TARP Watchdog: Treasury Overpaid For TARP Investments

[kpete]

Source: CNN

TARP Watchdog: Treasury Overpaid For TARP Investments

February 05, 2009: 10:23 AM ET


WASHINGTON -(Dow Jones)- The three government watchdogs overseeing the $700 billion financial rescue package continued to criticize the Treasury Department's implementation of the plan, suggesting a lack of a strategic vision and raising the concern that Treasury is overpaying for its investments in banks.

Representatives from the Government Accountability Office, a congressional oversight panel and a special investigator general said the Treasury continues to face challenges on both general and practical levels. The transparency and accountability surrounding the Troubled Asset Relief Program, or TARP, continue to fall short, leaving taxpayers and policymakers short of information on the program.

"Our money - and our economy - are on the line, and we all have a stake in the outcome," said Harvard Law School professor Elizabeth Warren in her prepared remarks for a Senate Banking Committee hearing.

Warren heads the five-member congressional oversight panel overseeing the TARP, and said that the group on Friday will issue a report suggesting Treasury has significantly overpaid for the assets it has purchased from financial institutions. She said an analysis of 10 of the TARP transactions, when extrapolated for all of the purchases made in 2008, suggests Treasury paid $254 billion for assets worth approximately $176 billion, a shortfall of $78 billion.


Read more: http://money.cnn.com/news/newsfeeds/articles/djf500/200902051023DOWJONESDJONLINE000447_FORTUNE5.htm

[Romulox]

1. Any idiot could tell you what an "asset" no one will buy is "worth".

Still laughing out loud at DU's Bailout Booster club, some of whom argued that the US would make money on these deals. :crazy:

[Baby Snooks]

6. They just assumed the million dollar home was worth a million dollars...

Some don't understand the "troubled assets" are the mortgages which at this point are probably worth half. If even that in some areas of the country. Some real estate was overvalued by as much as 60% according to some in Los Angeles and Manhattan. The wealthy in particular didn't mind but some of the wealthy aren't so wealthy any more. Everyone is watching to see what happens in Manhattan. Some of the Madoff investors may have to sell their real estate. Or the banks may have to.

It was nothing more than a scam by the banks and by Wall Street. The banks are fine. We are not.

[Romulox]

8. There's a couple dim bulbs on GD who claimed that the US would *make money*

by buying assets no one in the free market would touch.

They don't post as much as they used to.

[Winterblues]

9. Didn't Soros buy five billion dollars worth of Goldman Sachs

and received more value than the Treasury that bought ten billion dollars worth. Paulson received half of the stock value for twice the money spent. Works out to four fold in favor of Goldman Sachs at tax payer expense. Didn't Paulson actually chair Goldman Sachs for a while before he became Treasurey Secretary? No wonder Goldman Sachs came out so far ahead on the deal..

[Romulox]

10. You are 100% correct. nt

[Lucky Luciano]

15. Almost correct - it was Buffet. nt

[Winterblues]

16. You are right, don't know how I screwed that up

:spank: I be big dummy...

[No Elephants]

41. But Buffet had more negotiating leverage than the United States of America. Oh wait,. He didn't.

[jpak]

11. yup - republics can suck it

put 'em behind bars

[Jackpine Radical]

2. That's why Paulsen and the Piggies had to rush it through.

[Romulox]

3. The TARP also got the vote of the then junior Senator from Illinois.

[Jackpine Radical]

5. Indeed. And a lot of other Dems.

[Romulox]

7. So he was one of the ones that "rushed it through", and he's trying to rush through another

[jpak]

12. and your solution is?

:rofl:

[Romulox]

13. Not to hand over any more no-strings-attached cash to multinational corporations.

:think:

[jpak]

14. Isn't that what Obama wants to do?

n/t

[Romulox]

18. No, he's working on another TARP bill as we speak. MORE money to the banks. Hundreds of billions.

[HamdenRice]

19. "no-strings-attached cash" -- but didn't he just limit executive compensation?

How do you reconcile that order with a "no strings attached" description?

[terisan]

4. It would seem logical that hes "assets" are now falling in value even more.

[jz12]

17. TARP funds extended to other industries

February 5, 2009 - WASHINGTON - President Barack Obama announced today that the Mafia would be entitled to receive as much as 70 billion dollars of TARP bailout funds recently approved by Congress, to offset losses incurred last year in the organization's loan shark and Ponzi scheme divisions. The president noted that the crime syndicate would have to agree to the same restrictions on executive pay as were placed on legitimate financial institutions receiving government assistance.

Under those restrictions, Mafia dons would not be permitted to receive more than five hundred thousand dollars in annual compensation, except for stock options. The value of stock options paid as compensation or bonuses would be unlimited, but anyone receiving such options would not be permitted to sell the shares until the Mafia returns a profit. The restrictions were incorporated into the second bailout package, to address concerns by some that taxpayer funds from the first bailout were used to finance nine figure salaries for the same managers whose business strategies brought about last year's financial collapse.

A spokesman for the Mafia lodged a protest against the salary cap, saying that it would limit the beleaguered drug and extortion giant's access to the most talented professionals. Top-performing felons currently on the payroll might leave, he pointed out, attracted by more robust compensation packages from the Russian mob and other competitors.

