Breaking: TARP Repayment by Banks…Teh Roolz…
Steve Liesman breaking it on CNBC now..Charlie Gasparino has been calling TARP The Roach Motel..
FED: Supervisors now having discussions with several banks to repay TARP
Supervisors are requesting supplemental information for TARP repayment (WTH do they need after stress tests!)
No TARP repayment announcements expected until after June 8th
Supervisor will make recommendations on TARP repayment to the Treasury in batches (so no bank stands alone)
TARP repayment recommendations will be made to Treasury on monthly basis
Source: Treasury to announce process for auctioning TARP warrants in next several days
Treasury plans to spread out auction of warrants over several months
TEH ROOLZ TO REPAY TARP:
1. After repayment, still have to be able to pass stress test
2. Issue unguaranteed debt (no FDIC backup for you!)
3. Demonstrate ability to self-fund in the market (raising private capital)
4. Approval of supervisor
Dilution from repaying TARP: (Gov’t shares controlled by warrants as % of shares outstanding):
JPM 2.35%
Morgan Stanley 5.22% (OUCH!)
Golden Slacks 2.42%
Update: BofA refutes FT report, says not raising capital: Market Mover Monday: red-headed stepchildren of Stress Tests try to raise capital and save themselves from Government….goin’ down…
Update: 8:57am EST: CNBC Becky Quick live now talking to Buffett reporting BofA issued statement denying FT report that they are raising 10b in capital…..the fact that the banks are fighting it out with Team TOTUS bean-counters IN THE MEDIA is frightening..yeah I sold in May baby and I would go away could I afford a vacation in this economy, HA!!!
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Here they come, walking down the street, they get the funniest looks from the Treasury agents they meet..
Hey Hey they’re the Zombies, people say their capital’s down…
yada yada…they managed to get everyone but JPMC under their thumb here, they nabbed Wells Fargo and PNC too….
Bank of America is working on plans to raise more than $10 billion in fresh capital, even as it and Citigroup launch last-ditch attempts to convince the U.S. government they do not need to bolster their balance sheets, the Financial Times reported.
Citing people close to the situation, the paper said that Citi, Bank of America and at least two other lenders will on Monday attempt to convince the U.S. Treasury and Federal Reserve that the findings of “stress tests” into their financial health were too pessimistic.
Bank of America, which has had $45 billion in government aid, was found to need well in excess of $10 billion, the Financial Times reported on its website on Sunday, citing sources.
Regional lenders Wells Fargo and PNC Financial were also among the banks that would need to raise more capital unless they could persuade the authorities their findings were wrong, the paper reported, citing people close to the situation.
*Monkees courtesy of OrangeTabbyCat3
Update: Results will now be released Thursday…Market Mover Friday: Stress Test Results ‘delayed’ as Banks appeal findings…
Update: Results scheduled to be released Monday, now they say Thursday:
Results of the “stress tests” conducted on the nation’s 19 biggest financial institutions will be released late Thursday afternoon and include information on both the individual banks as well as aggregate data, CNBC has learned.
The results of the tests, which were conducted during April, will include estimated losses in certain loan categories as well as the banks’ resources to absorb potential losses, a source said. The source added that the information is not a solvency test….
The Federal Reserve will postpone the release of stress tests on the biggest U.S. banks while executives debate preliminary findings with examiners, according to government and industry officials.
The results, originally scheduled for publication on May 4, now may not be revealed until toward the end of next week, said the people, who declined to be identified. A new release date may be announced as soon as tomorrow, they said.
They really painted themselves into a corner on this:
At least six of the 19 largest U.S. banks require additional capital, according to preliminary results of government stress tests, people briefed on the matter said this week. While some of the lenders may need extra cash injections from the government, most of the capital is likely to come from converting preferred shares to common equity, the people said.
By pushing conversions, rather than federal assistance, the government would allow banks to shore themselves up without the political taint that has soured both Wall Street and Congress on the bailouts. The risk is that, along with diluting existing shareholders, the government action won’t seem strong enough.
Here is the best, most NO SHXT SHERLOCK line of the piece (and the process in fact):
Regulators and bank executives are concerned about how the disclosure is handled because weaker institutions could suffer a collapse in their stock prices.
You mean Uncle Sam is gonna tell us these guys cant survive a financial heart attack and investors might pull their money out? The hell you say! I AM SHOCKED! BWAAAAHAAAAAA frakkin maroons…..
Market Mover Monday: One bank needs more capital per stress tests..will the ‘Cheese’ stand alone?
Vodpod videos no longer available.
Airtime:
Fri. Apr. 24 2009 | 4:29 PM ET
Discussing the bank stress tests and more, with Robert McTeer, fmr. Dallas Fed Bank president; Bill Isaac, Secura Group of LECG; and CNBC’s Larry Kudlow
The cheese stands alone…but who is the cheese? DOW futures are down sharply, 141…
I say it’s CITI, any takers? The notion that our entire banking system is infected with TARP b/c Paulson and Geithner wanted to shield CITI by injecting capital into everyone, and now CITI is still a problem, if it is indeed CITI, well it sucks….
…if only the REGULATOR of CITI back then had KNOWN… who was that masked man? it was Geithner in NY as head of the NY FED…..
CITI CEO Vikram Pandit, who has been cooperating like crazy, even agreeing to cramdowns with Durbin…well WOTS is his head will roll as the sacrificial lamb…yet Dick Parsons somehow got promoted out of it, this after he presided over the TimeWarner stock tanking, go figure…
One of the 19 financial institutions that received a government stress test would require additional capital, based on the initial findings, according to an industry source…Though the source did not identify the company, the government in its report Friday said results were “conveyed” to the participating firms at the end of April, so the bank in question would be aware of the Federal Reserve’s assessment….
…Banks found to have inadequate capital, will have six months to raise the money, through a variety of means in the private sector. If unsuccessful, the government has said the institutions will be eligible for a capital infusion through its Capital Access Program….
“There are two things that are terribly wrong,” former FDIC Chairman Bill Isaac told CNBC.com. “First, that was publicly announced. I can’t imagine what Treasury was thinking when it made that move. It has been causing incredible angst in the markets … The second big problem is that the Treasury is directing the stress testing, apparently with direct involvement of the White House at the highest levels. Bank regulation by law is supposed to be carried out by the independent banking agencies without any political interference.”..
Update: Stress Test White Paper lacks detail…
Update: From WSJ:
Fed White Paper on Stress Testing Procedure pdf here: FED Press Release here; Market averages back to their trend line of the day, Dow up 130 to 8086, S&P up 14 to 86 NAS up 39 to 1691
For release at 2:00 p.m. EDT
A white paper describing the process and methodologies employed by the federal banking supervisory agencies in their forward-looking capital assessment of large U.S. bank holding companies was published on Friday.
The white paper is intended to assist analysts and other interested members of the public in understanding the results of the Supervisory Capital Assessment Program, expected to be released in early May. All U.S. bank holding companies with year-end 2008 assets exceeding $100 billion were required to participate in the assessment, which began February 25. These institutions collectively hold two-thirds of the assets and more than half the loans in the U.S. banking system.
More than 150 examiners, supervisors and economists from the Federal Reserve, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation participated in this supervisory process. Starting from two economic scenarios–a consensus estimate of private-sector forecasters and an economic situation more severe than is generally anticipated–they developed a range of loss estimates and conducted an in-depth review of the banks’ lending portfolios, investment portfolios and trading-related exposures, and revenue opportunities. In doing so, they examined bank data and loss projections, compared loss projections across firms, and developed independent benchmarks against which to evaluate the banks’ estimates. From this analysis, supervisors determined the capital buffer needed to ensure that the firms would remain appropriately capitalized at the end of 2010 if the economy proves weaker than expected.
The Supervisory Capital Assessment Program: Design Summary (287 KB PDF)
Released now, the parameters were apparently already out there, they used Case Shiller Housing Value Futures in their projections…CITI already tested itself against that same metric…
they are not giving the Tangible Common Equity number they want from the banks is it 3%? 4%? and they are also not giving out the specific projected losses or the size of the capital buffer the regulators want…..meanwhile the NY Post is reporting Vikram Pandit is out as CITI CEO shortly….
They gave the categories of loans they looked at and the counterparty risk but not the other parameters, reporters asked on the conference call…..
Will get up the CNBC clip as soon as it’s available
It’s managing expectations they say..a whole lotta nothin’ just came out…they Put on the Ritz for us…they don’t want anyone running the numbers before the banks shore up capital..
Next words will be the results of the stress tests on May 4th, I think the banks will begin to leak their own inner results before that..
The markets are turning down now, were up over 100 now up 50 on the Dow….
Submitted by IrishC
Moderate in the Middle 