The Man Who Knew Too Much

Michael Collins

Neil M. Barofsky wrote a devastating column for the New York Times on March 29, his last day as Special Inspector General for the Troubled Asset Relief Program (SIGTARP). The roles for his position were:

"to conduct, supervise, and coordinate audits and investigations of the purchase, management, and sale of assets under the Troubled Asset Relief Program ("TARP"). SIGTARP is required to report quarterly to Congress describing SIGTARP’s activities and providing certain information about TARP over that preceding quarter." April 21, 2009 (Image SIGTARP)

EU agrees to Greek bailout

The game of chicken is over. The EU blinked.

Trying again to halt a debt crisis that has hammered the euro, fellow eurozone governments tossed struggling Greece a financial lifeline Sunday, saying they would make euro30 billion in loans available this year alone — if Athens asks for the money.
The International Monetary Fund stands ready to chip in another euro10 billion, said Olli Rehn, the EU monetary affairs chief.

The loan will be at a 5% interest rate, well below the market rates of nearly 7%.

European Central Bank president Jean-Claude Trichet and German Chancellor Angela Merkel have insisted that Greece not get below-market interest rates amounting to an EU subsidy for its past bad behavior.
"This is certainly no subsidy" to Greece, Rehn told a news conference.

Actually that is exactly what it is.

All Things Greek

Greece is getting a bail out. Well, not really, because they are getting loans, oops, wait, yes really.

The Wall Street Journal notices Greece will pay more in interest than if it had gone to the IMF. According to the Wall Street Journal the two possible rates for the €30 billion in loans is 5.33%, fixed and 4.14% variable.

Either way, the IMF is way cheaper. It uses it’s own interest rate as a base, and it levies different surcharges. The fund’s rate works out to 2.71%, as of last week, for a €10 billion package.

Now Bloomberg is reporting a €45 billion loan package, €30 billion from the Euro-Zone finance ministers and €15 billion from the IMF. Bloomberg is reporting the current Greek bond yield is 6.98%.

But this thing isn't over.

Greece gets its bailout

The game of chicken is over. Europe blinked.

European governments have agreed in principle to support struggling euro-zone member Greece and are considering various options, including bilateral aid, a senior German coalition source said on Tuesday.
"The decision on help for Greece has been taken in principle within the euro zone," the source said.

We now own GMAC

Consider it the last bailout of 2009.

The federal government said Wednesday that it will take majority control of troubled auto lender GMAC and provide an additional $3.8 billion in aid to the company, which has been unable to raise from private investors the money it needs to staunch its losses.
The Treasury Department has said for months that GMAC would need more federal money, but the decision to increase the government's ownership stake came as a surprise, cutting against the grain of the Obama administration's recent efforts to wind down its bailout of large banks...
Treasury said that it will increase its stake in GMAC to 56 percent from 35 percent. The government also will hold about $14 billion in what amounts to loans that GMAC may eventually repay. The government plans to appoint four of the company's nine directors.

FDIC may seek bailout from banks

It's not just an irony, but a disturbing development.

(AP) — Regulators may borrow billions from big banks to shore up the dwindling fund that insures regular deposit accounts.
The loans would go to the fund maintained by the Federal Deposit Insurance Corp. that insure depositors when banks fail, said industry and government officials familiar with the FDIC board's thinking, who requested anonymity because the plans are still evolving.
The fund, which insures deposit accounts up to $250,000, is at its lowest point since 1992, at the height of the savings-and-loan crisis. Ongoing losses on commercial real estate and other loans continue to cause multiple bank failures each week.

Why does Barry Rithholtz hate Obama?

Over at, lambert relates Barry Ritholtz's latest rant:

So far, the Obama administration approach to bailouts has been to keep running Bush Economic term III. They have been far too kind (genteel even) showering taxpayer monies on the incompetents and fools who drove their firms over the abyss. Indeed, it's all but impossible to see where the largesse of the Bush bailout policies ends and the Obama bailout policies begins.

If today were November 2012, I would not vote for this team. As far as the banking sector is concerned, this gang is no different than the knaves and dolts who came before. It is more of the same irresponsible, expensive and reckless policy that preceded them.

Why Are Fannie and Freddie Still Publicly Traded Companies?

Yesterday, we "invested" another $46 billion in Fannie Mae and Freddie Mac. I should not be so pissed-off at this point but I am.

The Treasury payout yesterday included a $15.2 billion investment in Fannie’s preferred stock and a $30.8 billion purchase of Freddie’s preferred shares, the companies said in separate filings to the Securities and Exchange Commission today. The companies must pay a minimum dividend of 10 percent.

It doesn't seem like we are dealing with this crisis "head-on". Why are we not winding down their operations? I am sorry I forgot we are using them to re-leverage the housing sector.

Do we have effective control over their board and CEO? This quasi-nationalized state does nothing to restore confidence and trust. Are Fannie and Freddie bondholders going to take a "haircut"? Or will that upset China?