And the fun doesn’t end…  33 banks missed TAPR payments in the month of August. The largest of of the institutions was CIT Group.

What does CIT Group do, you ask.  They provide ”global vendor financing solutions…. and customized leasing and secured financing, primarily to end-users of aircraft, locomotives and railcars…. and lending, leasing and other financial and advisory services and solutions to middle-market companies, including those in industries such as healthcare, energy, and communications, media and entertainment.”

To put it into terms that may hit closer to home – when you used “Dell Credit” to buy a computer you were being financed via CIT Group. When you watch a train pass you by chances are some of the cars belong to CIT.  When you fly on your favorite air line of choice, you may very well be flying on a CIT airplane.

A CIT Group bankruptcy, with roughly 70B in assets, would be the 4th largest bankruptcy in the United States ever. A collapse of this company would mean an almost instant contraction in the consumer and small business credit markets, leaving consumer high and dry and businesses unable to fund their retail operations dependent on consumer credit. For the record, the government and the FDIC have already stated CIT is not too big to fail.

Here are the top 13 banks that missed their payments.

(via Reuters)

Here is a great interview with Elizabeth Warren – the person in charge of the chair of the Congressional Oversight Panel that oversees the U.S. banking bailout (TARP).

At times I don’t care for Bill Maher, but I think he hit it out of the park on this interview.

Thanks to Gianna for sending this.

If you think back several weeks with me, you’ll remember the the Treasury announcing a “bank stress test” that would help determine what banks had enough liquidity to stay functional.  Former Bank regulator, William Black, believes it’s a sham in order to make the public believe the government is taking action:

There are no real stress tests going on. 

If you did a real stress test, as Geithner explained them, you wouldn’t just have a $2 trillion hole — you’d impose regulatory capital requirements of 50%…

You can’t conduct a meaningful stress test without reviewing (sampling) the underlying loan files and it seems likely that the purchasers of securitized instruments (not just mortgages) do not even have the loan file data…

As Geithner describes the process, NO ONE can conduct reliable “stress testing.” It inherently requires testing everything in every way any and all aspects of everything could conceivably interact. It also doesn’t provide any meaningful output that can be operationalized (unless you want to force an enormous rise in minimum regulatory capital requirements, which he obviously doesn’t want to do).

A number of other economists also question the point of the stress test.  The general feeling was that the “worst case” economic scenarios that were used in the stress test did not even come close to recreating the conditions the financial industry really will be facing.

If, indeed, the stress test was a sham AND the economic scenarios used during the test do not reflect reality, what does it mean that the U.S. Government is going to delay the stress test results until AFTER the earnings season that just started in order to prevent a market panic.

To me, this really means three things:

1. Even under the easy standards set in the stress test some financial institutions cannot pass the test
    
2. The government is looking to buy time in order to develop a plan for the banks that are insolvent
    
3. If the plan for insolvent banks is nationalization, the Treasury Secretary expects the stock market to react in a highly negative manner.
    

With the Alcoa news this week, the Fed Meeting Minutes showing the recovery will be longer off than expected and the release of TARP funds to Life Insurance companies today, what does it mean to hear the Treasury is planning on delaying the bank test results?  

Easy.  The worst of the worst is not even upon the financial market as of yet….

When the news came out that President Obama, essentially, fired GM CEO Rick Wagoner I was blown away – and HIGHLY worried that the lines between government and business had finally blurred too much. I strongly believe the government should not tell a company how it should function. If the company cannot function on its own, the company should cease to exist.

My level of concern jump yet again as I found out the Obama Administration refused the repayment of TARP loans from a number of small banks. Why? I think Stuart Varney has hit the nail on the head:

The government wants to control the banks, just as it now controls GM and Chrysler, and will surely control the health industry in the not-too-distant future. Keeping them TARP-stuffed is the key to control. And for this intensely political president, mere influence is not enough. The White House wants to tell ‘em what to do. Control. Direct. Command.

It is not for nothing that rage has been turned on those wicked financiers. The banks are at the core of the administration’s thrust: By managing the money, government can steer the whole economy even more firmly down the left fork in the road.

If the banks are forced to keep TARP cash — which was often forced on them in the first place — the Obama team can work its will on the financial system to unprecedented degree. That’s what’s happening right now.

Paranoid? Maybe. Until one sees even more indicators of what the administration has in mind. On “Face The Nation”, Treasury Secretary Tim Geithner said the following:

When, in the future — or I’ll just say, if, in the future, banks need exceptional assistance in order to get through this, then we’ll make sure that assistance comes with conditions, not just to protect the tax payer but to make sure this is the kind of restructuring necessary for them to emerge stronger. And where that requires a change of management of the board, we’ll do that.

While I can understand conditions on assistance, there are a large number of fiscally sound financial institutions forced to take TARP cash. Yes, Forced. If the company was forced to take cash from the government, this implies any company forced to take cash will also be forced to change management as the government sees fit. Something is not “conditional” when you have no options to begin with.

