Niel Barofsky

So there’s good news and bad news. Obama is making good on his promise of transparency when it comes to distribution of TARP funds via Inspector General Neil Barofsky. The bad news is Barofsky has opened 20 criminal investigations to see whether tax dollars are being misused.

Barofsky is also conducting six audits. He says his goal is to “to inform, bring transparency and make appropriate recommendations.”

Job description

Barofsky has been appointed special inspector to oversee the Troubled Asset Relief Program. He says he wants taxpayers to understand where their money is going. He has detailed his concerns in a 250-page report.

Barofsky says he will expose any weaknesses in the TARP that could invite fraud.

TARP overview

TARP is mainly used to buy up defaulted personal loans and other bad accounts and assets that are hampering financial institutions. The 20 investigations Barofsky has opened could potentially lead to criminal charges if they find tax dollars are being pilfered or wasted.

What are the charges?

The investigations specifically address whether decisions about how TARP funds were awarded were influenced by people who stood to benefit from them. He is also looking into whether companies that received bailout funds are adhering to the policies regarding executive pay caps.

Additional duties

Barofsky has also compiled a list of recommendations for Treasury Secretary Tim Geithner and other officials involved with implementing the TARP.

His recommendations include requiring companies to report their usage of TARP funds. To me, this is a bit confusing because I thought they were already required to do that. Let’s hope this is just a reminder. Another recommendation is that officials should “safeguard a new mortgage rescue effort against scams.” Amen!

JPMorgan Chase Tower

JPMorgan Chase & Co posted a lower profit this quarter than it did a year ago. Nonetheless, it says it will pay back $25 billion in TARP funds as soon as possible. Though it posted a profit loss, it wasn’t as big a drop as analysts expected.

It’s payback time

So JPM’s bailout funds turned out to be only a short-term loan. That’s fabulous, right? A little snippet from “The Guardian” struck me as a bit odd. CEO Jamie Dimon said he would pay back federal loans “as soon as the government allowed it.”

“We’d like to repay it as soon as possible,” said Dimon. “We’re waiting for guidance from the government of the United States. We want to do what’s in the interests of the U.S. as well as in the interests of JPMorgan.”

After all of the cash advances the government has handed out, I should think they’d send someone over there to pick it up right away.

JPM on the books

JPM pulled in a $2.14 profit in the first quarter of 2009, according to the Wall Street Journal. To prepare for impending mortgage loan modification, it has set aside $4.2 billion to cover future loan losses. Though JPM’s profit fell about 10 percent compared to the same quarter last year, its revenue shot up 48 percent to more than $25 billion.

What’s their secret?

The Wall Street Journal reports that JPM’s relative success mainly was due to a recovery in securities trading.

In the same boat

Two other large financial institutions also surprised analysts with solid first quarters.

Goldman Sachs Group Inc. on Monday reported a $1.7 billion profit, reversing a $2.3 billion fourth quarter loss. And last week, Wells Fargo & Co. reported a $3 billion first quarter profit.

Goldman Sachs’ benefited from fixed income trading, and Wells Fargo got a boost thanks to its acquisition of Wachovia Corp.

For the third time, insurance company American International Group has turned to the government for help. The feds threw the company an $85 billion lifeline more than a year ago. After TARP fund started being handed out, the financing for the company was modified, and the total was brought to about $150 billion.

However, it appears that wasn’t enough. Now the company will receive an additional $30 billion from the TARP funds.

Why the bailout?

AIG signed a new bailout deal with the government as it faced its biggest quarterly loss in history. AIG is expected to report a $60 billion loss for last quarter on Monday.  Without this bailout the company could face a downgrade in its credit rating, which would further damage the faltering company.

AIG guarantees about $300 billion of asset-backed securities and other debt. Analysts agree that allowing the collapse of the company would have consequences for the global financial system.

“The counterparties on most of the book are (European) banks that would be hammered if the U.S. walked away. Hopefully, the third bailout will be the charm,” said Robert Haines, senior insurance analyst at CreditSights.

The new deal

The most recent bailout package modifies the terms on the total funding that the company has received from the government. The new terms are more lenient in regard to a government investment in its preferred shares. It also includes a lower interest rate on a government credit line.

The interest rate on AIG’s government credit line will be decreased to match the three-month London Interbank Offered Rate, which is about 1.26 percent. This is expected to save AIG about $1 billion a year.

More details

The new funding would allow AIG to issue preferred stock to the government later. The government will probably get a 5 percent cumulative dividend on its preferred  stocks.

