EveryJoe » federal bailout

BofA Repayment Delayed Over Disagreement

Mark Ellis — Sun, 25 Oct 2009 03:22:22 +0000

After taking billions of dollars of taxpayer money as part of the Troubled Asset Relief Program, Bank of America has now positioned itself to repay the money to the federal government as part of the agreement. However, Bank of America’s plans to repay the funds have been halted over a disagreement concerning how much additional capital the bank must raise to satisfy regulators.

The timing of the disagreement is difficult for the bank, as President Obama’s so-called “pay czar” has just set a variety of restrictions on executive compensation that has lowered compensation for the top employees of Bank of America and six other large firms receiving government aid.

Bank of America wishes to return $45 billion to the government, which would entail the entire investment that the government made in the bank, stating that it has raised $40 billion in new equity since May and will be able to survive alone. However, federal officials have expressed concern over the bank’s ability to absorb losses and has sought to replace at least some of the money with new capital beyond the $40 billion.

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BofA Repayment Delayed Over Disagreement

Obama Pay Czar Cuts Executive Pay

Mark Ellis — Wed, 21 Oct 2009 23:29:15 +0000

Pay czar Kenneth Feinberg has decided to bring the hammer of his authority crashing down on the executive pay packages of the seven firms receiving the most federal aid. According to media reports, Feinberg and the government will limit the pay of the twenty five highest-paid executives at these companies, with salaries taking the biggest cuts.

In all, salaries are expected to plummet 90 percent on average and total compensation will most likely fall by about 50 percent, marking a huge decrease in the amount that many executives will be receiving as compensation this year. The executives of AIG’s financial products unit, which has been identified in one of the main causes behind the insurer’s close brush with collapse, will receive no more than $200,000 in pay, and any perks packages larger than $25,000 in value at any of these firms will need approval.

Although the changes to pay levels have shocked the business community, Feinberg’s reported moves to demand changes in governance at these firms has also attracted much skepticism. Reports say that the positions of Chairman and CEO will have to be split, that boards will have to create risk assessment committees, and that certain director elections will be eliminated.

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Obama Pay Czar Cuts Executive Pay

Congressional Report: AIG Stable

Mark Ellis — Mon, 21 Sep 2009 19:03:47 +0000

According to a report from the research arm of Congress, American International Group, one of huge financial institutions to experience extremely dire straits as a result of the financial crisis, has reached a point of stability. However, the same report has raised doubts concerning whether or not AIG will ever be able to restructure and pay back the money it borrowed from the government.

This report from the Government Accountability Office came at the same time as Representative Edolphus Towns of New York was preparing to raise the possibility of renegotiating A.I.G.’s debt. Towns, the chairman of the House Committee on Oversight and Government Reform, recently met with Maurice Greenberg, former A.I.G. CEO.

So far, the terms of A.I.G.’s debt have already been eased three times because they were found to be too difficult for the company to manage. The company has taken $182 billion from the Federal Reserve and the Treasury, although it has not used all of that money at the same time. Whether or not A.I.G. will have the terms of its debt eased even further remains to be seen.

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Congressional Report: AIG Stable

Citi CEO Confident in His Bank

Mark Ellis — Wed, 16 Sep 2009 20:58:29 +0000

Citigroup Inc.’s Chief Executive Officer Vikram Pandit is not worried about the future, according to his recent statements concerning his bank’s plans. Pandit stated that he has “little doubt” that his company would quickly return to profitability once the economy starts to show definite signs of recovery.

Pandit also spoke of his plans to repay back the Federal Reserve for the bailout money his company received, stating that it would do so in compliance with regulators when it is in a better spot. Due to the government’s increased interest in the country’s financial institutions, Pandit has been trying to get the government’s nose out of Citigroup’s affairs.

According to Pandit, the bank has plenty of capital with which it could pay back the $20 billion it received from the federal government, also stating that the government’s investment in the bank has actually given the government a tidy profit. At this point, Pandit hints a variety of options for Citigroup going forward.

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Citi CEO Confident in His Bank

Bruce Witherell Named Freddie Mac COO

Mark Ellis — Wed, 19 Aug 2009 03:38:25 +0000

On Tuesday, Freddie Mac announced that the company will have a new COO as of September 14th. Bruce M. Witherell will be the new COO and will report to Charles E. Haldeman, Jr. — the CEO of Freddie Mac.

When you think of Freddie Mac, you probably think of federal bailout money. The mortgage company has received billions upon billions of dollars in bailout capital from the feds. Many experts believe that it may never be possible for Freddie Mac to pay back the government.

Image: Zuma Press

With that type of pressure, Witherell won’t have an easy job. However, Haldeman thinks he is up for the task.

Said Haldeman: “To accomplish Freddie Mac’s mission and business goals, we must make sure that the company is running at the highest levels of efficiency and operational excellence. I have asked Bruce – an experienced executive with demonstrated expertise in mortgages and capital markets, superb leadership skills and management experience – to join Freddie Mac’s strong management team and help us execute our many functions and focus on the right objectives.”

