense minutes on the House floor, support to move forward on the package seesawed, with Democrats shouting “Call the vote” and Republicans holding it open until they were able to persuade two lawmakers to switch their votes.
House Democrats — who were already trying to strike a delicate balance — found their calculation complicated by the White House, which released a pre-emptive signal that Mr. Obama would sign the bipartisan legislation if it made it out of Congress.
Josh Earnest, the White House press secretary, said the administration agreed with congressional Democrats who were angry about several provisions that affect financial regulations and others that would allow larger political contributions to parties during federal campaigns. But he called the funding bill “a compromise” and said passage of the legislation would be good for the economy and would bolster some of the president’s priorities, including consumer protection, early childhood education and the fight against climate change.
Senator Elizabeth Warren of Massachusetts expressed concerned Wednesday about weakening Wall Street regulation. Credit Stephen Crowley/The New York Times
Postponing action on the spending bill until next year would not have been good for either party. Republicans were eager to get the package behind them so they could start 2015 with a fresh agenda. And although Democrats found some provisions of the spending bill objectionable — including a measure that would significantly increase the limits on individual contributions to political parties — the package was negotiated on a bipartisan basis and they probably would have been forced into greater concessions next year.
Not everyone on the right was happy with the deal, either. Some House Republicans thought that Mr. Boehner did not go far enough in fighting Mr. Obama over his executive action last month to defer the deportation of as many as five million unauthorized immigrants. The spending deal funds the Department of Homeland Security — the agency primarily assigned to carry out the president’s immigration policy — only through February, at which point Republicans will control both chambers of Congress and have the leverage to try to curtail Mr. Obama’s action.
But some conservatives wanted to immediately defund the Homeland Security agency, despite the risk of a partial government shutdown. After the bill was passed, Representative Steve Scalise, Republican of Louisiana and majority whip, said that the vote “set the stage for a battle with the president” over his immigration action.
The liberal base of the Democratic Party, led by Ms. Warren, also found itself in an unlikely alliance with the Tea Party wing of the Republican Party. Both opposed the Wall Street bailout of 2008 and feared that the spending measure would not only provide a bounty for big banks but would also help cause another economic crisis. But last year, 70 House Democrats voted for a bill that included the very change to the Dodd-Frank regulations that their leadership opposed this week.
For Mr. Boehner and Ms. Pelosi, the lead-up to Thursday’s vote also demonstrated the strengths and limitations of their conferences.
Mr. Boehner displayed a willingness to buck his party’s more conservative members — as well as vocal outside groups — by passing the bill with the help of Democratic votes.
And Ms. Pelosi and her leadership team again reminded voters that House Republicans have often found themselves forced to rely on Democratic votes to pass crucial legislation, from the deal to reopen the government last year after a 16-day shutdown to relief for Hurricane Sandy.
“This bill is a one-two punch at middle-class voters,” said Representative Steve Israel of New York, a member of the Democratic leadership. “It weakens financial regulation on big banks and rewards Congress for doing so by increasing donation limits of big donors. This is exactly why middle-class voters have a contempt of Congress.”
Representative Nita M. Lowey of New York, the senior Democrat on the House Appropriations Committee, supported much of the bill but criticized the increase in limits on contributions to political parties. She linked that provision to efforts by the Senate majority leader, Harry Reid, Democrat of Nevada, and Mr. Boehner.
“The Reid-Boehner provision to increase by tenfold the limits on contributions to political parties is excessive and also does not belong on this bill,” Ms. Lowey said on the House floor.
But Representative Tom Cole, Republican of Oklahoma, said the campaign finance change had been negotiated with Senate Democrats.
“Democrats in the Senate consented to it and, I suspect, participated in it,” Mr. Cole said.
A version of this article appears in print on December 12, 2014, on page A1 of the New York edition with the headline: House Narrowly Passes Bill to Avoid Shutdown; $1.1 Trillion in Spending. Order Reprints| Today's Paper|Subscribe |
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Sat Dec 13, 2014 10:48 am |
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untanglingwebs
El Supremo
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http://www.nytimes.com/2014/12/12/business/furor-over-move-to-aid-big-banks-in-funding-bill.html
Furor Over Move to Aid Big Banks in Funding Bill
By JONATHAN WEISMANDEC. 11, 2014
WASHINGTON — In a 1,600-page, $1.1 trillion spending bill, a provision to roll back an obscure financial regulation became a focal point of uproar as Congress struggled to keep the government funded.