In order to further reduce its debt, AIG is considering securitizing up to $10 billion in U.S. life insurance policies and give them to the government. This could offset much of the $38 billion it has used from its government credit line.

More government ownership

AIG isn’t the only company that has received government aid three times. The United States’ third-largest bank, Citigroup, has also sought help from the feds for a third time.

The Treasury Department upped its stake in Citigroup on Friday. Previously the U.S. government has about 8 percent ownership in Citigroup. In effort to stabilize credit market, the Treasury increased its ownership in Citigroup to 36 percent.

Citigroup deal

Citigroup is modifying it previous deal with the governemnt:

Already, the government holds $45 billion of preferred shares in Citigroup and has agreed to share losses on $301 billion of troubled bank assets, according to USA Today.

Under the new deal, the government will trade some of its preferred shares in Citigroup for common shares. This matches the actions of private investors, including The Government of Singapore Investment Corp., Saudi Arabian Prince Alwaleed Bin Talal, Capital Research Global Investors and Capital World Investors.

This conversion does not require any more taxpayer dollars.

The United States Treasury is busy bailing out banks with TARP funds.

The Treasury seems to be determined to make good on its promise to report all the cash advances it gives to banks using bailout money. Today it reported that it has dispersed $1.15 billion between 42 banks within the United States.

Biggest cash advances

Banks in 25 different states got a piece of the Troubled Asset Relief Program funds. Flagstar Bancorp of Michigan received $266 million. The Treasury gave PrivateBancorp of Illinois $243 million. W.T.B. Financial Corp. of Washington and Anchor BanCorp of Wisconsin each benefited from the TARP money to the tune of $110 million.

Grand total

The Treasury started out with $700 billion in TARP money, which was approved last fall. Initially $350 billion was released to help stabilize the financial system, stimulate the housing market and encourage banks to start lending again. Congress granted President Barack Obama access to the remaining $350 billion last month.

“The Treasury said it has now invested $195.3 billion in 359 institutions in 45 states and Puerto Rico,” according to CNN Money.

New states take cash advances

Banks in two new states joined the ranks of financial institutions taking advantage of cash advances from the TARP funds. Nebraska threw its hat in the ring with Farmers and Merchants Bank. The Nebraska bank’s customers are mostly farms and rural businesses.

Wisconsin also made its first appearance on the bailout list with two local banks. Anchor BanCorp and Legacy Bancorp both received cash advances through TARP investment funds.

Related articles

• Review Board For Massive Financial Bailout Program Promised By Obama (huffingtonpost.com)
• The Bank Bailout is Broken (businessweek.com)
• New Bank Bailout Could Cost $2 Trillion (huffingtonpost.com)

Citigroup Center in New York

Your online payday loan store keeps you up to date on financial news.

Several weeks ago, a congressional watchdog panel came down hard on the Treasury for its use of the first $350 billion in bailout money. The panel accused the Treasury of not keeping track of how banks were using the money. One bank has taken matters into its own hands, and has issued a report on how it spent its share of the Troubled Asset Relief Program funds.

To read about the congressional panel’s criticism, check out this article by your online payday loan store.

Citigroup issues quarterly progress report

Citigroup received $45 billion in bailout money from the Bush administration last year. The bank’s quarterly report reveals that it used $36.5 billion in TARP funds for home loans and various other loans, including $1 billion in student loans and $2.5 billion for business and personal loans.

The bank used $27.5 billion to help stabilize the housing market. It spent most of it purchasing mortgages, and about $8.2 billion went to giving new home loans to customers with good credit. A survey published this week says lending at most banks is still pretty tight, even with government aid.

More banks to follow suit

Bank of America says it will also include its TARP spending when it files its quarterly reports. B of A received $45 billion in bailout money. There is no word on when the bank will file its reports.

Wells Fargo has not filed a full report of its fourth quarter activity. However, the bank has said that it “paid a $371.5 million quarterly dividend to the U.S. Treasury in exchange for the $25 billion that the Treasury Department invested in the bank last fall,” according to CNN Money.

Check back with your online payday loan store for more financial news.

U.S. Congressman Luis V. Gutierrez has been chosen to head the Financial Services Subcommittee on Financial Institutions and Consumer Credit, and payday loans are high on his agenda. The Democratic Caucus selected the Democrat from Illinois, and the Full Committee will vote on his appointment on Tuesday.

Gutierrez will be a key player in the implementation of any bailout plans involving financial institutions, including distribution of the $350 billion in remaining TARP funds. The subcommittee he will likely oversee has jurisdiction over chartering, merger, acquisition and consolidation of financial institutions.

