More Bailouts at the Expense of the Taxpayers

Congress works on bailout of union pension funds, using taxpayer money.

(Hat tip Market Ticker)

When I read this steam shot out of both ears. Here we are again with the prospects of another bailout with the taxpayer being the source of funds.

New rules expected from the Financial Accounting Standards Board (FASB) are causing massive heartburn for Big Labor and fueling a new backroom push in Congress for a taxpayer bailout of underwater union pensions.

With nine Republican co-sponsors of the House bill, Big Labor is pushing for passage during a lame duck session after the November elections.

The proposed FASB rules would require a company to report as a liability on its books the amount of the withdrawal penalty from its union multiemployer pension plan.

The penalties are pricey.  One of the largest of these multiemployer funds, Central States Funds, is in such bad shape that UPS paid a $6.1 billion penalty to extricate itself from employee participation in the fund. {…}

The current unreported liability has long been cause for concern as in some cases the amount of the withdrawal penalty exceeds the value of company assets.

A bill introduced by Sen. Bob Casey (D-Penn.), and a bill from Rep. Earl Pomeroy (D-N.D.) in the House, would for the first time put taxpayers on the hook for these underwater union pension plans.

The union multiemployer pension distress was not caused by the recent economic woes but by mismanagement.  The economic downturn has only exacerbated the problem.

The proposed bailout would create a new fund at the Pension Benefit Guarantee Corporation  (PBGC).  The PBGC is a government entity currently using premiums paid by private pension funds to insure a minimum pension benefit guarantee ($12,870 annually) to participants should a plan become insolvent.  The PBGC itself already sports a reported $21 billion deficit.

The Casey and Pomeroy bills would inaugurate the use of taxpayer dollars to guarantee the minimum benefits — which Casey’s bill ups to $21,000 annually — creating incentives for the multiemployer union pension fund trustees to dump the plans on taxpayers. {…} (emphasis mine) (HumanEvents)

Irresponsible action on the part of companies should not be the responsibility of the taxpayers to fix, period. If a pension fund is underwater then it must be the company and/or union to resolve the funding short comings by whatever means necessary. But leave the taxpayers out of it!




More on this topic (What's this?)
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Read more on Mutual Funds, 2008 Financial Crisis at Wikinvest

More Bailouts at Taxpayer Expense

Just two weeks ago President Obama claimed that bailouts funded by taxpayers would end. Well that did not last long.

A new bill that would provide upwards of $30 Billion to smaller banks is being put together. But instead of calling it a bailout the administration is calling it an assistance payment. That is taxpayer funds will go to smaller banks in the harder hit regions of the country to help them with deteriorating balance sheets. The cover story for the bill will be that the funds will enable the banks to make more loans. Where have we heard that before?

Congress is at work on a new program that would send $30 billion to struggling community banks, in a process similar to the huge federal bailouts of big banks during the financial crisis. This time, money is more likely to disappear as a result of bank failures or fraud.

{…} In his (President Obama) weekly radio and Internet address on Saturday, he described the new bailout program as “a common-sense” plan that would give badly needed lending help to small-business owners to expand and hire.

At its core, the program is another bank rescue. Some lenders need the bailouts to survive. Others could take the bailouts and crumble anyway. That’s what happens when banks run out of capital – the money they must keep in case of unexpected losses. Banks with too little capital can be shuttered to protect the taxpayer-insured deposits they hold.

Or, under this proposal, many could get bailouts. The new money would be available to banks that are short on cash. It’s supposedly reserved for banks deemed “viable.” But regulators won’t consider whether banks are viable now. They’ll envision how strong a bank would be after receiving a fresh infusion cash from taxpayers and private investors. If the bank would become viable because of the bailout, the government can make it happen. {…} (HuffPo)

The FDIC is responsible for absorbing the costs of failed banks and protecting depositors, that is why banks pay a fee to the FDIC reserve fund. But as I have written in the past, the FDIC has been struggling to keep the reserve fund in the black. The FDIC still has an open credit line with the Treasury for $500 Billion, just in case.

It is not the responsibility of the taxpayers to bailout banks, period.

The bill that President Obama spoke of during his radio address is nothing more than another taxpayer funded bailout. He can call it whatever he wants but it is simply another bailout using taxpayer funds. Looks like we have been duped, again.




Freddie Mac Needs More Money – From You

Freddie Mac (FRE) moments ago announced that they need $10.6 Billion to address a budget deficit of $10.5 Billion.

The FHFA, as conservator, will formally submit a draw request from the U.S. Treasury (taxpayers) as soon as possible. It is expected that Freddie Mac will receive the new funds by June 30, 2010.

Americans to Bailout Greece?

Will the deteriorating conditions in Europe result in American tax payers digging into their wallets to assist with European nation bailouts?

It was reported today that the U.S. Treasury Department was in “close contact” with officials in Europe. Whenever I hear that U.S. officials are in close contact with someone or some nation I get worried.

Why would we contribute to the bailouts in Europe? First is that American corporations are very intertwined with the Euro, and as such American corporations will push the government to make sure bailouts move swiftly in order to stabilize the Euro currency, even if that means involving American taxpayer funds.

Another reason goes right back to the banks and investment houses (yea, Wall Street again). It has been said by some main stream media outlets that a collapse of Greece or the Euro itself would have little impact on the United States. That statement could not be further from reality. Remember that Wall Street banks fought tooth and nail to have their restrictions reduced over the past decade, and as such these firms are ‘in deep’ with derivatives, currency swaps, and bonds of various flavors tied to Europe.