The “push-out” regulation — a measure to ensure that banks trade their riskiest financial instruments without the protection of the Federal Deposit Insurance Corporation or the Federal Reserve’s backup — was controversial from the start. Hundreds of billions of taxpayer dollars were shoveled into Wall Street banks after instruments like credit default swaps became worthless in the financial crisis, but even some crucial Democrats were unsure if Congress went too far when it voted to include push-out in the landmark Dodd-Frank law to regulate Wall Street in 2010.
But with regulators pressing to put rules into effect to carry out the law, a provision in the enormous spending bill to remove the push-out regulation drew bipartisan outrage. Representative Nancy Pelosi of California, the House minority leader, said she was “heartbroken” by the “taint” visited upon the spending bill, which would finance virtually all of the government through September.
Senators David Vitter, left, and Sherrod Brown oppose a provision in the federal spending bill. Credit Win Mcnamee/Getty Images
Senator David Vitter, Republican of Louisiana, one of the Senate’s most conservative lawmakers, teamed with Senator Sherrod Brown, Democrat of Ohio, one of its most liberal ones, to demand the provision’s removal.
“If Wall Street banks want to gamble, Congress should force them to pay for their losses and not put the taxpayers on the hook for another bailout,” the two wrote on Thursday to House and Senate leaders.
With a midnight deadline, Republican leaders postponed a scheduled vote on the spending bill on Thursday afternoon, trying to round up votes. Late Thursday night, the spending bill passed the House, 219 to 206. The bill now goes to the Senate.
Before the vote, the White House lamented the inclusion of a Wall Street measure that would “weaken a critical component of financial system reform aimed at reducing taxpayer risk,” but not enough to oppose the overall bill.
The fierce Democratic opposition over the Dodd-Frank rollback provision created the odd spectacle of President Obama and Vice President Joseph R. Biden Jr. calling Democrats to muster support for the spending bill over the opposition of Ms. Pelosi.
“I love the American political system, I really do, but the ability to sneak in substantive policy measures and make it take it or leave it, I think it’s appalling,” said Simon Johnson of the Massachusetts Institute of Technology’s Sloan School of Management and a former chief economist at the International Monetary Fund, who is a prominent critic of the nation’s big banks.
The push-out legislation assumed outsize importance, not only because of what it does but because the biggest Wall Street companies have fought it since it was proposed.
The language in the spending bill was inserted by Representative Kevin Yoder, Republican of Kansas, but he did not write it. Citigroup did. In 2013, the bank and its allies were able to corral a bipartisan vote to pass the rollback out of the House Financial Services Committee. In an analysis by The New York Times of Citigroup emails, more than 70 lines of the committee’s 85-line rollback bill came from Citigroup’s recommendations.
The banking industry strongly supports the rollback measure. James C. Ballentine, an executive vice president at the American Bankers Association, said financial instruments like credit deferred swaps are used to mitigate risk, not bolster it. To force their trading into units unprotected by federal taxpayers would be onerous, he argues.
“The push-out requirement to move some swaps into separate affiliates makes one-stop shopping impossible for businesses ranging from family farms to energy companies that want to hedge against commodity price changes,” Mr. Ballentine said.
Tony Fratto, a former official in the Bush Treasury and White House, called the opposition “a lot of hyperbole” around “an incremental common-sense regulatory improvement.”
Mr. Johnson said the evocation of family farms and mom-and-pop banks was specious. The four largest banks conduct more than 93 percent of all derivatives trading in the United States. The repeal push is for them, he said.
Such banks can still deal in derivatives and credit-deferred swaps in units uninsured by the federal government, but they could charge clients a considerably higher premium if they could keep that federal backstop.
