Treasury's Bailout Overseer Quits

Treasury Department assistant secretary Herb Allison, who oversaw the bank bailout fund, stepped down this morning. He reportedly decided to step down because the program was nearing an official end. According to Reuters.com:

Allison had been in charge of the $700 billion Troubled Asset Relief Program that is scheduled to expire in two weeks.

"With the TARP program entering a new phase and continuing to wind down, I have decided that now it is the right time for me to step down," Allison said in an e-mail to staff members that the Treasury made available.

He said he was returning to Connecticut after two years' service in Washington to spend time with his wife, who had been unable to join him during that time. The chief counsel for the financial stability office, Tim Massad, will take over as acting secretary on September 30.

Though TARP is officially ending on October 3, after which it cannot make any new investments in financial institutions, its work in recouping the money that it did lend will continue for years.

Allison is one in a line of officials preparing to take their leave from Washington, many of them more senior, including Larry Summers, director of the White House's national Economic Council; Council of Economic Advisers Chair Christina Romer and White House budget chief Peter Orszag.

Treasury Secretary Timothy Geithner, in a town-hall style event with Treasury staff, lavished praise on Allison and cast TARP as a highly effective mechanism despite the fact that it was "a four-letter word" for lawmakers and most Americans who saw it as a handout for bankers.

Continue reading at Reuters.com…

FDIC Says 829 U.S. Banks Remain at Risk for Failure

According to Wallet Pop, the FDIC has 829 financial institutions – or 1/10th of the banks in this country – on their “problem” list that need to be watched for potential failure. 118 banks have already gone under this year, compared with 140 in 2009.

Around 829 of the country's 7,800 banks were on the Federal Deposit Insurance Corp.'s "problem list" at the end of June, up from 775 at the end of the first three months of the year, the Wall Street Journal reported. Already this year 118 banks have failed, well ahead of last year when 140 went under.

It's still difficult to get a loan; total loan and lease balances fell 1.3 percent from April through the end of June. Total banking assets fell 1% to $13.2 trillion during the quarter.

FDIC Chairman Sheila Bair says banks are starting to ease lending standards in some cases but warned that "lending will not pick up until businesses and consumers gain the confidence they need to hire and spend."

The FDIC also says there were 104 fewer banks in the second quarter compared with the first quarter, and for the first time in the last 38 years, no new banks were added.

Continue reading at Wallet Pop.com…

Small Banks That got Bailout Money May Need More

According to the Congressional Oversight Panel, many of the smaller banks that received bailout money from the government may need more cash in order to survive. Less than 10% of these smaller financial instructions have paid the government back the funds they were loaned, and some have even missed dividend payments. I have included a section of a WalletPop.com story below on this new development, but you can find the full text here.

If you keep up on banking news, you may have heard the most recent dire report on small banks: If your small bank has taken bailout money from the federal government, that's a good sign your financial institution may be in trouble.

That's the latest from the Congressional Oversight Panel, which last week unveiled a report that drew attention to the fact that most of the small banks that received bailout money are struggling to pay it back.

If you're doing business with a small bank and are suddenly worrying about its health, here's some perspective:

Most of the small banks out there are doing just fine. The U.S. has approximately 8,000 banks, from a handful of giant, nationally known banks and all their branches (Bank of America, for instance, has approximately 7,500 branches across the country) to all those regional and local banks scattered across the 50 states.

Out of the more than 7,900 small banks that remain after you take away, say, the nation's 30 largest banks, a scant one-tenth -- just 707 banks -- took $205 billion of the $700 billion in bailout money. So plenty of small banks out there didn't take any bailout money and are doing quite well.

Banks: We're Hiring So We Can Make More Home Loans

Even though home sales are down, a handful of financial institutions are getting ready to hire more loan originators, so that they can increase lending. This should come as good news to the thousands of Americans finding it difficult to get a home loan. You can check out a segment of the story below, or read the full post at CNNMoney.com.

Several banks are gearing up to do a whole lot more mortgage lending in the future.

Even though new homes sales were at a historical low in May and the housing market in general is in the doldrums, these banks are hiring hundreds of loan originators, getting ready for what they believe will be a significant pick-up in lending.