Freddie Mac was founded in 1970 as a government sponsored enterprise. It is estimated that one in six homebuyers got assistance from Freddie Mac.

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Bruce Witherell Named Freddie Mac COO

Will Airlines Have Their Own Bailout?

Mark Ellis — Sun, 26 Jul 2009 22:49:05 +0000

The recession has been brutal for many businesses but the airline industry has suffered dramatically from soft ticket demand and unpredictable gas prices. Considering the dire straits that many of the world’s most prominent airlines are facing, a federal bailout for the airline industry may not be too far in the future.

Airlines typically look forward to the second quarter as a time of the year when travelers most frequently travel by airplane to get to their exotic vacation destinations. However, this year’s outcome has been very disappointing for the airline industry, as the recession, combined with a global swine flu fear, continues to take its toll.

Almost every major airline has had to take dramatic cost-cutting steps in order to stay afloat, shedding thousands of jobs just to break even. Analysts have hinted at the need for the airline industry to take in billions of dollars worth of capital in order to keep its planes in the air. A general slowdown in the amount of money investors are pouring into the airline industry may make a federal bailout all but necessary for global and domestic transportation.

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Will Airlines Have Their Own Bailout?

AIG on the Path to Recovery

Mark Ellis — Wed, 01 Jul 2009 03:38:56 +0000

Although it recently took $40 billion from the government in order to stay afloat, American International Group’s CEO Edward Liddy has expressed his confidence that AIG is on its way to quickly paying back its federal debt. AIG chalks this up to a sweeping decrease in risks in its derivatives business.

AIG has not released any sort of predictions regarding the value of its stock increasing or decreasing in the near future, much to its shareholders’ chagrin. However, Liddy has called AIG’s chances of repaying the government “excellent” and promises a changing business model in the coming months.

Liddy revealed his predictions of AIG’s wellbeing at the company’s annual meeting this week. The meeting also involved electing eleven nominees to the company’s board of directors and standard shareholder voting procedures. If things go the way Liddy is predicting, it would be quite a dramatic turnaround for a corporation that has seen the very worst the recession has to offer.

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AIG on the Path to Recovery

Allstate Turns Down Bailout Offer

Stephen Kersey — Wed, 20 May 2009 06:53:18 +0000

Not long ago, it seemed like every company that qualified was gladly accepting federal bailouts. On Tuesday, Allstate became the second insurance company to turn down federal bailout money. Last week, we reported that Ameriprise Financial was the first to say no.

“We applaud the Administration’s decision to include insurers in the U.S. Treasury’s programs, said Allstate CEO Thomas Wilson. “Given Allstate’s strong capital and liquidity positions, however, we will not participate in this program.”

According to Allstate, the company has more than $23 billion in highly liquid assets or cash. Additionally, Allstate says they have more than $12 billion in GAAP equity.

Said Wilson: “Maintaining our financial strength is a top priority in 2009 and we will continue to take proactive steps to manage our capital position as markets develop and the economy improves.”

Also on Tuesday, Allstate announce a $.20 cent quarterly dividend that will be payable on July 1st.

Allstate (Image: Flickr)

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Allstate Turns Down Bailout Offer

Ameriprise Financial Says No to Bailout

Stephen Kersey — Sat, 16 May 2009 01:33:07 +0000

With the United States federal government handing out bailouts to try to stimulate the nation’s economy, many companies around the country have happily gobbled up the bailout offers. However, on Friday we learned of the first company on record to outwardly turn down bailout funding.

Ameriprise Financial is the company to turn down the bailout offer. This company is in the financial planning field and claims to have a history in the field that dates back more than 110 years.

Said Ameriprise Financial CEO Jim Cracchiolo: “While we appreciate Treasury’s approval of our application, we have elected not to accept funding. We have carefully evaluated our current position and expectations for the future, and we are confident that our current capital position and access to potential additional funding sources are more than adequate.”

Investors were apparently happy with this news as Ameriprise stock rose to $25.19 and is now up nearly 7.5% since the beginning of 2009.

Ameriprise Financial (Image: Flickr)

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Ameriprise Financial Says No to Bailout

Bailout for Financial Sector to Cost More

Stephen Kersey — Sun, 05 Apr 2009 03:44:30 +0000

A recent report by the Congressional Budget Office predicts that the financial sector will require much more bailout money than initially estimated. In fact, the report says that the initial estimates were short by more than $165 billion.

Financial Sector Bailout (Image: Flickr)

The new number for the bailout of the financial sector is at approximately $365 billion. In January, that same estimate was less than $190 billion. The Congressional Budget Office blames the increased cost of the bailout on the securities in question now having larger yields.

Two companies that will be eating a lot of federal bailout money are Freddie Mac and Fannie Mae. These two companies, which deal in mortgage financing, will ultimately require more than $80 billion more in bailout funding, according to the latest estimates.

It will be interesting to see what kind of public outcry there will be following the release of this news, especially considering the report that Freddie Mac and Fannie Mae are giving out $210 million in bonuses.

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Bailout for Financial Sector to Cost More