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The
bailout success story that wasn't: TARP - (www.marketwatch.com) Remember the
Troubled Asset Relief Program, better known as TARP? When we last heard from
the Treasury Department, on Jan. 23, TARP was being wound down. It was, in the
estimation of Timothy Geithner & Co., a success: 93% of the $418 billion
disbursed had been collected including $70 billion last year. But hold
the Champagne. It ain’t over till it’s over. The idea that TARP is somehow a
wash because a few banks repaid the bailouts with interest is misleading. The
reality is that bailed-out firms essentially wrote off their losses on taxes.
As of Dec. 30, TARP was still owed $67.3 billion, including $27 billion in
realized losses — which is to say, that money is gone and is never coming back. Now,
TARP is losing money as it tries to exit the programs. A new report by SNL
Financial shows the Treasury Department is taking a beating in auctions of the
Capital Purchase Program, one of the pipelines through which bailout money
flowed. The auctions essentially sell off TARP debt and equity to private
investors. Unfortunately, investors aren’t really interested in zombie-bank
debt. It’s been selling at an 8% to 20% discount. The last auction, on Jan. 25,
met with a 35% discount. In all, the latest CPP auction cost taxpayers $104.5
million. There
are additional and less hidden costs, of course. Ally Financial, the old
automobile-financing company GMAC, is still $14.6 billion into TARP.
Underwater
Homes Remain a Dark Spot in the Recovery - (www.thefiscaltimes.com) When Sally Herigstad and her husband wanted to buy a house recently in
their Seattle suburb, they ran into some unfriendly numbers. They owe the bank
about $360,000 on their existing home, but a sale would bring in only the low
to mid-$300’s: they’d have to close the deal with a big check. So the
couple went ahead and bought the house they wanted--and then rented the first.
Still, Sally finds being a landlord a hassle. “If I could sell it and get my
money out, I’d do it today,” she says of the first home.
Four in 10 Americans are living paycheck to paycheck, study
says - (www.latimes.com) More than four in 10 Americans are living paycheck to paycheck and
nearly one in 10 doesn’t earn enough to pay for essentials, according to a
study released Tuesday. The survey, conducted for the Allstate insurance
company by FTI
Consulting Inc., underscored the conflicted emotions and attitudes
about personal finances among ordinary people. It showed the challenges that
people are facing in a soft economy and troubled labor market, but it also
demonstrated that many people make unwise financial decisions even when they
know better. The survey
found that 59% of Americans say they generally know how to handle money and
make the right financial decisions. But 47% of respondents said they’re saving
less money than they should be.
Currency fears spread in Latin America - (www.ft.com) Latin America
is going Brazilian. Previously, it was only Brazil, the region’s biggest
economy, that complained about the competitive devaluations generated by
money-printing in the west, the so-called currency wars. Now, however, as Japan joins the rush to print money and devalue,
the more orthodox and free-trading Latin economies – investor darlings such as
Mexico, Chile, Colombia and Peru – also fear catching a bullet. The issue may
well dominate this week’s G20 meeting in Moscow,
given that Asian exporters such as South Korea are also worried about currency
appreciation. “Not all Latin American policy makers have used the term currency war,” says Luis
Oganes, head of Latin America research at JPMorgan. But they “are expressing
increasing concern and reacting to it”.
Fed should begin to wean markets off QE3 this year: Plosser
- (www.reuters.com) The U.S. unemployment rate will probably fall quickly enough for the
Federal Reserve to start trimming its asset purchases before the end of 2013, a
top Fed policymaker said on Tuesday. "If my forecast is right and we are
close to 7 percent unemployment rate near the end of this year, then I think we
should at least to have begun backing off from our asset purchases if
unemployment is declining at that pace," Charles Plosser, president of the
Philadelphia Fed, told reporters after a speech here. "I think we would
start tapering in some way and gradually sort of wean themarkets and us off the
purchases to sort of wind them down," Plosser said
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