Weekly Audit: Stop Subsidizing Wall Street

 

by Zach Carter, Media Consortium MediaWire Blogger 

Treasury Secretary Timothy Geithner rolled out his new Wall Street bailout plan on Monday and the progressive verdict is already in: This bailout doesn't look much better than the last one. In fact, Geithner's latest plan isn't much different from several other flawed proposals policymakers have floated over the past year. At its core, Geithner's program is just another attempt buy up "toxic assets" from banks at inflated prices.  

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8 Top U.S. Banks Just Acknowledged They're Insolvent

Based  upon the fair-market value of their securitized loan assets in conjunction with annual federal accounting requirements, Bloomberg's Jonathan Weil informs us this evening that eight of America's top 24 banks are insolvent in: Wells Fargo, BofA Loan Values Are a Scary Sight.

Yes, Wells Fargo, Bank of America, SunTrust, KeyCorp, Fifth Third Bancorp, Huntington Bancshares Inc., Marshall & Ilsley Corp. and Regions Financial Corp have formally acknowledged that--for all intents and purposes--they're currently insolvent.

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"Heckuva job, Timmy..."

Yet again, Robert Kuttner,  economist and urban theorist, co-founder and co-editor of the American Prospect Magazine, Boston Globe columnist and author of , "Obama's Challenge: America's Economic Crisis and the Power of a Transformative Presidency," nails it. In fact, perhaps this time, he delivers a grand slam homer in: "Geithner's Folly."

As Kuttner tells us:


President Obama deserves immense credit for being willing to spend serious money to prevent recession from becoming depression. He has resisted pressures from fiscal conservatives to put budget balance first, or to make social insurance bear the brunt of spending cuts down the road. And he has used his gifts as a teacher to enlist the broad support of the American people for a far-reaching strategy of public investment.

However, all of this good work will be for naught if his team doesn't get the banking system functioning again. And so far the grand design of Treasury Secretary Tim Geithner is entirely on the wrong track.

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FDIC Privatizes Bank Investor Profits, Socializes Losses

Tonight (once again, late on a Friday, hoping the story bypasses most of the audience, the government informs us of another outrage): the Federal Deposit Insurance Corporation ("FDIC") formally extended--and has now grossly contorted--a Bush Administration Treasury program that was orignally established this past Fall to free up consumer credit markets, to the point where taxpayers are now insuring virtually all banking industry "senior unsecured debt that converts into (bank) shares no later than the guarantee's expiration, which can last through June 30, 2012."

Known as the FDIC's Temporary Liquidity Guarantee Program ("TLGP"), today's announcement means that the FDIC is now getting into the business of insuring investors' funds when they buy into the preferred stock or warrants of a given bank, where (which covers most transactions of this nature) those investors may  then convert their notes and/or preferred shares to common stock shares of that entity.

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Breaking: Gov't 'Officially' Sticking Fork In Citi Today

This is literally breaking on Bloomberg, the NY Times and the Wall Street Journal as I write...


Citigroup Will Be Required by U.S. to Get Private Capital
By Bradley Keoun and Rebecca Christie

Feb. 27 (Bloomberg) -- The Obama administration will require Citigroup Inc. to raise private capital and make changes to its board of directors as part of an effort to strengthen the bank, according to people familiar with the matter.

The plan, which may be announced as soon as today, will involve the Treasury Department converting preferred shares into common stock. The government doesn't immediately intend to provide additional money after channeling $45 billion to the New York-based bank last year, the people said.


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