“It’s time to apply the same rules from top to bottom: No bailouts, no handouts and no cop-outs. An America built to last insists on responsibility from everybody.” Thus President Obama laid down the gauntlet in his recent State of the Union address. Yet he remains committed to subsidizing industries. And mortgage lending is high on his priority list. In his speech, he announced a plan that “gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low rates…A small fee on the largest institutions will ensure that it won’t add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust.” Last Wednesday, February 1, Obama unveiled the specifics of this demand-side bailout, which would require congressional approval. Lawmakers should think about some likely consequences.
Charlie Gasparino of Fox Business Network reported yesterday that the Obama Administration, Federal Reserve and Wall Street firms (like Goldman Sachs, Citigroup, etc.) are exploring a “face-saving” measure by splitting the presidentially beloved ShoreBank Corporation in two, with the community/green jobs lender surviving with the “good” assets while the FDIC and private investors absorb the toxic assets. Another reporter following the story told me that ShoreBank’s Friday deadline from the investors has been extended but he didn’t know how long. A spokeswoman from Goldman Sachs refused to comment on the issue.
Here’s the split-the-baby scenario explained by Gasparino:
This is asinine: as was reported last week by Bloomberg , ShoreBank’s Tier 1 capital has fallen from $43.5 million in December 2009 to $4.1 million at the end of June. It is almost entirely worthless and is only being saved – while other …
Probably not. Seems like the more that presidentially-prizedShoreBank gets extensions from private financial institutions (Goldman Sachs, Citigroup, etc.) and from its federal regulators (the FDIC and Federal Reserve), the deeper in the hole it finds itself. Earlier this week the Chicago Tribunereported:
ShoreBank’s capital deficiency worsened in the second quarter, according to newly submitted financial results to regulators, and the Chicago-based lender now needs to raise at least $190 million just to meet targets set out in March by state and U.S. banking regulators….
The South Side bank has arranged a capital infusion of about $150 million fromWall Street investment firms,big banks, insurance companies and philanthropic groups. It’s hoping that private investment will then make it eligible for about $75 million in bailout funds from the U.S. Treasury Department.
Concerns have been raised about whether $225 million will be enough to save
The deadline for ShoreBank to come up with sufficient outside capital has been extended again, with the Federal Reserve saying more than $150 million from the likes of Goldman Sachs and Citigroup and $75 million in TARP money aren’t enough to save the politically-connected community lender. Crain’s Chicago Business reports it’s the third extension the Wall Street firms have granted to enable ShoreBank to get its act together, with the new deadline August 6.
While the Obama administration has denied pressuring big lenders to bail out ShoreBank, these extensions (while other community lenders have been allowed to fail) only serve as further evidence that powerful political forces are at work on their behalf. Charlie Gasparino of Fox Business Network has reported that the Federal Deposit Insurance Corporation was a big player in convincing the Wall Street finance companies – all who received government bailout funds themselves – to ante …
Supporters call it “financial services reform.” Yet one has to wonder what the Restoring American Financial Stability Act of 2010 is reforming or stabilizing. The House on Wednesday by a 237-192 margin passed the 2,300-plus-page conference bill designed to protect American households from predatory practices by banks, subprime lenders, brokerage houses and other intermediaries. But evidence suggests that if it becomes law, the bill instead will lay the groundwork for another major federal bailout. During House-Senate conference sessions, affirmative action zealots inserted a host of mandates to promote credit allocation by race. Sen. Christopher Dodd, D-Conn., and Rep. Barney Frank, D-Mass., the prime sponsors of this “comprehensive” bill, have refused to entertain legitimate objections. If the Senate approves the measure – Majority Leader Harry Reid, D-Nev., has vowed to corral the necessary filibuster-breaking 60 votes in a matter of days – Congress once more will have shown that it places a higher priority on …
Last week the Chicago Tribunereported that Illinois Finance Authority chairman Bill Brandt threatened “a firestorm” in the Windy City if the Federal Reserve did not follow through with a bailout of South Side-based ShoreBank. This followed some reported pressure applied by the Obama Administration on companies like Goldman Sachs, Citigroup, GE Capital, Bank of America, and Chase, who were asked to kick in $20 million each to make politically-backed community lender appear eligible to receive TARP funds.
Turns out the preference for Chicago-type coercion goes right to the top (and the origins) of the troubled bank itself.
Illinois Republican Rep. Judy Biggert on Wednesday inserted into the financial regulatory reform bill an amendment calling for an investigation of efforts to rescue ShoreBank. Meanwhile the White House issued denials that it pushed for a bailout of the politically-favored community lender. The Chicago Sun-Times reported yesterday:
As Chicago’s ShoreBank struggles to survive, the Obama White House issued a strong statement Wednesday denying that it is interfering in any way with federal regulators or influencing financial institutions willing to pump money into the bank.
“White House officials have not met with ShoreBank regarding support measures for their bank, nor has the White House ‘made asks’ of financial assistance to other financial institutions for ShoreBank,” said Amy Brundage, a White House spokeswoman.
Keeping with the policy to “put nothing in writing, ever,” and the historical precedent the administration made in a non-offering of a non-job to Pennsylvania Democratic Senatorial candidate Joe …
According to a story over the weekend from the Chicago Tribune, the $135 million that the Obama Administration reportedly coerced from TARP recipients like Goldman Sachs and Citigroup may not be enough to save ShoreBank, the politically connected “community” lender whose big bank bailout was supposed to make it eligible for its own TARP funds. From the Tribune:
The bailout of Chicago-based ShoreBank has hit a serious snag as the Federal Reserve and Treasury drag their feet on whether to provide funding to the ailing South Side lender, sources close to the situation say….
The Treasury is deferring to the Federal Reserve. One source said some at the Fed want ShoreBank to raise more private dollars before it gets government money.
The source said the private investors are unlikely to kick in any more money. Many of the big banks received federal bailout money and have since
Despite mortgage interest rates falling to near all-time lows, America’s homeowners are in a state of unease not seen since the Great Depression. In 2009, nearly 4 million foreclosure notices went out to homeowners unable to keep up with their payments, an increase of more than 20 percent from 2008. Many explanations lie behind this collapse, but arguably the most crucial, and underappreciated, has been excessive federal intervention in the housing market. Recent reports and articles from American Enterprise Institute (AEI) Senior Fellow Peter Wallison and AEI Visiting Fellow Charles Calomiris strongly suggest the pileup of bad mortgage paper has the words “Made in Washington” written all over it. In other words, rogue capitalism is partly to blame, but rogue government has played a central enabling role.
Our nation has over-invested in housing. To put the matter more simply, we’ve bought more housing than we can afford. According to …
The word “reform” in the age of Obama has taken on a clear meaning: aggressive expansion of government control over economic decision-making by businesses and consumers. The recently-passed health care bill, rammed through Congress via highly unorthodox parliamentary procedures, is evidence enough of that. Yet even supporters of new financial services reform legislation now before the full Senate may be hard-pressed to explain how the mammoth 1,336-page measure is supposed to improve efficiency and integrity in credit markets. The bill’s most likely legacy, if passed into law, would be the creation of powerful federal bureaucracies that in the long run not only would fail to avert future banking crises, but may well increase their likelihood. The House of Representatives, led by Rep. Barney Frank, D-Mass., passed its own somewhat different package last December 11 by a 223-202 vote.
The Senate bill, unveiled last Monday, March 15, is called the Restoring …