“In 2008, we learned the economic consequences of conducting derivatives trading in taxpayer-insured banks,” said Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corporation, calling the repeal Congress is contemplating “illogical.”
A version of this article appears in print on December 12, 2014, on page B1 of the New York edition with the headline: Furor Over Move to Aid Big Banks in Funding Bill.
Last edited by untanglingwebs on Sat Dec 13, 2014 10:58 am; edited 1 time in total |
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Sat Dec 13, 2014 10:56 am |
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twotap
F L I N T O I D
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Sat Dec 13, 2014 10:57 am |
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untanglingwebs
El Supremo
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| “If Wall Street banks want to gamble, Congress should force them to pay for their losses and not put the taxpayers on the hook for another bailout,” the two wrote on Thursday to House and Senate leaders. |
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Sat Dec 13, 2014 10:58 am |
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untanglingwebs
El Supremo
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| The language in the spending bill was inserted by Representative Kevin Yoder, Republican of Kansas, but he did not write it. Citigroup did. In 2013, the bank and its allies were able to corral a bipartisan vote to pass the rollback out of the House Financial Services Committee. In an analysis by The New York Times of Citigroup emails, more than 70 lines of the committee’s 85-line rollback bill came from Citigroup’s recommendations. |
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Sat Dec 13, 2014 11:00 am |
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untanglingwebs
El Supremo
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http://www.dailykos.com/story/2014/12/11/1351125/-Elizabeth-Warren-to-GOP-Who-do-you-work-for-Wall-Street-or-the-American-people?detail=facebook .
Thu Dec 11, 2014 at 02:30 PM PST.
Elizabeth Warren to GOP: 'Who do you work for—Wall Street or the American people?'
Kerry Eleveld.
Sen. Elizabeth Warren has some questions for the House GOP about the last-minute goodies for big banks in the budget bill:
"To Republican leaders in the House, I would ask this: You say you're against bailouts on Wall Street. I've heard you say it again and again for five years. So why in the world are you spending your time and your energy fighting for a provision written by Citigroup lobbyists that would increase the chance of future bailouts.
Why in the last minute as you head out the door and a spending bill must be passed are you making it a priority to do Wall Street's bidding.
Who do you work for—Wall Street or the American people?" |
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Sat Dec 13, 2014 11:30 am |
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untanglingwebs
El Supremo
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http://www.esquire.com/blogs/politics/Senator_Professor_Warren_Meets_Her_Moment?click=feed
Senator Professor Warren Is Tired Of Reasoning With You People
By Charles P. Pierce on December 11, 2014
It may have escaped your attention, what with this week's revelations that America's foreign policy took a right turn at Torquemada and didn't stop until it got to Vlad The Impaler -- And it should be said, for the purposes of apt historical parallels, that Vlad used to impale his victims in the same manner in which the CIA apparently fed recalcitrant prisoners -- but the Congress is preparing to give away the store. A "bipartisan" deal has been crafted to fund the government through next September. Please forgive any typos in this post, as it is difficult for me to type, having Krazy Glue'd my wallet to my hands.
"This bill fulfills our constitutional duty to fund the government, preventing damage from shutdown politics that are bad for the economy, cost jobs and hurt middle class families," said Maryland Sen. Barbara Mikulski, a Democrat, and Kentucky Rep. Hal Rogers, a Republican, in a joint statement. "While not everyone got everything they wanted, such compromises must be made in a divided government. These are the tough choices that we must make to govern responsibly and do what the American people sent us here to do."
Hang on. I'll be back in a minute. I am now attaching the wallet to my palms with tenpenny nails.
This deal does a lot of things, many of them horrible. It is a veritable compost heap of Republican goodies. The IRS gets defunded, so that phony "social-welfare" political front groups no longer will be inconvenienced in their paperwork. The EPA takes a huge whack, so that conservative bundlers and the oligarchs whom they bundle no longer will be inconvenienced by people who wish to breathe, and who believe their water should be neither yellow nor flammable. But the real Saturday end of it is a provision that guts a key provision of the Dodd-Frank Wall Street reform bill that was passed so that it would be a little harder in the future for people to wreck most of the economy and then steal what's left. Specifically, Congress is preparing to open the casino again.
