Archive for Sunday, October 26, 2008

Companies start competing for piece of bailout pie

October 26, 2008


— The bailout is now the hottest lobbying game in town.

Insurers, automakers and American subsidiaries of foreign banks all want the Treasury Department to cut them a piece of the largest government rescue in U.S. history.

The betting is that many with their hands out will be successful, especially with financial markets in a stomach-churning dive and predictions the economy is about to tumble into a deep recession.

These groups argue that the credit squeeze is so severe and the risks to the economy so dire that their industries need financial support as well.

The Treasury is considering requests from a variety of industries but has not decided whether to expand the program, officials said Saturday.

Lobbying efforts are intensifying.

The Financial Services Roundtable wrote Treasury officials on Friday requesting that the initiative to buy $250 billion in bank stock grow to cover insurers, auto companies, securities dealers and U.S. subsidiaries of foreign companies, including banks. The Treasury's plan is intended to bolster banks' tattered balance sheets and get them to resume making loans.

As the Treasury now interprets it, these additional groups would not participate in the bank stock program. They could receive help from a separate part of the $700 billion rescue that will buy bad assets from financial institutions.

Steve Bartlett, the president of the Roundtable, urged the Treasury to broaden the definition of those eligible for the stock purchase program.

"The institutions that are excluded play a vital role in the U.S. economy by providing liquidity to the market," Bartlett wrote Neel Kashkari, the Treasury Department official running the bailout program.

Referring to U.S. subsidiaries of foreign companies, Bartlett said, "This is a global crisis and to not recognize the U.S. firms controlled by foreign banks or companies would create further impediment to the market's recovery."

A financial industry official said Treasury Secretary Henry Paulson met over the past week with various groups, including hedge fund managers, that were petitioning for assistance. The official spoke on condition of anonymity because the Treasury has not made a decision.

Some insurers technically would be eligible for stock purchases now if they own subsidiaries that are savings and loan institutions regulated by the Office of Thrift Supervision.

Last month, American International Group, the country's largest insurance company, received an $85 billion loan from the Federal Reserve. Since then, it has gotten further support in an effort to withstand the biggest upheavals on Wall Street since the Great Depression.

Complicating the government's decision-making is that the Bush administration will not be in charge after Jan. 20. Paulson, who has said he has no intention of staying on the job, has pledged to consult with both campaigns on his bailout actions.

Democrat Barack Obama's presidential campaign said Friday it supported the effort by the auto industry to get money from the $250 billion made available for stock purchases. That would be in addition to $25 billion recently approved by Congress for low-interest loans to help the struggling industry retool and build fuel efficient vehicles.

The debate over expanding the bailout comes as the Treasury is rushing to get money out the door to the primary recipients: banks that sharply curtailed lending after suffering billions of dollars of losses on mortgage-related assets as home foreclosures soared in the housing slump.

Lawmakers are pressuring the Treasury to do more in the foreclosure area, as well.

Sheila Bair, head of the Federal Deposit Insurance Corp., told Congress about efforts to provide government-backed loan guarantees for mortgages that are reworked to help homeowners in danger of default. That would give banks an incentive to speed up refinancing efforts because the government would back part of the reworked loan.


Godot 9 years, 7 months ago

but,but,but, The One promised in a campaign speech the other day that HE would spend the $700 billion to help main street.How can that be? The president is only allowed to propose; Congress must dispose.That is, that was the way it was until the two "rescue" bills were passed.The bills he pushed for, that he said he approved of, gave the Treasury Secretary the sole, unchallenged authority, to spend not just that $700 billion, but an unlimited amount, in any way he sees fit. So why in the world should Obama be surprised that billions are being given to banks so the banks can buy their competitors, to pay huge bonuses and salaries, and to buy back shares of their own companies? Maybe that is what His O'ness wanted, since those banks and investment houses are financing his campaign to the tune of millions of dollars? And could it be that since the Treasury is part of the executive branch, he knows will soon have complete control over the US Treasury with no oversight, no check and balance, from Congress?

SMe 9 years, 7 months ago

Ah, ain't Socialism wonderful.I need a helping hand myself. Need to move the business. Didn't get a ARM loan. No I decided to be stupid and get a fixed rate loan. I sure could use some help with these mortgage payments now that everything else has gone sky high.When're the Boys gonna give me a couple hundred thou?Oh right that's just for the big boys (and foreign owned companies)! They get hundreds of millions

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