Posts tagged Henry Paulson
October 13, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged ABK, ambac, dow closed, Henry Paulson, interbank lending, MBI, MBIA, Mitsubishi, Moody's, Morgan Stanley, MS, Radian Group, RDN, SCA, stimulus package, stocks, Syncora, wall street
Forget Prozac, the market needs lithium. After last week’s worst week, today marked the best day in Wall Street’s history and the biggest one-day percentage gain since 1933. Stocks rallied all across the board. The Dow closed up 936 points, or over 11%, to $9,387, and the Nasdaq and S&P also gained over 11% each. Morgan Stanley (MS) traded like an OTC today, gaining 86% from its close of $9.68 on Friday after Japan’s Mitsubishi UFJ Financial Group invested in it $9 billion. Will it stick? Maybe. Countries all across the globe are now jointly focused on fixing their banks to stave off a worldwide recession, so if this doesn’t work, what will?
By the way, sometime over the weekend the plan changed from “buying toxic mortgage-backed assets” to “let’s follow Great Brittan because they seem to know how to deal with this crisis, so let’s pump money into a few good banks like they’re doing over there across the pond”. So that’s what we’re doing. And the figure is now $250 billion instead of $700 or $850 or whatever it ended up being once al the rum and wooden arrow makers across the nation were settled up.
The credit markets were closed today because of the holiday, but they open back up tomorrow. Analysts are now looking to see if the interbank lending rates, or the rates banks charge each other to borrow each other’s money (think what needed to happen but didn’t when people ran IndyMac) will come down so that banks will again lend to each other. Until banks again start covering each other, no one who missed one electric bill will be able to get a loan.
The only stocks I’m ahead in right now are Radian Group (RDN), MBIA (MBI), and Syncora (SCA); the rest are one big hemorrhage. Moody’s still hasn’t lifted their threat of downgrade of Ambac (ABK). But to stay positive after such a positive day, at least I’ll be able to average down. And average down I definitely will!
Word that a second stimulus package may be on its way may have also helped boost the markets today. Crude oil followed the rest of the market today, closing up $4.14 to $81.84.
The #1 movie in America is Beverly Hills Chihuahua.
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October 4, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged $700 billion, C, Citigroup, dow closed at, F, FDIC, Ford, General Motors, GM, Henry Paulson, House approves bill, Huntington Bancshares, mark-to-market, National City, oil closed at, regional, SEC, Wachovia, WB, Wells Fargo, WFC
“Henry Paulson buries U.S. Toxic Debt.” So much has happened in four days.
The SEC also gave new flexibility to the accounting departments at banks with bad housing assets, allowing them to use their own judgment when assessing value. Up until now, banks had to assess the value of these properties against similar properties on the market- called the “mark-to-market accounting rule”. Now, banks can assess value based on what they feel a property may fetch when times are good again. This new rule, or lack of a rule, caused the stock values of regional banks like National City (NCC) and Huntington Bancshares (HBAN), who have a ton of bad properties on their books, to make consistent gains this past week.
President Bush signed the $25 billion loan to the US automakers this week to transform their old factories into green-auto producing ones. This did little to the stock prices of Ford (F) and General Motors (GM). “When the country gets a cold, Detroit gets the flu,” they say.
The Senate devised their own bailout plan that included a bunch of tax breaks to keep the republicans happy, and passed it to the House. This bailout plan differs from the one originated in the House of Representatives by a few key points:
Temporarily raising the FDIC insurance cap to $250,000 from $100,000
Allowing the FDIC to borrow from the Treasury to cover any losses that might occur as a result of the higher insurance limit
Extending tax breaks to individuals and businesses using renewable energy, and giving a deduction for the purchase of solar panels
Offering relief for another year from the Alternative Minimum Tax
Added to the bill this time around were tax $150 billion exemptions for wooden arrow and rum manufacturing.
What?
The House stamp approved the bill yesterday, and immediately afterwards, the bottom fell out of the Dow- again. News that 159,000 jobs were lost in September, the unemployment rate has held at 6.1%, and an overall skepticism of the potential effectiveness of the bailout plan all caused people to sell into the fire.
President Bush signed the $700 billion bailout bill into law today.
Because the bill was passed, the short-selling ban, which was originally set to expire on October 2, but then was extended until October 17, will now expire on October 8- the third day of the bailout bill’s enactment.
What seemed like a done deal between Citigroup (C) and Wachovia (WB), was undermined my Wells Fargo (WFC), who swooped in stole the show with a $15.1 billion bid. Citigroup is going to contest, but this didn’t stop Citi from losing 18% yesterday. Wachovia, on the other hand, gained over 50%.
Oil has been creeping around in the background, closing at $93.88 on Friday afternoon. At one point, the Dow was up over 280 points yesterday, but then freefell to close down 157 to $10,325.
September 28, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged $250 billion, $700 billion, ABK, ambac, bailout plan, Banco Santander, bankruptcy, Ben Bernanke, Citigroup, CNNMoney, credit crunch, economy, Henry Paulson, Moody's, Nikkei, S&P, SEC, STD, Wachovia, wall street, WB, Wells Fargo
Early this morning, Congress finally agreed on the wording of the bailout. CNNMoney.com reported the following provisions attached to the way the money is spent:
*The $700 billion would be disbursed in stages, with $250 billion made available immediately for the Treasury’s use. (After the initial $250 million, an additional $100 million can be released by the President. If after that more money is needed, Congress can re-vote on release of the remaining $350 million.)
*Curbs will be placed on the compensation of executives at companies that sell mortgage assets to Treasury. Among them, companies that participate will not be allowed to offer golden parachutes to executives; they will not be able to deduct the salary they pay to executives above $500,000.
*An oversight board will be created. The board will include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director and the Housing and Urban Development secretary.
*Allow for the Treasury to receive the option to take ownership stakes in participating companies under certain circumstances.
*Treasury may establish an insurance program – with risk-based premiums paid by the industry – to guarantee companies’ troubled assets, including mortgage-backed securities, purchased before March 18, 2008.
Congress wanted to get the bill together before the opening of the Asian markets tonight. The Nikkei 225 opened $10 lower than Friday’s close, but then began a slightly hesitant ascent. How the bill’s finalization will affect our market’s opening tomorrow, or if anymore bankruptcies or downgrades will occur, is still up in the air. My guess is that there will be a sigh of relief across all sectors tomorrow but any real change will only happen after the bill is signed, sealed and the money is delivered.
Will Ambac (ABK) avoid a Moody’s downgrade before the relief comes through, and when the relief comes through, will it help ABK? Message boarders seem to think the price of ABK will skyrocket tomorrow, and the very late-day increase in ABK’s share price on Friday may have hinted belief that a weekend deal would in fact help ABK come Monday. But the “Moody Monster” is still lurking in the woods. Analysts are blaming a lot of the financial crisis on these ratings agencies for rating companies way higher than they deserved, therefore needing to make drastic corrective downgrades. On March 20, 2001, Frank Raiter, Standard & Poor’s former top mortgage official, said he was asked by S&P to rate a real estate investment he had never even reviewed. He told Bloomberg that he was told to “just guess” because the S&P was in competition with other ratings companies (possibly Moody’s?) for fees on a $484 million deal. It’s good that ratings are being revealed as little more than smoke and mirrors, but people still take ratings seriously, and a Moody’s downgrade of Ambac would devastate the company and its stock price.
And will the news of consensus on Capitol Hill save Wachovia (WB) from going bust before another bank picks up its fractions? Or will we remember Wachovia as the last big victim of the “credit crunch”? We’ll have to wait to see…
September 21, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged "Paulson's Monster", $11 trillion, $700 billion, ABK, ambac, bankruptcy, banks, Barclays, Berkshire Hathaway, bond insurer, economy, Google, hedge funds, Henry Paulson, investing, Lehman Brothers, MBI, MBIA, Moody's, SEC, Warren Buffett
“Paulson’s Monster”, as it’s being called, has now proposed the need for $700 billion of taxpayer dollars, raising the US debt limit to $11 trillion, to spin off the bad sectors of the financials into its own entity. Paulson claims his plan will “minimize” the cost to the taxpayer in the long run, but who can really be sure? As part of the plan, Paulson said that he was currently in talks with other countries for help. He wouldn’t disclose which countries.
Back in Ratings land, one ABK message boarder claimed that the Feds raided Moody’s on Friday looking for connections between the ratings company and hedge funds. No link was provided, and given that any Joe Schmo can go on a Google Finance board and post whatever he or she pleases, it could very well be completely fabricated. However, a Bloomberg article titled “Berkshire’s Bond Insurer, Moody’s Stake Face Probe”, reports that one such link may in fact come to light:
“Billionaire Warren Buffett’s Berkshire Hathaway Inc. faces a probe by Connecticut’s attorney general for possible conflicts created by owning almost 20 percent of credit ratings company Moody’s Corp. while also running a new municipal bond insurer.
Moody’s gave its top rating last week to Berkshire Hathaway Assurance Corp., created in December as existing bond insurers struggled to maintain their AAA ratings. A favorable rating for Berkshire by New York-based Moody’s, or a lower rating for competitors including MBIA Inc. and Ambac Financial Group Inc., may give Buffett’s company an advantage.”
So maybe there is truth in rumor.
In other news, Barclays is the proud new owner of Lehman Brothers’s investment banking and trading businesses. The $1.75 billion deal approved yesterday is a definite bargain as compared to the one Barclays would have had to strike last week for Lehman’s entire assets before bankruptcy.
September 21, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged ABK, AIG, ambac, banks, banned, Barclays, Ben Bernanke, Charles Schumer, economy, financials, Henry Paulson, investing, LEH, Lehman Brothers, LEHMQ, MBI, MBIA, Moody's, Moody's Ratings, short selling, stocks
Whoa mama. I was definitely wrong about the profit-taking. The US market rallied harder in the last two days than it has in 38 years- longer than I’ve been alive! Lehman Brothers, now on the OTC board as LEHMQ, gained 313% on rumors that it would sell parts of itself to foreign banks. Barclays is back in the running. In just the last two days of trading, I made up almost all of what I had lost in the last week and a half.
The SEC banned ALL short selling- regular and naked alike- of 799 financials for the next 10 days. The United Kingdom temporarily halted short selling yesterday, and the US did the same. This is a huge step from just banning naked shorting; this is a total ban on betting that stocks will lose value, essentially disqualifying half of the game. Hillary Clinton and Charles Schumer, both New York Senators, proposed the ban. Critics say this ban will warp the market, making it seem as if the financial stocks are worth more than they are. But when naked shorting was banned in July, the effect lasted long after the ban was lifted. In fact, it lasted right up until last week when AIG teetered and fell and dragged the entire sector along with it. So in a market that is so emotionally driven, a little banning may do the trick to snap the depression (no pun intended).
Henry Paulson, our Treasury Secretary, and Federal Reserve Chairman Ben Bernanke proposed the idea to spin all bad parts of financial institutions into its own entity- a black hole of badness. This idea reminds me of that story I had to read in high school about the utopian society that was only a utopia because of the little girl who lived in a cage in the basement of someone’s house. Remember that one? I was never big on reading, so titles slip my mind. I just remember the girl in the cage and the annual field trip every schoolkid would take to see the girl in the dirty dark cage dungeon as a reminder of why they lived as perfectly as they did. I wonder if part of the Paulson and Bernanke plan will have the American people visiting the dark entity once a year. Oh wait, now I get it. We will be visiting once a year- at tax time. Seems these two guys kept up on their high school reading.
Meanwhile in Ratings Land, Moody’s threatened to downgrade Ambac (ABK) and MBIA (MBI), which dropped ABK 42% and another 27% in afterhours, and MBI 8% and another 8% in afterhours. The ABK message boards caught fire, and it seems Moody’s may catch some of it by Monday, if not sooner.
Do you know the name of that book yet? Maybe it was a short story.
