Unexpected TARP blowback... - PeachParts Mercedes-Benz Forum

Hatterasguy · #1 03-30-2009, 12:14 AM

http://money.cnn.com/2009/03/27/news/economy/tarp_takeback/index.htm

Wow start to cap how much the exec's can make and all of a sudden they start dancing to a different tune. "um well we don't want your TARP money anymore."

TARP may work, but for different reasons.

And they said Gordon Gecko was dead.

neanderthal · #2 03-30-2009, 01:41 AM

I hope there's an "executive compensation" sized pre- payment penalty.

JollyRoger · #3 03-30-2009, 10:18 AM

Quote:

Originally Posted by Hatterasguy

http://money.cnn.com/2009/03/27/news/economy/tarp_takeback/index.htm

Wow start to cap how much the exec's can make and all of a sudden they start dancing to a different tune. "um well we don't want your TARP money anymore."

TARP may work, but for different reasons.

And they said Gordon Gecko was dead.

Precisely one of the original intentions, this not an unexpected blowback. It's like you have a house with glass walls, so the whole neighborhood gets to see you do your business. Get your own money, you can buy some curtains. Unfortunately, it isn't as transparent as my example, however it is bothersome enough to those used to having the power of Henry the Eighth within their corporate dukedoms now having to be the Pauper instead of the Prince, to want their crowns back. Look at today's GM news: off with their heads. That should give them even more impetous, as the old saying goes, nothing focuses the mind more than the prospect of being executed.

Mistress · #4 03-30-2009, 12:24 PM

we need more "star talent" to run the banks further into the ground...

aklim · #5 03-30-2009, 12:40 PM

Quote:

Originally Posted by JollyRoger

It's like you have a house with glass walls, so the whole neighborhood gets to see you do your business. Get your own money, you can buy some curtains.

Fair enough. Care to respond to the question of why the banks are being forced to take the money? Like it or not?

Goldman Sachs (GS, Fortune 500), Bank of New York/Mellon (BK, Fortune 500), Wells Fargo (WFC, Fortune 500), JP Morgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500) - all 'mega-banks' that the government forced to take bailout money - say they want to return taxpayer funds "as soon as practical."

JollyRoger · #6 03-30-2009, 04:26 PM

One for all, and all for one!

aklim · #7 03-30-2009, 04:34 PM

Quote:

Originally Posted by JollyRoger

One for all, and all for one!

And here is another quote.

cmbdiesel · #8 03-30-2009, 05:12 PM

One ring to rule them all, one ring to find them, one ring to bring them all, and in the darkness bind them.

Hatterasguy · #9 03-30-2009, 06:59 PM

Quote:

Originally Posted by JollyRoger

Precisely one of the original intentions, this not an unexpected blowback. It's like you have a house with glass walls, so the whole neighborhood gets to see you do your business. Get your own money, you can buy some curtains. Unfortunately, it isn't as transparent as my example, however it is bothersome enough to those used to having the power of Henry the Eighth within their corporate dukedoms now having to be the Pauper instead of the Prince, to want their crowns back. Look at today's GM news: off with their heads. That should give them even more impetous, as the old saying goes, nothing focuses the mind more than the prospect of being executed.

Its working like a charm.

The government should make them give up some other perks to, company cars with drivers and the private jets.

We want to make these loans very unpleasent.

tankdriver · #10 03-30-2009, 07:55 PM

Quote:

Originally Posted by Hatterasguy

Its working like a charm.

The government should make them give up some other perks to, company cars with drivers and the private jets.

We want to make these loans very unpleasent.

x2
The more punitive the loans, the better IMO.

A secondary positive side effect is that part of the scare is that the crisis is unfixable. Now business is saying, we don't need federal dollars, we'll fix it ourselves. Quite a tune change from Oct/Nov last year. And it's more reassuring when they think they can fix themselves than when they're shouting, 'help me! help me!'

Hatterasguy · #11 03-30-2009, 08:00 PM

They were shouting help me because they thought they could get cheap money from the gov and ride the public gravy train for a bit. I don't think they thought the government would call them on there BS. The owners of Chrysler could have pumped money into it if they wanted too, but they don't.

Since the government is doing the lending they can set whatever terms they damn well please; if they dislike the terms than don't take the money. If they are viable they will get the money elsewhere, if not they will go bankrupt. Thats how it works, produce or get eliminated.

aklim · #12 03-30-2009, 09:09 PM

Quote:

Originally Posted by Hatterasguy

Since the government is doing the lending they can set whatever terms they damn well please; if they dislike the terms than don't take the money. If they are viable they will get the money elsewhere, if not they will go bankrupt. Thats how it works, produce or get eliminated.

But why is the govt forcing money on the banks?

cmbdiesel · #13 03-30-2009, 09:28 PM

Quote:

Originally Posted by aklim

But why is the govt forcing money on the banks?

I believe they were 'forced' to take the loans because they did not have adequate capital in reserve. The gov't was attempting to keep the banks solvent. There are banking regulations about the amount of liquid assets a bank needs to maintain relative to the amount of deposits. Banks like Wells Fargo are starting to whine about how they don't want pay cuts and they could have raised the capital themselves, BUT they haven't.
Suck it up boy's, your gravy train has left the station (I hope)

aklim · #14 03-30-2009, 10:31 PM

Quote:

Originally Posted by cmbdiesel

I believe they were 'forced' to take the loans because they did not have adequate capital in reserve. The gov't was attempting to keep the banks solvent. There are banking regulations about the amount of liquid assets a bank needs to maintain relative to the amount of deposits. Banks like Wells Fargo are starting to whine about how they don't want pay cuts and they could have raised the capital themselves,

BUT they haven't.

I thought that was governed by FDIC.

If that was so, where is the issue? They would not be able to return the money and still remain "solvent" per FDIC regulations.

cmbdiesel · #15 03-30-2009, 11:47 PM

I'm not a banker, but I'll take a stab at it -
FDIC requires banks to maintain a certain capital adequacy ratio. This is to make sure it can handle a certain amount of loss. My interpretation is that the capital/risk ratio has undergone significant changes, with some risk (home mortgages) being weighted differently than they historically have been. That fundamentally changes the ratio. I am not sure if the current situation has caused any alteration in the calculating of tier 1 capital, but would seem to follow that it would.
The FED mandates the reserve requirements for depository banks. These reserve requirements can be changed by the FED for a multitude of reasons.

Which agency required the banks to take the TARP money, dunno. Maybe both. But, it seems like it was determined, by whoever does the determining, that the capital reserves of these banks was inadequate in the face of the economic meltdown. If the banks don't like it, they can lobby for change or close up and start over in the Caymans.