At issue is the "swaps push-out" rule, which requires banks to move derivatives trading out of taxpayer-backed subsidiaries. Derivatives are risky financial instruments that contributed to the 2008 crash. Allowing banks to conduct those trades on the assumption that taxpayers would bail them out if the deals went sour was not only bad for taxpayers; it also raised the value of the trades and thus effectively acted as a subsidy for the banks. Financial institutions, obviously, weren't thrilled with the new rule. In 2013, lobbyists for Citigroup gave lawmakers a proposal to exempt a wide array of derivatives, and it subsequently appeared in a bill approved by a House committee that year.
Derivatives are what nearly sank the whole thing the last time around. And now, the Congress has decided, in the same kind of "bipartisan" way that brought us the repeal of Glass-Steagall and the Commodity Futures Trading Act during the Clinton Administration, to let these guys gamble with taxpayer money again. This is such a spectacularly bad idea that it's hard to believe that its supporters didn't sneak it into the bill the way they did just as a goof, to see what they could get away with, those scamps.
"Hey, Bob. Let's see if we can get them to pass the Free Smack Subsidy next! Somebody call Luntz and have him think up a name for it. The Opiate Liberation And Personal Freedom Liberty Act Of 2014, or something."
The arrangement is the result of a "bipartisan compromise" engineered by Mikulski by which Wall Street gets to oil up the roulette wheel again in exchange for increased funding for the Commodity Futures Trading Commission, which is supposed to oversee things like derivatives training, and which the incoming, and more radical, Republican congressional majority surely will chloroform entirely the first chance it gets. Meanwhile, things are being arranged to put us all on the hook again for Wall Street's gambling jones. And Senator Professor Warren, who can see a church by daylight, is having none of it. She rose yesterday to excoriate the covert sellout and, by extension, the people in both parties who connived to bring it about. You want bipartisanship? This is bipartisanship.
"I come to the floor today to ask a fundamental question -- who does Congress work for? Does it work for the millionaires, the billionaires, the giant companies with their armies of lobbyists and lawyers? Or does it work for all of us?"
I'm not entirely sure that she has the votes to stop this abomination. People want to go home for Christmas. Everybody's drunk deeply of the egg nog in the rancid punchbowl of "compromise" for its own sake. Right now, she's counting on the House to strip it from the bill, but a large portion of the House majority is crazy, and a large portion of the House minority is hiding behind the drapes, so I'm not optimistic. (Nancy Pelosi has gotten ferocious on the issue, though, so we'll see.) It will be interesting to see if she exercises her right to talk the provision to death against what will be a well-organized counterattack by the Very Serious People who will sing in one voice the praises of "bipartisan" governance against this noisy obstructionist. Nothing in her career so far is as serious a gut check as this one is. The inserted provision strikes at the very heart of everything that made her a senator in the first place. It will be interesting to see how many people have her back.
And this is coming at the same time as her campaign against Antonio Weiss, the Lazard executive who's the president's nominee to be Undersecretary of The Treasury for Domestic Finance, something that has given severe agita to the financial press, especially Andrew Ross Sorkin of The New York Times, who's carried so much water for some of these guys that you could fly him over a forest fire to help put it out. Part of Warren's problem with Weiss is a going-away goodie he got from Lazard that surprised even my cynical mind. Lazard will pay Weiss a $21 million bonus just for taking the Treasury job, in which he'll be intimately involved with the industry Weiss is now leaving, however temporarily. How does this not seem to be a form of pre-emptive bribery? Used to be you needed a quo for every quid. And both of these fights together are the best arguments I can think of for why MoveOn and Democracy For America, both of which are trying to dragoon Warren into a quixotic presidential run, should shut the fk up.
Even the shadow of the possibility of a presidential campaign makes it easier to characterize Warren's positions here as political grandstanding. Oh, look. Here's Chris Cillizza of The Washington Post to do that very thing.
Speeches like the one Warren gave Wednesday will just fuel chatter about why she should challenge Hillary Rodham Clinton in two years. And she knows it.