So will American taxpayers be a part of Europe’s bailouts? I expect we will.

Obama concerned about Greek debt, monitoring closely

ABOARD AIR FORCE ONE, April 28 (Reuters) – U.S. President Barack Obama is concerned about Greece’s debt problems and his administration is in touch with Europe about the issue, White House spokesman Bill Burton said on Wednesday.

"This is something that is of great concern to the president and we’re monitoring it very closely," Burton told reporters on Air Force One, adding that the U.S. Treasury Department and other agencies were "in close contact with folks in Europe about the issue." […]

Fannie Mae (FNM) Asks for More Taxpayer Funds

Fannie Mae (NYSE:FNM), in their latest earnings statement announced that an additional $15.3 Billion is required to cover additional losses.

WASHINGTON, DC – Fannie Mae (FNM/NYSE) reported a net loss of $15.2 billion in the fourth quarter of 2009, compared with a net loss of $18.9 billion in the third quarter of 2009. Including $1.2 billion of dividends on our senior preferred stock held by the US Department of Treasury, the net loss attributable to common stockholders was $16.3 billion, or ($2.87) per diluted share, in the fourth quarter of 2009, compared with a loss of $19.8 billion, or ($3.47) per diluted share, in the third quarter of 2009. Our fourth-quarter results were driven primarily by credit expenses, which declined from the third quarter but remained at an elevated level, and our recognition of a $5.0 billion loss on our low income housing tax credit investments. […]

For the full year of 2009, Fannie Mae reported a net loss of $72.0 billion, compared with a loss of $58.7 billion for 2008. […]

The fourth-quarter loss resulted in a net worth deficit of $15.3 billion as of December 31, 2009, taking into account unrealized gains on available-for-sale securities during the fourth quarter. As a result, on February 25, 2010, the Acting Director of the Federal Housing Finance Agency submitted a request for $15.3 billion from Treasury on the  company’s behalf. FHFA has requested that Treasury provide the funds on or prior to March 31, 2010. […]

Whatever happened to the “no more bailouts” the Obama administration announced five months ago?

Elizabeth Warren – Wall Street Bonus Babies

Elizabeth Warren has penned an op-ed for the Wall Street Journal, and she holds nothing back.

[…]Banks and brokers have sold deceptive mortgages for more than a decade. Financial wizards made billions by packaging and repackaging those loans into securities. And federal regulators played the role of lookout at a bank robbery, holding back anyone who tried to stop the massive looting from middle-class families. When they weren’t selling deceptive mortgages, Wall Street invented new credit card tricks and clever overdraft fees.

In October 2008, when all the risks accumulated and the economy went into aelizabeth-warren tailspin, Wall Street CEOs squandered what little trust was left when they accepted taxpayer bailouts. As the economy stabilized and it seemed like we would change the rules that got us into this crisis—including the rules that let big banks trick their customers for so many years—it looked like things might come out all right.

Now, a year later, President Obama’s proposals for reform are bottled up in the Senate. The same Wall Street CEOs who brought the economy to its knees have spent more than a year and hundreds of millions of dollars furiously lobbying Washington to kill the president’s proposal for a Consumer Financial Protection Agency (CFPA). […]

[…] The consumer agency is a watchdog that would root out gimmicks and traps and slim down paperwork, giving families a fighting chance to hang on to some of their money. So far, Wall Street CEOs seem determined to stop any kind of watchdog. They seem to think that they can run their businesses forever without our trust. This is a bad calculation.

It’s a bad calculation because shareholders suffer enormously from the long-term cost of the boom-and- bust cycles that accompany a poorly regulated market. J.P. Morgan CEO Jamie Dimon recently explained this brave new world, saying that crises should be expected "every five to seven years."

He is wrong. New laws that came out of the Great Depression ended 150 years of boom-and-bust cycles and gave us 50 years with virtually no financial meltdowns. The stability ended as we dismantled those laws and failed to replace them with new laws that reflected modern business practices. […]

[…]When the history of the Great Recession is written, they can be singled out as the bonus babies who were so short-sighted that they put the economy at risk and contributed to the destruction of their own companies. Or they can acknowledge how Americans’ trust has been lost and take the first steps to earn it back.

Read the full article at the WSJ

More on this topic (What's this?) Read more on Wall Street Bonuses at Wikinvest

GMAC Reports Record Loss – Mortgages Gone Bad

GMAC, the company that was not content with just issuing car loans, is now bleeding money from every orifice. I guess the tax payers will have to bail them out, again.

(Bloomberg) — GMAC Inc., the auto and home lender controlled by the U.S. government, posted a record quarterly net loss, driven by the declining value of mortgage assets.

The fourth-quarter loss from continuing operations was $3.9 billion, compared with profit of $7.7 billion a year earlier, Detroit-based GMAC said in a statement. GMAC’s net loss was $4.95 billion after writing down mortgage holdings. For the year, GMAC swung to a net loss of $10.3 billion from a $1.87 billion profit.[…]  (H/T Butch)

Tim Geithner – Written Testimony For AIG Hearing Is Released

Ahead of tomorrows big show on the Hill, Tim Geithner’s written testimony has been leaked. I do not know if this was intentionally leaked or not. Nor do I know how it came to be on the net ahead of the embargo period, but it is swilling around the net now.

Tim Geithner Written Testimony