Why does the Administration want significant control of the financial markets? I my opinion, it is not due to the current recession, it is due to Europe and the G20.

G-20 leaders declared a crackdown on tax havens, tighter regulation of hedge funds and a new supervisory body to flag problems in the world financial system.

A sweeping G-20 communique appeared to bridge the gap between the United States and major European countries over how far to push changes on regulation to curb the market excesses that led to the current crisis.
Marco Annunziata, chief economist of the UniCredit Group in London, said the G-20 accord gives the U.S. “very little” while Europeans got most of what they wanted.

The agreement out of the G20, essentially, gives regulatory power over our economy and finical system to international interests – mainly France and Germany. This is huge as EU interests and priorities regarding economics are NOT the same as US interests.

If you thought the Bush administration was power hungry, and it was, you need to wake up and see what is going on now. The current administration is not looking out for U.S. interests, as it said it was going to under the “change” mantra; no, the administration is marching free enterprise and capitalism right into the hands of European controlled socialism.

My intent was to spend a significant amount of time on this post, do a bunch of research and publish it tomorrow after President Obama releases his plan to assist people with troubled mortgages. Yea, I can’t wait.. basically my mind is occupied, and very annoyed with, what is going on in the government at this point. This includes both parties. With all the money is being thrown around, with all the waste going on, I want to know where our F&#!ing bailout is!

The Trouble Assets Relief Program (TARP) enacted by the Federal Government last year has turned out to be a huge waste of money – $700 Billion dollars to exact. The whole idea of the program was that good old Uncle Sam would provide the money, either by direct investment in a corporation or insuring of troubled assets, in order to stabilize financial institutions. The execution of the TARP, however, was an unmitigated failure at most, very problematic at least.

As of 02/09, the TARP money has been allotted in the following manner:

• $250 billion pledged for purchases of senior preferred shares and warrants in banks and thrifts (direct investment)
• $20 billion pledged for Bank of America in addition to $25 billion pledged under the direct investment program listed above
• $20 billion investment in Citigroup
• $40 billion investment in troubled insurer American International Group
• $20.9 billion to prop up the U.S. auto industry (GM, GMAC, Chrysler, Chrysler Financial)
• $20 billion pledged to cover potential losses for a Federal Reserve program aimed at improving consumer access to credit.

Guess what? TARP has done very little in terms of changing… well… anything. Had the program followed the original plan – the formation of a bank to take troubled assets – the financial institutions in the U.S. would look significantly different at this very moment. The problem is that those overseeing the original TARP program realized they did not have the funding to support such a bank after the got approval to put their plan in motion.

The credit markets are still basically frozen as banks continue to crank down on available credit. As a matter of fact, lending by the top banks in the U.S. actually fell 1% over the last 4 months. Losses at Bank of America and Citigroup were so large that they needed to go back to the federal government for more money. GM needs an additional $16.6 Billion, a good $17 Billion more than they originally stated they needed to fund operations, if they have any hope of staying alive.

So much for that plan.

Seeing the government has had so much success with the TARP, why would the general public expect the execution of a stimulus plan to make a significant impact on the economy? Who cares if it will or will not, right? Let’s pass a $787 Billion dollar stimulus plan anyway…. a plan that has… a lot of money for a whole lot of nothing.

I don’t have the time to break out all the spending, but you can read the bill here and here.

Based off of what I’ve seen there is very little “new spending” in the bill. For the sake of argument let’s say the “new spending” included in the bill is divided up between the states that need the funding. These states then distribute the money on infrastructure projects. How many IT professionals, finance majors, office workers and the like, who lost their jobs, are going to be building bridges and rebuilding road? How many corporate procurement managers will be able to install those solar panels? Really, how many people will this impact?

My guess is very few. But, let’s take it a bit further.

There will be an $800 tax credit for couples (married couples that file jointly, making under $150K a year) or a $400 tax credit for individuals (making under 75K a year). Oh, by the way, that credit includes people who DO NOT PAY TAXES. The IRS will mail checks to individuals who do not pay income tax due to low/no income? Kinda hard to give someone a “tax cut” if they don’t pay taxes, isn’t it?

So where does this leave me?

I’m decidedly middle class which means I fall outside of the eligibility limit set by the government… so I will not be getting a tax credit. Obviously I am not a giant bank, so I am not getting anything there….But let me get this straight. The financial institutions have money thrown at them, they continue to fail, and the government continues to support them. Here, I am paying my taxes – which end up supporting those financial institutions – and I cannot get any type of consideration?

Ok….

The government is providing a “tax credit” to people who DO NOT even pay taxes AND I GET nothing!?!

How is this fair? Let me get past the anger, no rage… I don’t like that idea. It’s socialism, plain and simple, but for the greater good (and I only say in such an extreme case) I can get on board with the idea. As much as it goes against my principles, I can still get on board as I would much rather see the survival of the United States than total anarchy in the name of a personal view.