Yeah, it's not that she's ever been concerned about how the country's fiscal policy is under the control of the forces that nearly demolished it, or that she understands what the reopening of the casino will mean. It's all about the "chatter." Stop it, all of you. She's right where she belongs. You don't put a lion in a horse race. |
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Sat Dec 13, 2014 11:38 am |
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untanglingwebs
El Supremo
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"This deal does a lot of things, many of them horrible. It is a veritable compost heap of Republican goodies. The IRS gets defunded, so that phony "social-welfare" political front groups no longer will be inconvenienced in their paperwork. The EPA takes a huge whack, so that conservative bundlers and the oligarchs whom they bundle no longer will be inconvenienced by people who wish to breathe, and who believe their water should be neither yellow nor flammable. But the real Saturday end of it is a provision that guts a key provision of the Dodd-Frank Wall Street reform bill that was passed so that it would be a little harder in the future for people to wreck most of the economy and then steal what's left. Specifically, Congress is preparing to open the casino again.
At issue is the "swaps push-out" rule, which requires banks to move derivatives trading out of taxpayer-backed subsidiaries. Derivatives are risky financial instruments that contributed to the 2008 crash. Allowing banks to conduct those trades on the assumption that taxpayers would bail them out if the deals went sour was not only bad for taxpayers; it also raised the value of the trades and thus effectively acted as a subsidy for the banks. Financial institutions, obviously, weren't thrilled with the new rule. In 2013, lobbyists for Citigroup gave lawmakers a proposal to exempt a wide array of derivatives, and it subsequently appeared in a bill approved by a House committee that year.
Derivatives are what nearly sank the whole thing the last time around. And now, the Congress has decided, in the same kind of "bipartisan" way that brought us the repeal of Glass-Steagall and the Commodity Futures Trading Act during the Clinton Administration, to let these guys gamble with taxpayer money again. This is such a spectacularly bad idea that it's hard to believe that its supporters didn't sneak it into the bill the way they did just as a goof, to see what they could get away with, those scamps. " |
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Sat Dec 13, 2014 11:39 am |
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untanglingwebs
El Supremo
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http://www.wsj.com/articles/SB10001424052748704869304574595600479204352
Citi, Wells to Repay Bailouts
Last Big Banks to Shake Off Government Aid; Milestone for Recovery of Financial System
By DAVID ENRICH And DEBORAH SOLOMON
Updated Dec. 16, 2009 9:12 a.m. ET
Citigroup Inc. and Wells Fargo & Co. won agreements to begin extracting themselves from the U.S. government's grip by paying back a total of $45 billion in aid, marking a major milestone in the year-long effort to rescue the American financial system.
The U.S. financial system faced the possibility of collapse a year ago. With the deals announced Monday, however, banks will have repaid $161 billion of the $245 billion in capital that was pumped into about 700 institutions as part of the Troubled Asset Relief Program. Citigroup and Wells are the last major lenders to return their TARP money.
Citigroup said Monday that it would repay $20 billion that the government pumped into the company last fall and would unwind an agreement in which the government was shielding the New York company from most losses on $301 billion of assets. Hours later, San Francisco-based Wells said it would repay its $25 billion taxpayer lifeline as soon as it drums up $10.4 billion by selling shares.
The government could earn a profit of about $14 billion on its investments in Citigroup once the New York company completes a stock offering and other moves that are part of its deal with regulators. The Treasury Department said last week that it expects $19 billion in total profit from its infusions and other investments in financial institutions, reversing the agency's initial projection of a $76 billion net loss.
Still, the government expressed frustration Monday at one aspect of its banking-system rescue: the failure so far to coax U.S. banks to make more loans. At a White House meeting, President Barack Obama prodded officials from 12 large TARP recipients to "explore every responsible way" to open their lending spigots, especially for small and medium businesses.
"America's banks received extraordinary assistance from American taxpayers to rebuild their industry, and now that they're back on their feet we expect an extraordinary commitment from them to help rebuild our economy," Mr. Obama said.
In response, Bank of America Corp. Chief Executive Kenneth Lewis said the nation's largest bank in assets would increase its lending to small and midsize businesses by at least $5 billion in 2010 compared with this year. U.S. Bancorp CEO Richard Davis promised that banks would reconsider small-business loans that they'd previously rejected.