Pumping payday loan hype

When the senator is officially assigned to his new post, he plans to turn his efforts toward regulating payday loans.

“I plan to devote specific attention to payday lending reform, ensuring that consumers do not get caught in a debt trap at the hands of unscrupulous and virtually unregulated lenders,” Gutierrez said.

We can only hope he does his homework before he dives into regulating payday loans. If he follows the example of states, such as Ohio, who have put interest rate caps on payday loans, the results could be devastating. Since Ohio passed laws regulating interest rates on payday loans, 6,000 people who worked in the payday lending industry have lost their jobs. In many cases, interest rate caps drive payday  lenders out of business and put hard working Americans out of jobs.

Job description

Besides being in charge of financial institutions, Gutierrez’s committee also oversees all matters pertaining to consumer credit. There has been much clamoring about regulating credit cards and other forms of consumer lending, and this committee will be in charge of those regulations as well as enforcing the regulations already in place.

The committee is also in charge of the Truth in Lending Act and the Consumer Credit Protection Act. It also oversees fair credit reporting and the use of credit information by credit bureaus and creditors, consumer access to financial services, as well as the overall safety and soundness of the banking system.

The man behind the job title

Gutierrez has served eight terms in the U.S. House of Representatives. In 1992 he was the first Latino to be elected to Congress from the Midwest. He has devoted a lot of time and effort to immigration issues.

Gutierrez currently serves on the Financial Services Subcommittee chairing the Domestic and International Monetary Policy, Trade and Technology panel as well as sitting on the Immigration, Citizenship, Refugees, Border Security and International Law Subcommittee.

Let’s hope that is his new quest to protect consumers and small businesses he doesn’t forget that interest caps on payday loans drive small businesses to bankruptcy and cause working consumers to lose their jobs.

Congress is working on legislation that will shape Obama's $825 billion stimulus plan.

Payday loan restrictions aren’t on the agenda for Congress yet; they have urgent work to do in order to fix the country’s failing economy. Today House Democrats began to push through legislation that will shape Barack Obama’s American Recovery and Reinvestment Plan.

The plan, estimated to cost $825 billion, is scheduled to be ready for approval and implementation in mid-February. On day two of Obama’s stay in the Oval Office, Congress got to work on finalizing his economic stimulus plan. The House Ways and Means Committee approved $275 billion in tax cuts with a vote of 24-13. All Democrats voted yes, and Republicans voted no.

Tax cut support, opposition counter intuitive

Despite the fact that Republicans voiced support for the tax cuts in the days following Obama’s announcement, they opposed the measure that cemented those tax cuts. The reason for their opposition? The tax cuts were not big enough.

It is also odd that Democrats, many of whom said they thought the recovery plan should contain fewer tax cuts, voted in favor of the bill. However, the urgency of the situation has been greatly emphasized, and Democrats are focused on getting a bill passed quickly. Or perhaps they wanted to push the cuts through before the Republicans had a chance to augment them.

Who’s the boss?

Democrats hold a majority of the positions on legislative committees, including tax-writing committees, a result of the election.  So it’s no surprise that the Democrats’ effort to preserve a tax break for this year and 2010 was successful. The tax break will amount to $500 for individual workers and $1,000 for couples per year. This might help a few people avoid needing a payday loan.

Democrats also voted down a Republican proposal that would help laid-off workers with health insurance. Because the measure would only help those who previously held employer-covered health insurance, Democrats argued that it would mostly help upper-income individuals.

Energy and technology

The House Energy and Commerce Committee met separately Wednesday to approve more legislation that will expedite Obama’s long-term plans. The committee approved $2.8 billion to expand broadband access. It also approved several billion more dollars to promote energy efficiency.

Other proposals the committee worked on were geared toward health care. Specifically, legislators are preparing for increased enrollment in Medicaid, food stamps and unemployment insurance, which traditionally rise during a recession.

Point taken

In a symbolic vote, the House voted to block access to the remaining $350 billion in TARP funds. Because the Senate already approved use of the funds last week, the vote has no actual effect on usage of the funds. The vote was merely a chance for House lawmakers to make their opposition known.

Many lawmakers did take the opportunity to indicate their dissent, including 90 Democrats. In total, the vote ended up being 270-155. Despite the landslide vote to block access, the action has no actual effect. Obama already has access to the funds, and he and his advisers are already drawing up plans for how to use it.