So far my tax dollars are supporting major corporations and the nations poor but the government and I get nothing. Where is my help on what I need – my property value.

My condo value has fallen so much that I am now roughly anywhere from 60K to 90K “in the red” on my mortgage. While President Obama is expected to announce a mortgage relief program tomorrow, to help those who face foreclosure due to the inability to pay on their mortgage, it appears that there will be very little to assist families that are significantly “in the red” due to property value declines.

Just to recap…

1. Money goes to companies that continues to fail
2. Money goes to people that do not pay taxes
3. Assistance is provided to those who are facing foreclosure but not those in the red due to property value decline

[NOTE: 2/18 - The news coming out today is saying the Govn't will help people underwater by using cash to refi their mortgages. Depending on the info point #3 may change... and my frustration may be defused]

[NOTE #2: 2/18 - Read the impact of the bill, no... didn't defuse my frustration.]

How is this fair to me? How is this fair to the countless other middle class families and individuals facing the same situation, the countless households in this nation that have continued to pay their bills and taxes, even in the hardest of times?

It’s not.

Where is our F&#!ing bailout?

I understand the economy is facing more and more difficulty and that there is no plan that can address everything, but the segment of society that is actually footing the bill – and that is hurting as well – is the group eventually facing pain. The fact no relief or consideration for the individuals actually paying for everything will come back to haunt the government when this segment of society faces large layoffs (more so they they are now), which will trigger an even large wave of bankruptcies and foreclosures.

The shortsighted call to “help the poor” and “the corporations” will create a pressure on the middle class who will be unable to sustain funding the rest of the nation. If we are a lucky nation, and I fear that we are not, the United States will be able to get past this economic event on shoulders of the middle class. If not, the nation will face a depression longer and deeper than anyone had expected. Once the back of the middle class is broken, and there is no where else for the government to find the tax revenue, will the economy face capitulation and a true bottom to the recession will be called.

Things are going to get a lot worse before they get better…

Hello, pot… this is kettle calling again… just wanted to point out that you are black.

At a news conference today, Treasury Secretary Tim Geithner said that move the administration are currently making are aimed at “restoring trust” in the financial system. If that is the case, if President Obama wanted to restore trust, wouldn’t it make sense to fire Tim Geithner? Larry Kudlow, economist and journalist, thinks so as well:

Geithner never answered the question put to him by senators Kyl and Bunning: Would he have paid his back taxes if he were not nominated to run the Treasury? His issue has never been resolved. He will never have the full trust of the country…This is a matter of personal character and accountability. It is a matter of honesty. Too many of our leaders suffer big deficits in these areas.

How can we trust a man who “forgot” to pay his taxes for a few years to restore trust in the system?

Compensation limiting for executives tied to bailout money?

Not to be ringing the socialist alarm once again, but what does limiting the compensation of executives sound like to you? In no way am I advocating that people should be making millions a year for driving a company into the ground but this has the potential to open the door to other such actions in the name of “market stability”.

Actually, I’ll go one step further and say that a case can be made for why a company that requested funds should be limited to how the money is spent. Ok, that sounds fair… until you hear one name: J.P. Morgan

J.P. Morgan/Chase was forced to take TARP funds from the government.

J.P. Morgan was not in need of capital funding, nor did they request it, so why should J.P. Morgan/Chase be limited to what they pay their management? I understand the need to limitation, but when you start forcing companies to do thing – like take the funding, then what executives should earn – is a very dangerous.

ion Television

No clue what cable channel ion Television is but Heat, the Michael Mann classic and arguably one of the top 10 movies of the last 30 years, is on right now. I know what I am going to do….

UPDATE 2/5/09, 3:32 PM – it turns out that J.P. Morgan and Goldman Sachs will not be limited when it comes to compensation.

We knew it was going to happen, it’s not like there was any question is GMAC was going to become a bank. If they did not achieve bank status GMAC would have gone into bankruptcy, which would have meant that GM would have not been able to obtain credit for consumers through any other source.  

Get it?  

If GMAC went down the tubes, GM would have followed.  The second GM received their “loans” GMAC was almost guaranteed to receive bank status.  It is all tied together.

So why does the Fed continue to work with their head up their collective asses? GMAC lost roughly $5.5 billion during the first 9 months of 2008 and major losses are expected moving forward. The additional $6B provided by the TARP funding will only allow the company to operate for a few more quarters.  

Maybe that was the intent of the government – put GMAC into a position where they can support GM until the new administration is in office, and where the new government has the ability to implement their own bailout. 

Frankly, I don’t understand how either GM or GMAC make it out of 2009 without going into some form of Bankruptcy restructuring.  They are both bleeding money like there is no tomorrow, the government continues to prop up businesses that should be failing on their own.

Anyone care to bet?