But the government's leverage over U.S. banks is weakening as it allows them to exit TARP and the toughened scrutiny that came along with the taxpayer-funded lifelines. In a sign of the shifting power, Citigroup CEO Vikram Pandit, who has spent much of the past year trying to mend the company's tattered relations with Washington, skipped the White House meeting; the bank's chairman participated via phone instead.
Journal Community
Vote: How would you grade the Obama administration's management of the TARP fund?
Mr. Pandit spent the day trying to convince investors to buy Citigroup's stock. The company will have to drum up $20.5 billion in new capital by selling common stock and other securities. Regulators required the company to raise that much capital as proof it has the financial strength to stand on its own.
"We owe the American taxpayers a debt of gratitude and recognize our obligation to support the economic recovery through lending and assistance to homeowners and other borrowers in need," Mr. Pandit said in a statement Monday.
With Wells Fargo's announcement late Monday, all nine of the giant banks that were first to pocket TARP funds last year are on track to repay their infusions. J.P. Morgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley paid the government back in June. Last week, Bank of America wired its $45 billion repayment to Treasury.
The government is requiring Wells Fargo to raise considerably less capital than it required of Bank of America and Citigroup. That may be because Wells Fargo doesn't have a large risk-taking investment-banking business, although the San Francisco bank has a huge portfolio of risky mortgage loans stemming from its acquisition last year of Wachovia Corp.
In another sign of the Treasury Department's growing confidence that U.S. banks are stabilizing, the agency said it will sell $5 billion worth of Citigroup shares. The government acquired a 34% stake in Citigroup earlier this year as part of a third bailout of the company. Treasury officials expect to sell the rest of the stake over the next year.
The Treasury Department called Citigroup's repayment "another step in the right direction."
The cost to Citigroup could have been far higher if not for a little-noticed ruling late Friday by the Internal Revenue Service. The ruling, following months of negotiations with Citigroup executives, concluded that Citigroup wouldn't have to sacrifice a multibillion-dollar tax benefit if the Treasury sold significant amounts of its share holdings, according to Robert Willens, an independent tax analyst.
"This amounts to a taxpayer subsidy to Citi shareholders," said Michael Mayo, a banking analyst with Calyon Securities.
Launched in October 2008, TARP was intended to help banks cleanse their books of soured loans and securities. The Bush administration scrapped that plan after realizing it would be dauntingly complex to implement.
Treasury officials decided instead to pump capital directly into banks, hoping to instill confidence that the government wouldn't allow the banking system to unravel. Government officials also believed that strengthening the capital cushions of banks would spur them to lend more.
TARP gradually erased doubts about the banking industry's overall viability. That was highlighted by huge stock offerings earlier this year by Bank of America and Citigroup. "It just reaffirms how successful the program has been," said Ernie Patrikis, a former general counsel at the Federal Reserve Bank of New York and now global co-head of law firm White & Case LLP's banking practice. "You go through the worst crisis in since the Depression in such a short period of time. It's remarkable."
In an October report to Congress, TARP's inspector general reached a similar conclusion, noting that the capital injections "played a significant role in bringing the system back from the brink of collapse."
While the report noted that "it is extremely unlikely that the taxpayers will see a full return on their TARP investments," that can't be blamed on the capital injections into banks. Instead, the U.S. government is likely to pile up losses on bailouts of American International Group Inc. and the automobile industry, as well as a $50 billion program to coax banks to modify troubled mortgages, the report said.
But bank loans remain scarce, undercutting one of TARP's principal objectives. The Federal Deposit Insurance Corp. said last month that overall loan balances declined by 2.8% during the third quarter, the sharpest dropoff since the FDIC started collecting the data in 1984. Some experts said then that it was premature for troubled banks to repay their taxpayer funds.
The government continues to directly and indirectly prop up the banking industry. The FDIC has guaranteed more than $300 billion in bank-issued bonds, while the Federal Reserve has bought more than $1 trillion of mortgage-backed securities, allowing banks to collect fees on loans without shouldering any of the risk. The Fed also has kept interest rates near zero, helping banks mint money by charging higher interest rates to lend money than they're paying to borrow funds.
