Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

TARP Club Membership Growing

By

Some thoughts on the bailed-out.

PrintPRINT

American Express (AXP) becoming a holding company was the price of admission to the TARP club. I would note that Morgan Stanley (MS) and Goldman Sachs (GS) also had to join the club.

Does it make it easy now for these firms to raise deposits? I don't really think so. And, notwithstanding all their rhetoric to the contrary, I think it is far more likely these firms will be bought by a bank than that they'l buy one (at least of meaningful size), but as members of the TARP club, they stay alive.

Other thoughts:

  • On AIG (AIG): Necessary and important to systemic risk. As a taxpayer, sorry we had to do it.

  • On General Motors (GM): Yes, we will bail them out (in some way). But, at least to me, all this does is buy time. $60 billion (what's left of TARP Part 1), if all applied as equity to GM, that would still just get the company's net worth to... drumroll please... Zero.

Moving onto Secretary Paulson's speech this morning:

  • On killing troubled asset purchases: It's about time. No one I know thought it would work. Worse, few banks have the common equity capital to take the hits. Most likely outcome of this change, however, is a major suspension of mark-to-market accounting for "certain" assets.

  • On helping the securitization market: It's necessary and not just for credit cards and auto loans. The mortgage market needs help too. Treasury has a choice - either subsidize borrowers or lenders. My guess is we see some of each.

  • On meaningful foreclosure relief: Not until the new administration takes office.

  • On private capital joining the government: Until the government demonstrates consistency, only senior to the government.

  • On the Global Challenge: I encourage everyone to read that part of the speech, for it gives you a wonderful sense of the multiple agendas going into this weekend's G-20 meeting.

  • Finally, the most important sentence of the whole speech: "Market turmoil will not abate until the biggest part of the housing correction is behind us."
Position in SPY options
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE