This deal is getting worse all the time

[Guest guest]

This deal banking deal is looking worse all the time. Read towards the end and you can see the fed doesn't want banks talking to anyone about the details of the plan. Small wonder.

http://www.cnsnews.com/public/content/article.aspx?RsrcID=37772

Treasury Can Keep Ownership Stake in Banks As Long As It WantsMonday, October 20, 2008By Matt Cover and Jane O’Brien

(CNSNews.com) – The U.S. government is under no obligation, ever, to surrender any of the assets it purchases as part of the federal financial bailout plan, a Treasury Department official told CNSNews.com on Friday.That includes the ownership interest the Treasury is buying in nine major banks and the shares it hopes to purchase in perhaps hundreds of other smaller banks around the country.“It would be (left) up to the government’s discretion as to when they would want to sell it (private assets) back,†spokeswoman Zuccarelli said.Under the bill signed by President Bush, only the Treasury Secretary’s purchase authority is set to expire, not the authority to hold or relinquish assets held by the government.“We can hold them for as long as we want,†she said. “We just can’t purchase after that date.â€Under the law, the sunset date for the government to purchase assets is Dec. 31, 2009, unless Congress extends it.Last Monday, as part of the financial industry bailout bill, the Treasury announced a program in which the government will purchase up to $250 billion of “senior preferred shares†--i.e., stock-- in a variety of U.S.-controlled banks, savings-and-loans and other institutions.The stock held by the Treasury will be required to pay dividends to the government at the rate of 5 percent for five years, a figure that is set to rise after five years to 9 percent, according to guidelines.In fact, according to guidelines issued by the Treasury Department, companies can not buy their shares back for three years, unless they raise 25 percent of the shares’ value in private capital.The stock “may not be redeemed (repurchased) for a period of three years from the date of this investment, except with the proceeds†from the sale of assets “which results in aggregate gross proceeds of not less than 25 percent of the issue price (of the stocks),†the guidelines state.After three years, the shares can be bought back at their original selling price. This means that if a participating bank wanted its assets back, it would have to give back the entire amount it had received from the Treasury.“The banks can choose to give the money back after three years,†Zuccarelli said. “They have to give us the same amount of money back.â€However, the decision on whether to actually re-sell the stock to the banks rests solely with the Treasury Secretary and there is no timeline under the law for re-privatizing government-held stocks and assets.“The Secretary may, at any time, upon terms and conditions and at a price determined by the Secretary, sell … any troubled asset purchased under this act,†the law says.The law, formally titled the Emergency Economic Stabilization Act of 2008, explicitly grants sole authority to the Secretary of the Treasury to purchase, hold, and sell troubled assets.“The Secretary,†says the law, “is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation, the following: … In order to provide the Secretary with the flexibility to manage troubled assets in a manner designed to minimize cost to the taxpayers … to purchase, hold, and sell troubled assets and issue obligations.â€When the bailout bill was debated and passed by Congress, it was generally assumed that the $700 billion the law provided to the secretary of the Treasury to stabilize the financial markets would be used to buy mortgages and mortgage-backed securities. It was not generally believed the law was being enacted to empower the secretary to buy an ownership interest in banks. However, the actual language of the law authorized the secretary not only to purchase mortgages and mortgage securities but also what was sweepingly described as “any other financial instrument.â€The ownership interests that the secretary is now going to purchase in financially healthy banks are being purchased under this “any other financial instrument†clause.The language is included in the part of the bill that defines “troubled assets.â€Says the law: “The term ‘troubled assets’ means--(A) residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary determines promotes financial market stability; and ( any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress.â€Treasury Spokesperson Zuccarelli said that according to the law, Treasury is required to keep the taxpayer’s best interests at heart.“We are going to have to consider the taxpayer’s interest at all times,†she said. “We are going to have to consider the health of the (financial) institution, and if it’s not in the taxpayer’s interest to hold them, that’s something we’re going to have to keep in mind.â€CNSNews.com contacted the nine major banks initially enrolled in the Treasury program in an effort to clarify the terms under which they could reclaim their stocks. None of the banks would comment on the specifics of the program, but a spokesman for Bank of New York Mellon, the bank designated by the Treasury to run the program, explained why: The government has asked banks not to divulge details of its program.“Honestly, I think that’s a question you should be asking them,†Bank of New York Mellon spokesman Heine said. “The reason I’m saying that is because the government has asked us--and I think they’ve asked the other banks--not to describe their program. “In other words, it’s fine for us to say what we think of the participation in the program, but when people call here about details related to the program itself, the Treasury Department has asked that we defer those questions back to them because they don’t want the banks describing to the press or to the external world their program.â€â€œNormally that probably wouldn’t be the case, but because it’s the U.S. government, you know, the U.S. government tells you not to talk about their program, you basically don’t talk about their program.†Heine told CNSNews.com.

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[Guest guest]

I don't find it as troubling that the law doesn't set a cut-off date

for the return of the previously-private corporation/whatever,

because setting a hard deadline date also means the government has a

rather finite time in which to make things work out in terms of

(hopefully!) being profitable for the taxpayers, as I do about the

fact that the details about how it all works seems to be so

secretive. This isn't a matter (that I could see) of national

security/state secrets in terms of defense and things like that, and

the craziest thing to me is my apparently limited understanding was

that the whole point of the insane " bailout " act was to make people

and banks have more confidence in others that they won't have things

go wonky, which was largely caused in the first place by things not

being transparent in how all these financial vehicles work and are

administered and evaluated: it seems like what the banks are stating

is that the same thing that got things where they are today for

messed up credit markets that was done privately, is being repeated

by the government, by obscuring details that logically should be

made public to instill confidence...

That, and the fact that the Treasury positions in question aren't

elected positions gives a bit of pause. Perhaps someone should send

in a bill demanding that all the details of where all this money is

going, and the status of it, is at least reported on in full details

every January 20th at the State of the Union address, until it has

fully run its course: after all, taxpayers (probably most whom had

no choice in the matter) are the purse holders for this thing, and

at least those of us trying to do the right thing have a right to

know what's become of our inflation-loss dollars...

>

> This deal banking deal is looking worse all the time. Read towards

the end

> and you can see the fed doesn't want banks talking to anyone about

the details

> of the plan. Small wonder.

>

>

>

> _http://www.cnsnews.com/public/content/article.aspx?RsrcID=37772_

> (http://www.cnsnews.com/public/content/article.aspx?RsrcID=37772)

>

> Treasury Can Keep Ownership Stake in Banks As Long As It Wants

> Monday, October 20, 2008

> By Matt Cover and Jane O’Brien

>

>

> (CNSNews.com) †" The U.S. government is under no obligation,

ever, to

> surrender any of the assets it purchases as part of the federal

financial bailout

> plan, a Treasury Department official told CNSNews.com on Friday.

>

> That includes the ownership interest the Treasury is buying in

nine major

> banks and the shares it hopes to purchase in perhaps hundreds of

other smaller

> banks around the country.

>

> “It would be (left) up to the government’s discretion as to

when they would

> want to sell it (private assets) back,†spokeswoman

Zuccarelli said.

>

> Under the bill signed by President Bush, only the Treasury

Secretary’s

> purchase authority is set to expire, not the authority to hold or

relinquish

> assets held by the government.

>

> “We can hold them for as long as we want,†she said. “We

just can’t

> purchase after that date.â€

>

> Under the law, the sunset date for the government to purchase

assets is Dec.

> 31, 2009, unless Congress extends it.

>

> Last Monday, as part of the financial industry bailout bill, the

Treasury

> announced a program in which the government will purchase up to

$250 billion of

> “senior preferred shares†--i.e., stock-- in a variety of

U.S.-controlled

> banks, savings-and-loans and other institutions.

>

> The stock held by the Treasury will be required to pay dividends

to the

> government at the rate of 5 percent for five years, a figure that

is set to rise

> after five years to 9 percent, according to guidelines.

>

> In fact, according to guidelines issued by the Treasury

Department,

> companies can not buy their shares back for three years, unless

they raise 25 percent

> of the shares’ value in private capital.

>

> The stock “may not be redeemed (repurchased) for a period of

three years

> from the date of this investment, except with the proceedsâ€

from the sale of

> assets “which results in aggregate gross proceeds of not less

than 25 percent of

> the issue price (of the stocks),†the guidelines state.

>

> After three years, the shares can be bought back at their

original selling

> price. This means that if a participating bank wanted its assets

back, it

> would have to give back the entire amount it had received from

the Treasury.

>

> “The banks can choose to give the money back after three

years,†Zuccarelli

> said. “They have to give us the same amount of money back.â€

>

> However, the decision on whether to actually re-sell the stock to

the banks

> rests solely with the Treasury Secretary and there is no timeline

under the

> law for re-privatizing government-held stocks and assets.

>

> “The Secretary may, at any time, upon terms and conditions and

at a price

> determined by the Secretary, sell … any troubled asset purchased

under this act,

> †the law says.

>

> The law, formally titled the Emergency Economic Stabilization Act

of 2008,

> explicitly grants sole authority to the Secretary of the Treasury

to purchase,

> hold, and sell troubled assets.

>

> “The Secretary,†says the law, “is authorized to take such

actions as the

> Secretary deems necessary to carry out the authorities in this

Act, including,

> without limitation, the following: … In order to provide the

Secretary with

> the flexibility to manage troubled assets in a manner designed to

minimize

> cost to the taxpayers … to purchase, hold, and sell troubled

assets and issue

> obligations.â€

>

> When the bailout bill was debated and passed by Congress, it was

generally

> assumed that the $700 billion the law provided to the secretary

of the

> Treasury to stabilize the financial markets would be used to buy

mortgages and

> mortgage-backed securities. It was not generally believed the

law was being

> enacted to empower the secretary to buy an ownership interest in

banks. However,

> the actual language of the law authorized the secretary not only

to purchase

> mortgages and mortgage securities but also what was sweepingly

described as “

> any other financial instrument.â€

>

> The ownership interests that the secretary is now going to

purchase in

> financially healthy banks are being purchased under this “any

other financial

> instrument†clause.

>

> The language is included in the part of the bill that defines

“troubled

> assets.â€

>

> Says the law: “The term ‘troubled assets’ means--(A)

residential or

> commercial mortgages and any securities, obligations, or other

instruments that are

> based on or related to such mortgages, that in each case was

originated or

> issued on or before March 14, 2008, the purchase of which the

Secretary

> determines promotes financial market stability; and ( any other

financial

> instrument that the Secretary, after consultation with the

Chairman of the Board of

> Governors of the Federal Reserve System, determines the purchase

of which is

> necessary to promote financial market stability, but only upon

transmittal of

> such determination, in writing, to the appropriate committees of

Congress.â€

>

> Treasury Spokesperson Zuccarelli said that according to the law,

Treasury is

> required to keep the taxpayer’s best interests at heart.

>

> “We are going to have to consider the taxpayer’s interest at

all times,â€

> she said. “We are going to have to consider the health of the

(financial)

> institution, and if it’s not in the taxpayer’s interest to

hold them, that’s

> something we’re going to have to keep in mind.â€

>

> CNSNews.com contacted the nine major banks initially enrolled in

the

> Treasury program in an effort to clarify the terms under which

they could reclaim

> their stocks. None of the banks would comment on the specifics of

the program,

> but a spokesman for Bank of New York Mellon, the bank designated

by the

> Treasury to run the program, explained why: The government has

asked banks not to

> divulge details of its program.

>

> “Honestly, I think that’s a question you should be asking

them,†Bank of

> New York Mellon spokesman Heine said. “The reason I’m

saying that is

> because the government has asked us--and I think they’ve asked

the other

> banks--not to describe their program.

>

> “In other words, it’s fine for us to say what we think of the

participation

> in the program, but when people call here about details related

to the

> program itself, the Treasury Department has asked that we defer

those questions

> back to them because they don’t want the banks describing to

the press or to

> the external world their program.â€

>

> “Normally that probably wouldn’t be the case, but because

it’s the U.S.

> government, you know, the U.S. government tells you not to talk

about their

> program, you basically don’t talk about their program.†Heine

told CNSNews.com.

>

>

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