|
According to
U.S. Treasury Secretary Timothy Geithner, the worst is well and truly behind
us (via Business
Insider):
"The U.S.
financial system is stronger and getting stronger...we have shut down or
restructured the weakest parts of our system... finally we've been able to
dramatically reduce the expected cost of the financial crises to levels
unthinkable in 2009...the financial system is much less vulnerable than it
was and is much more able to manage a growing economy."
And yet, we
have this --
"Treasury
May Let Investors Pay to Lend to U.S. Government" (Reuters)
The U.S.
government may ask investors to pay for the privilege and safety of holding
short-term debt issued by its Treasury Department.
In response to
clamor from investors, the Treasury said on Wednesday it was looking closely
at allowing negative-yield auctions. This would mean bidders who want the
security of U.S. government debt in the face of global insecurity, might have
to pay a premium for it.
Doing so would
allow the U.S. government to benefit from something that is already occurring
on the secondary market, where investors have accepted negative yields in
recent months to protect their cash from financial strains.
Remarkably,
Wall Street is asking to be able to pay a premium for U.S. debt even after
the United States lost its prized AAA rating last year and as the government
heads for a fourth straight year with $1 trillion-plus budget deficit.
"It is the
unanimous view of the committee that Treasury should modify auction
regulations to permit negative rate bidding and awards in Treasury bill
auctions as soon as feasible," according to minutes of the Treasury
Borrowing Advisory Committee, which includes 21 financial institutions that
make markets for U.S. government securities.
The European
debt crisis and worry about global prospects is fueling investor demand for
safe assets like short-term U.S. government debt. Treasury said modifying its
auction rules would require overcoming "operational issues" but
they were related to accounting rather than to legal questions.
and this --
"REPORT:
Prepare For A Giant New Wave Of US Bank Failures"
(Business Insider)
Forget Europe
— the weak U.S. recovery puts more than 750 domestic banks at risk of
failure, according to a report from Invictus
Consulting Group (via Business Wire).
Invictus,
which stress tested all FDIC-insured banks, says 758 lenders could collapse
in the next three years, forecasting a new wave of borrower defaults in the
absence of a strong economic up-tick.
A disaster in
Europe would probably make things much worse.
Invictus
says the at-risk lenders — mostly regional banks or subsidiaries of the
majors — won't be able to sustain themselves on current earnings, and
will likely fail if they don't merge or raise "significant" amounts
of new capital. --
and this --
"Treasury’s
2008 Financial Rescue Could Last Until 2017"
(Real Time Economics)
The U.S.
government’s rescue of the financial system could last for five more
years as the Treasury Department unwinds its investments in hundreds of banks
and other companies propped up in the aftermath of the 2008 financial crisis,
a government watchdog said Thursday.
The Bush
administration launched the financial rescue plan in the autumn of 2008 at
the height of the financial crisis. At its launch, Congress authorized spending
$700 billion on the bailout known as the Troubled Asset Relief Program, or
TARP. The Treasury Department currently estimates that the final cost for
TARP will be $68 billion.
As of the end
of last year, about $414 billion had been spent through 13 programs, while
$278 billion had been repaid and $51 billion was still available to be spent,
according to a quarterly report to Congress by the special inspector general
for the TARP program. The remaining institutions in the program include 455
banks and thrifts, plus insurer American International Group Inc., General
Motors and Ally Financial Inc.
“TARP is
not over,” said Christy Romero, the acting TARP special inspector
general. “Some TARP programs last until 2017, and market volatility has
slowed Treasury’s progress in unwinding its investments.”
The report also
found that exiting these investments could be difficult in the coming years,
as financial markets remain rocky and many community banks that receive
federal aid continue to struggle.
Yep, things sure
are looking good for the financial system.
Michael J. Panzner
|