Meanwhile, banks still are grappling with swelling losses on real-estate loans. Losses could soar if the economy tumbles into a double-dip recession.
Some banks that have repaid their TARP funds remain sensitive to enraging the public. Goldman, for example, said last week that it would pay its top executives primarily in stock rather than cash, seeking to mute the uproar over its pay packages.
Since receiving government bailouts late last year, Citigroup has taken pains to stay in Washington's good graces. For example, the company bucked its peers and endorsed Democratic legislation that empowered bankruptcy-court judges to unilaterally modify the terms of troubled mortgages. The move infuriated other banks, which vigorously opposed the so-called "cram-down" legislation.
At a Nov. 20 employee meeting, Mr. Pandit cited Citigroup's support of the cram-down bill as an example of how "we make certain decisions because we think it's the right thing to do from a social perspective" as a result of TARP.
Write to DAVID ENRICH at david.enrich@wsj.com and DEBORAH SOLOMON at deborah.solomon@wsj.com |
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Sun Dec 14, 2014 6:24 pm |
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untanglingwebs
El Supremo
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The previous 2009 article highlights the financial debacle created by the big banks and derivatives that led to our most recent recession. Now the GOP is opening the door for more taxpayer insured derivative gambles by the big banks.
They get the profits when their gambles win and the taxpayer insurance covers their losses. |
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Sun Dec 14, 2014 6:28 pm |
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untanglingwebs
El Supremo
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http://www.forbes.com/sites/steveschaefer/2014/12/03/five-biggest-banks-trillion-jpmorgan-citi-bankamerica/
Steve Schaefer
Forbes Staff
12/03/2014 @ 10:37AM 5,211 views
Five Biggest U.S. Banks Control Nearly Half Industry's $15 Trillion In Assets
Jamie Dimon and JPMorgan lead the pack with $2 trillion in assets.
The wreckage of the financial crisis led to pages upon pages of financial reform aimed at ending the era of Too Big To Fail, but six years after the banking system blew up the five biggest firms control 44% of the $15.3 trillion in assets held by U.S. banks according to data compiled by SNL Financial. Those banks — JPMorgan Chase JPM -1.8%, Bank of America BAC -1.95%, Wells Fargo WFC -1.34%, Citigroup C -2.04% and US Bancorp USB -1.81% — collectively held $6.8 trillion in assets as of Sept. 30.
JPMorgan holds just over $2 trillion in assets, or 13.1% of the industry’s total, followed by BofA at $1.5 trillion (9.9%), Wells Fargo just under $1.5 trillion (9.7%) and Citi at $1.4 trillion (9%), before a substantial dropoff to US Bank at $387 billion (2.5%).
SNL’s analysis, which considered only commercial banks, notes the drastic increase in banking industry concentration over the past few decades. In 1990, the five biggest U.S. banks held less than 10% of industry assets, but that figure has steadily marched higher ever since, pausing only for the year from 1999 to 2000. Today, Wells Fargo, the third biggest bank, controls basically the same percentage of assets the entire top five did in 1990.
Bank concentration
That increased concentration is largely thanks to banking industry consolidation that accelerated in the 1990s then hit overdrive after Sandy Weill’s controversial deal to create the modern Citigroup prompted the repeal of Glass-Steagall, the legislation that forced a separation of church and state between commercial and investment banks.
In 1990, Citibank was the largest bank by assets, followed by Bank of America and Chase Manhattan. But it isn’t hard to see how JPMorgan leaped to first place over the past 24 years: Chase merged with the two banks behind it in 1990, Morgan Guaranty Trust Company of New York and Manufacturers Hanover Trust Company.
The next round of financial industry consolidation likely won’t be driven by the Too Big To Fail crowd though. The Federal Reserve has established rules taking effective in 2015 that will prohibit mergers that result in a combined company’s liabilities exceeding 10% of the industry’s total. As a result, dealmaking is more likely among the second-tier and regional banks, and SNL points to BB&T’s recent takeover of Susquehanna as a transaction more illustrative of industry trends.