Check back with your payday loan source for more news on where the nation’s money is being spent.

Showing the money

On the same day House Democrats unveiled their version of the economic recovery plan, Congress agreed to release the remaining $350 billion slated for bailout money to ease the mortgage crisis.

Barack Obama secured his first legislative victory before he even took office when Congress agreed to allow access to the remaining $350 billion in TARP funds.

Thought Barack Obama is not officially president yet — he will be inaugurated Jan. 20 — congress released the money to him. The money is part of the Troubled Asset Relief Fund.

Narrow victory

The vote in the Senate on whether to release the bailout money was close. But in the end, the movement to release the funds passed 52-42. Many Senators on both sides of the asile sought to block the funding because they were angry with the way the first half of the TARP funds hand been handled.

The Treasury did not carefully track where all of the funds went. Also, the majority of the home loans that were modified after the bailout ended up in default anyway.

Avoiding crisis

Passage of the measure to give Obama the bailout money mean an awkward situation has been avoided. Obama requested the funds last week. After many Democratic leaders in Congress expressed the desire to vote down the motion, Obama threatened that he would veto the vote to block access to the funds the day he became president.

In other financial news, obama has said that when he takes over office he is considering placing federal restrictions on the payday loan industry. A few states have already put interest rate caps on payday lenders, and Obama wil consider whether to make those caps nationwide.

Bringing change

Obama has promised that the remainder of the TARP funds will be handled differently than the first half. He will require more stringent monitoring of where the money goes. He has also said that a large portion of the money will go toward preventing foreclosures.

he also assures the public that the process will be transparent, and that American citizens will know  what is being done with the bailout money. Democratic leaders are also calling for regulation to limit the amount of money tha tgoes to salaries and compensation for financial institution executives.

Senators chime in

Democratic Senator Claire McCaskill supported handing the money over to Obama, saying she is giving the incoming administration the benefit of the doubt. But Republican SenatorJim Inhofe was vehemently against it, calling the vote “egregious.”

Casting their last votes of their Senate careers, Vice President-Elect Joe Biden and Secretary of State-Designate Hillary Clinton supported giving Obama access to the funds.

Obama’s two cents

Obama said he was “gratified” that the vote went in his favor> he renewed his promise to handle this half of the TARP funds more responsibly than the Bush administration had handled the first half. He said he will proceed with the plan in a “new and responsible way.”

This article was provided by your payday loan source.

The Troubled Asset Relief Program was meant to aid homeowners in avoiding preventable foreclosures, the panel says, and there is no evidence that the bailout money went toward that effort.

Poor bookkeeping

The $700 billion program, TARP, was approved in mid-October. The oversight panel, headed by Elizabeth Warren, says the Treasury hasn’t even released a strategy for stabilizing the financial system.

“Treasury needs to be clear as to what, if anything, it has done,” Warren said.

Warren says Congress gave $350 billion to the Treasury and specified it was meant to help borrowers refinance their homes. The Treasury set up the system and did not put in place a tracking mechanism to monitor whether it was meeting Congress’ requirements. Homeowners, with mortgages that exceed the value of their homes, may still be taking out payday loans to pay their mortgage so they don’t get thrown out of their houses.

The other half

In order to access the other $350 billion, the Treasury needs congressional approval. Whether the Treasury requests these funds remains to be seen. And whether they receive the funding will be up to the discretion of President-elect Obama’s administration. Obama’s economic team is now overhauling the remaining fund to speed the flow of credit to consumers.

The initial deadline for approval for bailout money was Dec. 31. The Treasury has extended the deadline to Jan. 15, five days before Obama’s inauguration. This gives regulators extra time to process and approve requests, and it potentially gives more financial institutions time to apply for funding. So it will likely be a while before we find out just exactly what the Treasury did with the money.

Hello? Anybody home?

To aid in drafting its report, the panel had submitted 45 questions to the Treasury. Several of the questions were not answered, according to the panel.

A Treasury spokesman gave no comment in response to the panel’s report, which was released today. He said he had not seen it.

Keeping an eye out

The Treasury apparently has nothing to say in response to the report at the moment, but sometimes these things take time. I’ll be watching the news for a response, so check back for updates.

My thoughts? It may be too late for the bailout funds to help average Americans keep their homes. Sure, home foreclosures have gone down since TARP was approved, but is that just because so many people have already been kicked out? The funding still may be able to help some people, but now that the deadline to approve institutions for funds has been extended, there are probably some panicked homeowners out there taking out payday loans so they can pay their overpriced mortgages.