JPMorgan Chase (JPM, Fortune 500), one of the nation's largest lenders, is in the midst of hiring 1,200 mortgage officers. "We may not be inundated with applications tomorrow, but we are confident the the need will be there," said Christine Holevas, a spokeswoman for JPMorgan Chase.

Housing experts, however, warn that overall mortgage lending is expected to remain flat, largely due to a decline in refinancing.

Loans for home purchases should steadily increase over the next two years to $916 billion, up from an expected $725 billion this year, according to forecasts by the Mortgage Bankers Association. But refinancings should plummet to $474 billion in 2012, down from $717 billion this year.

5 Lies The Big Banks Keep Telling Us

The federal bank bailouts and financial crisis are hot topics currently on the minds of many. Regarding the topic, it seems like every day we hear more excuses from CEOs. However, taxpayers are becoming fed up with big banks and the lies they are telling. MSN Money published a great article this morning highlighting the five most common lies big banks are telling us all and I highly recommend reading their full list here.

It's tough to head off the next disaster if you don't understand why the last one happened -- an insight that's apparently lost on Wall Street.

Instead, as I watch banker after banker being grilled on how the mortgage mess happened, they seem to repeat a lot of the excuses I've heard for more than a year. Such as "No one knew." Or "It was everyone else's fault."

Although there's a little truth in each excuse, no excuse is completely honest. "If we're going to avoid these mistakes, it really starts with an honest assessment of what's happened," says Phil Angelides, the head of the Financial Crisis Inquiry Commission, an investigative panel charged with identifying to causes of the credit crisis.

The excuses also muddy the waters at a critical time. The nation is just starting to recover from the meltdown. Financial reform has finally taken center stage in Washington. We need to know what truly went wrong to keep this from happening again.

Big lie No. 1: No one could have known

Consider this scenario: You work at the top of a key bank on Wall Street. You hire the smartest guys from the best schools. You get paid big bucks to know your business better than anyone else. And warning signs are everywhere. When it goes bad, can you really say you didn't know?

Continue reading at MSN Money.com…

White House Plans to Lend $30 Billion to Small Banks

From the Wall Street Journal:

The Obama administration is finalizing plans to create a new government program to lend $30 billion to community banks that would include incentives to boost small-business lending, people familiar with the matter said, a move White House officials hope will help jump-start the economy.

Details are still being finalized and changes could be made, the people familiar with the plan said.

Under one leading version, the government would allow banks with less than $1 billion in assets to borrow an amount equal to 5% of their assets from the government. These banks would have to pay the government a 5% dividend on the loan, but that dividend would be reduced to as little as 1% if the banks substantially increased their lending to businesses.

Banks with between $1 billion and $10 billion in assets would be able to borrow up to 3% of their assets from the new program.

The plan would essentially use leftover money from the Troubled Asset Relief Program to allow banks to tap the government funds with fewer strings attached than the initial program created in 2008. Banks that already have TARP funds would be able to essentially refinance into the new program.

Continue Reading at WallStreetJournal.com…

Citigroup Q4 Loss Narrows, Loans Seem to Stabilize

From WashingtonPost.com:

Citigroup Inc. posted a $7.6 billion quarterly loss on costs related to repayment of U.S. bailout funds and still-high loan losses, but the bank's shares edged higher as some investors saw glimmers of hope. In a sign of stabilization, losses on consumer and corporate loans fell compared with the third quarter.

"They've crept out of the abyss like everyone else," said Henry Asher, president at Northstar Group, whose clients own Citi shares.

"They have a long way to go before they start reporting significant profits," Asher added.

The government still has a bigger stake in Citigroup than in any other major U.S. bank, reflecting the swamp of toxic assets that threatened Citi's survival. Chief Executive Vikram Pandit told investors that U.S. consumer credit remained an issue for the bank, although he said some credit fundamentals appeared to be stabilizing, especially internationally.