That may bode well for the new acquirers though. For the stretch leading up to the financial crisis there appeared to be a real benefit to the swelling asset bases of the biggest banks. SNL notes that the average return on assets for the group beat competitors from 1999 to 2006, peaking at 1.4% in 2004 to a median of 1% for the industry. That gap has shrunk since 2006 though, with the five biggest banks delivering a return on assets of 0.9% to the industry median of 0.85% for the first nine months of 2014. |
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Sun Dec 14, 2014 6:39 pm |
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untanglingwebs
El Supremo
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(Don't forget that Jamie Dimon was calling congressmen to pass the spending bill.)
http://www.forbes.com/sites/steveschaefer/2012/08/13/jpmorgans-jamie-dimon-heres-why-banks-should-be-so-big/
s 8/13/2012 @ 12:06PM 5,463 views
JPMorgan's Jamie Dimon: Here's Why Banks Should Be So Big
WASHINGTON, DC - JUNE 13: President and CEO o...
(Image credit: Getty Images via @daylife)
Jamie Dimon recently spoke with New York Magazine and inside the story is what amounts to the JPMorgan Chase chief’s defense against his former mentor Sandy Weill, who has called for the tearing down of the financial supermarket model he created.
Though he declined to directly address the comments Weill made to CNBC, Dimon had plenty to say about why the Too Big To Fail set should not be broken up:
“ “There are huge benefits to size,” [Dimon] says instead, a distinct air of tired-of-this-[s***] creeping into his voice. “We bank Caterpillar in like 40 countries. We can do a $20 billion bridge loan overnight for a company that’s about to do a major acquisition. Size lets us build a $500 million data center that speeds up transactions and invest billions of dollars in products like ATMs and apps that allow your iPhone to deposit checks. We move $2 trillion a day, and you can see it by account, by company. These aren’t, like, little things. And they accrue to the customer. That’s what capitalism is.”
via 122 Minutes With Jamie Dimon.
Dimon’s laundry list of benefits to his bank’s size – the $20 billion loan comment would appear to be a reference to JPMorgan’s financing commitment for AT&T’s since-scuttled takeover of T-Mobile – is unlikely to do much to sway those on the other side of the Too Big To Fail discussion. On that side of the debate, the scale that may benefit major institutional clients and corporations is not worth the risk that ordinary depositors’ capital may be at risk with taxpayers on the hook if anything big goes wrong as it did in 2008.
Recent blunders and scandals in the banking industry have certainly reminded the marketplace of those tumultuous times, from recent allegations of shady financial business with Iran levied against Standard Chartered and money laundering accusations against for HSBC to the ongoing Libor-fixing scandal. Then there is the London Whale trading mess that has cost JPMorgan nearly $6 billion to date.
Dimon addressed the issue, expressing regret over “the dumbest thing I have ever seen,” but suggesting that his “tempest in a teapot” remark was fairly accurate, albeit tone-deaf. In fact, he tells the NY Mag’s Jessica Pressler that if his bank weren’t so big it likely would have escaped notice for a blunder of this relative size.
“[I]f you had a $100 million market-cap bank that made something like $3 million that quarter and lost $3 million, you wouldn’t even talk about it,” Dimon says, touting the bank’s profitable second quarter even with the impact from the mistake.
Quarterly results are not the only thing to be impacted by the London Whale though: In JPMorgan’s recently filed 10-Q the firm pushed back its planned resumption of share buybacks to the first quarter of 2013, from late 2012.
Nomura analyst Glenn Schorr notes that more headaches may be brewing too, as the bank said possible litigation loses could climb to $5.3 billion, up from $4.2 billion in its last estimate. The cause for the increase is not easy to determine, Schorr says, “but Libor-related suits could be part of the equation,” and JPMorgan has received subpoenas from a number of regulators and authorities on both sides of the Atlantic.
Follow @SchaeferStreet on Twitter, or on Forbes at the top of this post. Subscribe to updates on Facebook. |
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Sun Dec 14, 2014 6:47 pm |
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