Troubled Asset Relief Program
Geithner is going to release the government's program for the new and improved TARP Monday at noon EST.
Many of the TARP reformations have been held close to the vest. But, according to Reuters today, the following information is emerging.
EXAMINING THE OPTIONS
The Obama administration has already committed to using $50 billion to $100 billion from the remaining half of the bailout war chest to combat rising mortgage foreclosures, but has remained tight-lipped on other steps it might take.
U.S. officials considered setting up a government-run "bad bank" to buy distressed debts from banks in the hope they could then attract private capital and resume lending.
and there's more
Under that program, the Treasury has already pledged $20 billion to cover credit risks for the Fed in lending up to $200 billion to holders of top-rated securities backed by auto, student, credit card and small business loans.
Officials have said that program could be expanded to cover an array of mortgage-backed securities, but to do so would require more cash from the Treasury.
The administration may also use part of the bailout fund to offer insurance to banks against losses on assets that they would continue to hold on their books but would be "ring-fenced" from the rest of their portfolio.
The hope would be that the banks could then attract private capital to restore their financial health and increase lending, helping to stem the recession in the world's biggest economy.
The Treasury is also expected to continue to pump taxpayer funds into banks by taking stakes in them.
The Wall Street Journal said Geithner is considering a plan under which the government would buy preferred shares in banks, thus avoiding immediate dilution of current shareholders, but which would convert into common stock within seven years.
So, is Geithner's TARP better than Paulson's TARP? The banks don't think so. From Politico
Democrats have spent the last two weeks pressing for tough new restrictions on financial institutions that get some of the initial $700 billion bailout money. But industry officials warn that banks’ fears that policymakers will slap them with onerous retroactive rules could chill participation in the Capital Purchase Program, designed to help healthy banks increase lending.
The American Bankers Association has heard from several banks that were accepted by Treasury to participate in the Capital Purchase Program but have since decided not to take the government funds, said Wayne Abernathy, the trade group’s executive director for financial institutions policy and regulatory affairs.
A few other banks have said they are for now delaying the decision to complete the process as they wait to see what policymakers do with the program, he said, declining to name any of the banks that had withdrawn.
“The number one concern I’ve heard is that they’re worried about the strings that would come along with it,” Abernathy said.
So, what has happened with the initial TARP funds?
-- $250 billion pledged for purchases of senior preferred shares and warrants in banks and thrifts under the Capital Purchase Program.
In the most recent report on TARP transactions through January 30, the Treasury said it has completed equity purchases totaling $195.33 billion in 359 institutions.
-- $20 billion pledged for Bank of America (BAC.N) as part of a package in which the government agreed to share in losses on $118 billion of assets. The $20 billion is in addition to $25 billion for the bank disbursed under the $250 billion Capital Purchase Program.
-- $20 billion investment in Citigroup (C.N) as part of a package in which the government agreed to share in losses on $301 billion of assets. In addition to the $20 billion investment, the Treasury agreed to cover up to $5 billion in losses on the portfolio with TARP funds.
-- $40 billion investment in troubled insurer American International Group (AIG.N).
-- $20.9 billion to prop up the U.S. auto industry. The amount is made up of $10.4 billion in loans to General Motors Corp (GM.N), including $1 billion for GM to help its financing affiliate GMAC reorganize as a bank holding company; a $4 billion loan for Chrysler LLC CBS.UL; a $5 billion direct investment in GMAC; and a $1.5 billion loan for Chrysler Financial. GM could also qualify for a further loan of $4 billion in March.
-- $20 billion pledged to cover potential losses for a Federal Reserve program aimed at improving consumer access to credit.
For details on money already disbursed and recipients, see www.treas.gov/initiatives/eesa/transactions.shtml.
Who are the TARP recipients? Click here for a full list.
Oh yeah, just to add a little spice,TARP Recipients Paid Out $114 Million for Politicking Last Year
The struggling companies whose freewheeling business practices have contributed to the country's economic woes are getting a lucrative return on at least one of their investments. Beneficiaries of the $700 billion bailout package in the finance and automotive industries have spent a total of $114.2 million on lobbying in the past year and contributions toward the 2008 election, the nonpartisan Center for Responsive Politics has found. The companies' political activities have, in part, yielded them $295.2 billion from the federal government's Troubled Asset Relief Program (TARP), an extraordinary return of 258,449 percent.
Hopefully, Geithner's plan will work more in favor of the U.S. taxpayer. I have my reservations, though. Geithner is a banking insider. I suppose we will find out tomorrow at noon.