The third-largest U.S. bank said its quarterly loss amounted to 33 cents a share, compared with a loss of $17.3 billion, or $3.40 a share, a year earlier. The loss matched analysts' average estimate, according to Thomson Reuters I/B/E/S. Citigroup shares rose 7 cents, or 2 percent, to $3.49 in midday trading.

"It's not an impressive quarter in my view," said Matt McCormick, portfolio manager and banking analyst at Bahl & Gaynor Investment Counsel. Investors are still worried about further credit losses ahead, as well as the impact of sweeping changes to banking regulation, McCormick said.

Bank Tax Unfair, To Have Serious Effects - Bank Group

From CNN Money:

U.S. banks are worried about the impact of a planned tax on lenders and believe other industries that received federal money, such as car makers, should be targeted, a top economist at a banking group said Friday.

"We're concerned that such a high tax directed at the wrong parties will have serious consequences," James Chessen, Chief Economist at the American Bankers Association, told a press conference presenting ABA's latest economic forecasts.

Thursday, President Barack Obama said banks have a responsibility to make taxpayers whole for the financial-sector bailout and should pay a proposed tax by rolling back big bonuses.

If approved by Congress, the new tax--which the White House calls a "financial crisis responsibility fee"--would force about 50 banks, insurance companies and large broker-dealers to collectively pay the federal government roughly $90 billion over 10 years.

Should the Government Tax Bailed-out Banks to Recover TARP Money?

As the U.S. economy remains unsteady, and multiple banks that were bailed out last year are seeing huge profits, President Obama is reportedly considering a new tax on financial institutions. The tax would be levied to help recover funds from the TARP program, and help lower the deficit.

In this new article, ABCNews.com is asking their readers to weigh in on this new tax. You can find a section of their article below, but click here to share your comments with the author.

President Obama is considering a tax to recover as much as $120 billion in bailout money from the financial institutions that were rescued by the government.

This announcement comes as banks report record profits and begin paying out huge bonuses, sparking anger amongst Americans, many of whom are still out of work.

Our question to you today: Should the government tax bailed-out banks to recover TARP money?

Post your comment at ABC News.com…

US Clashes With UK Over New Tax Proposal

The United States and United Kingdom usually agree on economic policies, according to Tax Girl leaders from each countries have publicly taken different views on a proposal to tax financial transactions to fund banking rescues.

UK Prime Minister (for now) Gordon Brown is in favor of such a tax, referred to as a so-called “Tobin Tax”, as a way to take the burden off taxpayers in the midst of financial crisis. The idea would be to implement a tax or levy, also characterized as an insurance fee, to be implemented across the board on financial institutions in all economic centers including the US, Europe, Asia, and the Middle East. Brown described it as a “just distribution of risks and rewards.”

But US Treasury Secretary Timothy Geithner has said he would not support such a tax, adding that it should not be the position of those today to pay for future risks. He did not, however, rule out the idea of any responsibility by banks to pay for the economic crisis – he just apparently feels that it’s too soon to consider a tax in the face of other alternatives.

Interestingly, Russia appeared to be in agreement with the US with Russian finance minister, Alexei Kudrin, also voicing skepticism over the tax. Canadian Finance Minister Jim Flaherty also expressed concern over the tax.

However, Max Lawson, the senior policy adviser for Oxfam was enthusiastic about the UK proposal, saying:

Gordon Brown today signaled that payback time for banks could be just around the corner. A tax on banks would be a major step towards clearing up the mess caused by their greed.

While the two day G20 Summit has ended, the matter is far from over. The International Monetary Fund is already looking into this very issue with an eye towards what it’s calling a financial sector tax. One way or the other, we’ll see further discussion on this…

Source: Tax Girl

Where's My Stimulus?

With so much effort being spent on re-building the banking industry, and pushing through a health care reform package, many small business owners around the country are feeling forgotten. CNNMoney.com posted a new article explaining the frustration of small business owners who are beginning to ask, “what about me?” I’ve included a snippet of their article below, but you can check out the full text at CNNMoney.com.

During her four years as an entrepreneur, Trina Nelson has seen plenty of ups and downs. But nothing prepared her for the crisis last December, when the American economy lay in tatters and her Dallas-based catering business nearly collapsed. "The phones stopped ringing," says the founder of Par-T-Trayz Catering (motto: "From sushi to soul food").

Unfortunately, Nelson, 38, has had a history of borrowing woes. In 2007 she needed a loan to stay afloat but was turned down by four banks because she didn't have an established line of credit. (Like many startup founders, Nelson had used personal credit cards to fund her business; now her credit rating is "shot.") Lenders said the amount she was seeking -- $15,000 -- was too small.

"They told me I wasn't asking for enough money," she recalls. "Why would I ask for more money than I needed?"

For the past nine months, Nelson has struggled to keep her business alive. Fortunately, her phones have started ringing again. But that's revealed another problem. "I'm turning down big business because I don't have the staff to execute the orders," she says. If Nelson had the capital, she would hire 10 full-time employees and expand to offer mail order and personal-chef services.

"The government is giving billions to companies that make billions, and they're still going out of business," she complains. "Why don't they give some of that money to small businesses?"

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After Call From Senator's Office, Small Hawaii Bank Got U.S. Aid

Although numerous financial institutions have already begun repaying money they were loaned by the federal government, a new report has surfaced questioning the aid that was provided to a small Hawaiian bank. Check out the following article on the developing story via the Washington Post.

Sen. Daniel K. Inouye's staff contacted federal regulators last fall to ask about the bailout application of an ailing Hawaii bank that he had helped to establish and where he has invested the bulk of his personal wealth.

The bank, Central Pacific Financial, was an unlikely candidate for a program designed by the Treasury Department to bolster healthy banks. The firm's losses were depleting its capital reserves. Its primary regulator, the Federal Deposit Insurance Corp., already had decided that it didn't meet the criteria for receiving a favorable recommendation and had forwarded the application to a council that reviewed marginal cases, according to agency documents.

Two weeks after the inquiry from Inouye's office, Central Pacific announced that the Treasury would inject $135 million.

Many lawmakers have worked to help home-state banks get federal money since the Treasury announced in October that it would invest up to $250 billion in healthy financial firms. But the Inouye inquiry stands apart because of the senator's ties to Central Pacific. While at least 33 senators own shares in banks that got federal aid, a review of financial disclosures and records obtained from regulatory agencies shows no other instance of the office of a senator intervening on behalf of a bank in which he owned shares.

Inouye (D-Hawaii) declined a request for an interview but acknowledged in a statement that an aide had called the FDIC to ask about Central Pacific's application. Inouye said he was not attempting to influence the outcome. The statement did not address Inouye's personal role in the inquiry, including whether he directed the aide to make the call or knew at the time that it had been made.

Even if Inouye were directly involved, it would not violate the rules the Senate sets for itself, experts said.

Continue reading here.

U.S. Eyes Bank Pay Overhaul

Barack Obama and his administration have been considering a major bank overhaul as a potential solution to stabilize the way financial services companies are paying their employees and executives. Check out the following segment of a WallStreetJournal.com article discussing the topic.

The Obama administration has begun serious talks about how it can change compensation practices across the financial-services industry, including at companies that did not receive federal bailout money, according to people familiar with the matter.

The initiative, which is in its early stages, is part of an ambitious and likely controversial effort to broadly address the way financial companies pay employees and executives, including an attempt to more closely align pay with long-term performance.

Administration and regulatory officials are looking at various options, including using the Federal Reserve's supervisory powers, the power of the Securities and Exchange Commission and moral suasion. Officials are also looking at what could be done legislatively.

Among ideas being discussed are Fed rules that would curb banks' ability to pay employees in a way that would threaten the "safety and soundness" of the bank -- such as paying loan officers for the volume of business they do, not the quality. The administration is also discussing issuing "best practices" to guide firms in structuring pay.

At the same time, House Financial Services Committee Chairman Barney Frank (D., Mass.) is working on legislation that could strengthen the government's ability both to monitor compensation and to curb incentives that threaten a company's viability or pose a systemic risk to the economy.

It is unclear how such a bill would fit with what the Fed and others are already considering. But any legislation passed would make it harder for policy makers to dial back limits once the financial crisis subsides.