"There are only a finite number of candidates who have the knowledge and experience required to manage multi-billion dollar rackets," he said, "and they will naturally seek positions which reward them accordingly." A Forbes magazine survey indicates that as many as 3,000 mafiosi would have their salaries cut if the government's terms are accepted. Attorneys for the Mafia are preparing a package of threats and financial incentives to persuade congressional leaders to set aside the requirement.

Consumer advocate and presidential candidate Ralph Nader voiced objection to the disbursements, but no one heard him. Publishers have long insisted that Mr. Nader's opinions be expunged from the public record, as a dangerous impediment to the concentration of wealth.

[sabra]

20. Treasury overpaid $78 bn for toxic assets

Source: Chicago Trib

<snip>

Elizabeth Warren, the Harvard University law professor Congress chose to chair the committee that's overseeing the Treasury Department's implementation of the TARP program, said financial experts her panel consulted say the government paid $78 billion too much for the toxic assets it purchased from financial institutions.

Her comments came during yet another congressional hearing on the TARP. This morning's hearing is before the Senate Banking Committee.

Warren said:

"At the time of the first set of transactions, Treasury substantially overpaid. According to the data we've investigated, Treasury put in about $254 billion for which it received about $176 billion in value from the financial instituions. That's a shortfall of about $78 billion when measured as of the date of the transactions, not in terms of what happened to the markets since then . We want to emphasize there may be good policy reasons for overpaying. But without a clearly delineated reason, we can't know that. We return to a theme that we have spoken about repeatedly, and that is the need for clear goals, for a clear framework, for methods for how we're getting there and measurements to see if that is happening."

Sen. Chris Dodd, chairman of Senate panel, rightly called this information "eyebrow raising"


Read more: http://www.swamppolitics.com/news/politics/blog/2009/02/treasury_overpaid_78_bn_for_to.html

[aquart]

21. We gave them party money.

[marketcrazy1]

22. no kidding!!

I am SHOCKED!! SHOCKED i say!!!! :sarcasm: and this will be the model for what is to come (bank bailouts/asset purchase/guaranties) get ready for it......

[Alhena]

23. I'm sure Paulson will get his cut now that he's back in the private sector

[proud progressive]

24. bull! the 78b was for xfer fees, graft, political contributions. jeezz!

[Gin]

25. I didn't think we purchased any toxic assets yet....isn't that going to be

what the Bad Bank is for?

[karynnj]

32. This does suggest that the Bad Bank is not the best solution

It is hard to evaluate the value of the toxic assets - and the Bad bank would have the same problem. The concern of many, including Senator Kerry is that the government would pay too much and in addition would likely sell the assets too low and speculators who buy them would profit as the economy comes back. This looks like he has very much on target.

(Kerry spoke both on Andrea Mitchell's show last week and MTP on Sunday)

[KansDem]

26. WTF???

:wtf: Is this the biggest smash-n-grab in American history?

What's going on?!!

[mbperrin]

27. Claw back!!!!

nt

[Psephos]

28. Just wait 'til we spend a trillion on the next round

And don't forget, it's money borrowed from foreigners. We get to fly; the next generation gets to pay.

[maxsolomon]

29. wait - wasn't that the POINT of TARP?

to buy toxic assets that weren't worth as much as purported, but were worth something, and get them off the bank's books so they remained solvent?

[Igel]

34. That was the point, before it wasn't the point.

Yes, to buy toxic assets not at market, demand-based valuation, but trying to make a stab as to what a returns-based valuation would be, the premise being that uncertainty had depressed the market price below what the assets would be worth.

This isn't news. This is, ultimately, spin, because the different in kinds of valuation is both ignored (if not suppressed) while being at the very heart of the discussion.

The problem with TARP is that it wasn't transparent; that allows this type of discussion because ultimately the basis for valuation wasn't precisely defined.

[AML]

30. The best way to rob a bank...

...is to own one.

[Psephos]

36. well and truly said n/t

[Romulox]

31. Once again, the Bailout Boosters fall silent! nt

[Joanne98]

33. HELL YEAH!

[serrano2008]

35. "there may be good policy reasons for overpaying" - ha ha ha

Like...um, kickbacks to Bush, future "speaking engagement" fees for Cheney, Paulson, Bush, Rice.

Wouldn't it be nice if there was like a General Office of Accounting, they could even call it the "GOA", and they could find out exactly where all this money went.

[natrat]

37. so these scumbag gpldman sachs types create this shit

put their agents in the government
then they bond their companies together so too big to fail
then take billions that they now won't account for-has to be the biggest scam in modern history

and FUCK CHRIS DODD he's the whore who wrote the bill

[MGKrebs]

38. I'll be interested to see more on this.

It says they tried to help 300 institutions, and Warrens' group took 10 transactions and extrapolated from them. That's a small sample.
Also, "comparing the price paid by Treasury and the value of the asset at the time of purchase." ... Well, valuing the asset is part of the problem. If somebody owes you $1000 but they aren't paying, is it worth $1000? Presumably, the government is going to re-work those mortgages it has acquired so that they can be paid, albeit at a lower value.

[indepat]

39. Let the boys be boy, unfettered by government regulation or oversight so they can privatize their

ill-gotten gains and have their losses socialized: perfect 'puke philosophy and SOP working to a charm. :P

[Zenlitened]

40. "Eyebrow-raising." Yes, that was exactly my reaction.

I raised an eyebrow, and said "Tsk, tsk." Then had the servants bring me another daiquiri as I continued lounging by the pool.

These things can be so very distressing But then one mustn't allow oneself to become upset, must one?

:eyes: