All Blog Posts from Econwatch

This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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Over the weekend, the government found $200 billion in TARP money and Elin Woods discovered a few more paramours were hanging with husband Tiger. (If that $60 million enhancement to the pre-nup is true, it looks like Elin the scorned will be collecting $6.66M per girlfriend!)

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This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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Special Inspector General for TARP (aka "SIG TARP") Neil Barofsky said something we've all known for a while: the government gave away the farm when AIG failed.

If you recall, AIG's failure meant that the companies on the other side of all of its contracts (counterparties) were going to be left holding the bag. Under normal cases of bankruptcy, the court would impose haircuts to the amount of money due to counterparties, but because AIG didn't actually declare bankruptcy, the counterparties claimed that they were owed 100 cents of every dollar. The only bank that even considered taking a haircut was UBS - the Swiss, for goodness sakes - hard to imagine that a Swiss bank could make US banks look bad, but here's a case in point.

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This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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When is a loss good news? When you're General Motors and the loss could have been worse. Call me a cheerleader or a concerned citizen, but I have been rooting for GM throughout the financial crisis.


This morning, GM announced that it lost $1.2 billion in Q3. Yes, we'd like to see profits, but the news is movement in the right direction. Pessimists might note that it's a lot easier to get back on track when you wipe out a boatload of your outstanding debt and the taxpayer pumps billions of dollars into the endeavor. True enough, but GM had some good news on that front too - the company said that intends to re-pay the $6.7 billion US taxpayer loan by the middle of 2011. Here again, the more cynical will remind you that those loans represent something like 13% of the $52 billion of the government's infusion over the past year, still, I'd prefer to get the money back, wouldn't you?

What's next for GM? During the earnings call, CEO Fritz Henderson said that the company is seeing signs of "stability" in the in the auto sector and that vehicle sales should increase from about 10.7 million vehicles annually today to 11-12 million next year. The company has also seen some success in China and is trying to address problems in Europe, especially after backtracking on the sale of Opel.

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Just a year after receiving a record-setting amount of government aid to rescue their failing companies, three of Wall Street's giants will pay the government's generosity forward, in the form of nearly $30 billion worth of executive bonuses, according a report in Bloomberg.

Goldman Sachs, Morgan Stanley and JPMorgan Chase, which have all exited the government's Troubled Asset Relief Program, or TARP, are set to dole out $29.7 billion in bonus money.

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This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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With two months to go in the year, let's take a deep breath and assess where we stand. The economy is in a bottoming process that is neither smooth nor wildly different from previous economic recoveries. The weekend news of CIT's bankruptcy, 9 more bank failures (that makes it 115 closures for 2009) and this morning's better-than-expected earnings from Ford, can sometimes make it seem that recovery from the Great Recession is a fickle as the direction of the wind.

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Executives at bailed out U.S. firms have to "understand you can't party on like it's 2007" when it comes to compensation, TARP's congressional watchdog said Thursday.

Elizabeth Warren, who chairs the congressional oversight panel for the Troubled Asset Relief Program, told CBS' "The Early Show" that executive compensation has become a "problem in American industry" that must be fixed.

The White House's executive pay czar, Kenneth Feinberg, is expected to announce executive pay cuts at seven of the largest companies receiving significant federal bailout money – cuts that would slash top salaries by 90 percent, reports CBS News correspondent Bill Plante.

Lavish corporate pay packages, even after the taxpayer funded bailouts, have stoked anger and resentment in Washington D.C. and around the country.

"You know, you really begin to wonder what it's going to take to get the attention of the people in charge of these very large corporations," Warren told "Early Show" co-anchor Harry Smith. "They have taken taxpayer money, unemployment is now running at almost 10 percent. … And yet the executives want to say 'I take your money when I make mistakes and I still want to compensate myself richly because I'm the one when's in charge of this big company.'"

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It would be "unrealistic" for Americans to expect the government to recoup all of the $700 billion spent in the last year to prop up a teetering financial system, the bailout's inspector general said Wednesday.

Neil Barofsky, who oversees the federal Troubled Asset Relief Program, said that while TARP funds helped pull the economy back from the brink of collapse, there is "no expectation at all that that money will come back."

Barofsky released a report Wednesday detailing the program's mixed results. During an appearance on CBS' "The Early Show", he graded the bailout effort as "incomplete"

"There's been some successes in as far as pulling us back from the brink of a financial collapse. But as far as restoring lending, helping homeowners, helping small businesses, that hasn't materialized yet. We'll have to wait and see," he told "Early Show" co-anchor Harry Smith.

One aspect of the program that's appeared to raise the ire of the public and Congress is the lavish bonuses paid out by Wall Street firms aided by taxpayer money. Barofsky called the bonuses a "significant issue" but noted "there's nothing in the legislation to stop them from doing so."

Uncle Sam is wearing many hats these days, one year after the collapse of Lehman Brothers marked a seismic shift in the economic landscape.

As The New York Times writes today, government spending (which today includes stimulus programs and bailouts) accounts for a bigger share of the nation's economy — 26 percent — than at any time since World War II.

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If you want to make yourself a little nuts, read about America’s Bailout Barons. The Institute of Policy Studies released its annual report on compensation and the results are staggering. Here’s one of the more disturbing sentences: “From 2006 through 2008, the top five executives at the 20 banks that have accepted the most federal bailout dollars since the meltdown averaged $32 million each in personal compensation.” Yes, that was through 2008.


I never expected that the government could really address this issue, even with the appointment of Kenneth Feinberg as “Pay Czar”. Despite the clamor earlier in the year after the AIG bonuses were awarded, there were too many other issues for the Obama administration to tackle. Wall Street banks soon realized that the easiest way to escape the Pay Czar would be to repay TARP funds and a bunch have done so. For the rest, I have a sneaking suspicion that financial innovation will be alive and well.

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Bank of America is looking to pay back a portion of its federal bailout money in an effort to relieve some regulatory pressure, according to a Wall Street Journal report ($) Tuesday.

At the same time, the U.S. is pushing the bank to pay up to $500 million dollars to get it to abandon a tentative agreement that would have had the government absorb potential billions in losses.

According to the report, which cites sources familiar to the matter, both issues pertain to Bank of America's acquisition of Merrill Lynch in January – a transaction that required an extra $20 billion in taxpayer funds. The bank received $45 billion overall as part of the Troubled Asset Relief Program.

Bank of America wants to pay that $20 billion back, which would remove it from the list of "exceptional" aid recipients – a designation that brings increased government scrutiny, including reviews of executive compensation.

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