Wednesday, June 10, 2009

Ten banks allowed to pay back TARP

~1/3 of outstanding TARP allowed to be paid back.

** Old news, but I believe not posted as yet. Could This mark a real economy bottom for U.S.? Even though Obama plays that thought down. ** Ten leading banks won approval to repay money from the government's controversial TARP program, regulators said Tuesday, which could represent approximately $68 billion in bailout funds returned to taxpayers. The Treasury Department, which has overseen the $700 billion Troubled Asset Relief Program, did not indicate which banks were included in that group, although most lenders confirmed the news separately.

Posted by 51ck-6-51x @ 02:17 PM (789 views)
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3 thoughts on “Ten banks allowed to pay back TARP

  • The banks borrow ”pretend’ money from the central bank – they collectively bid up share prices – then they sell – they keep the profit and they pay back the central bank. Hey presto – the bank is re-capitalised.

    Who loses?

    The poor suckers and pension funds who get back into the market just as it’s about to reverse direction once more…

    “Proceeds received from those 10 banks will be applied to the Treasury Department’s general account, the agency said Tuesday, some of which be will used to promote financial stability should the economy take a turn for the worse”

    In other words – we’ll repeat the process once the market has tanked again.

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  • Ladies and Gents…start your shorting!

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  • Largely because they’ve been permitted to stop accounting for losses honestly, by removing the rule of marking assets on their books to their current market value. That has improved their capital position on paper so they can pay back TARP, but in fact they’re now at greater risk.

    They’ve managed to convince the regulators that the mortgage-backed securities should be valued higher as the customer is still paying the mortgage, but the point of capital when it comes to a bank is the ability to cover unexpected losses by selling those assets. The capital value to the bank is either the value of selling the mortgage to someone else (toxic market) or of foreclosing on the loan and seizing the underlying asset it’s secured on (housing, declining market).

    Back in the real world, the continued tighter credit to businesses will restrict their growth, leading to lower pay claims and some unemployment, and the ramping of commodities will increase everyone’s real rate of inflation. People are still going to fall behind on mortgages and ultimately even the fake valuations will be noticed.

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