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Recovery and Repair at the Tipping Point: Liveblogging Paulson Press Conference

By Admin

Q&A

1. Tarp not for state and local governments.

2. How to subsidize mortgage modifications, through copays?

3. Automakers: supportive of manufacturing, but any solution must lead to long-term viablity. Amend 136.

4. Not timetaable on second Tarp tranche.

5. Change in tax code that facilitated bank mergers. Through legal administrative process. Made chaange to allowing unrealized losses to be realized after merger.

6. What non-bank financial institutions to you have in mind. If non-bank financials, why not non-financial companies? Tarp is focused on financial system.

7. Change of focus from purchasing illiquid securities to enhancing bank capital does not constitute a lie to Congress, but a laudable change of strategy in the face of a change in circumstances.

8. Timing of ABS liquidity facility is weeks to design, longer to get up and running, size uncertain, though would need to be significant to make a difference.

Highlights

Auction-based ,

Loss

55% of banking assets sold $125M of preferred stock

FDIC guarantee of newly issued senior unscured debt for up to three years and unliminted guarantee on non-interest bearing accounts until the end of next year

Necessary steps to abvoid ‘broad systemic event’.

Major accompplishment, major hallenges

Significant illiquid assets.

Not abate until biggest part of housing crisis behind us

Recovery and repair

avoid preventable foreclosures

Weak economy– housing correction lending contraction

10/07 Hope Now Alliance, streamlined protocol, 200K/month avoid

HUD compliment FHA options to refinance
Stability to fin amarket

available of ortgage finance

protecting taxpayers (bs, chaning cnlicts in GSE struture)

Fannie MAE record loss and write-down of assets, but within range of expectations

Deploying remaining Tarp funds:

1. Reinforce financial system. More capital for banks and non-banks that lend.
2. Support securitized credit market. 40% of consumer credit (credit cards, student loans, auto loans)
3. Reduce foreclosure risks. Buying illiquid mortgage assets NOT the most effective user of Tarp funds.

Build capital in finacial institutions. Leverage aTrp investment by attracting private capital by

Consumer access to credit. Non-bank consumer finance. ABS market.

Though end of October, IndyMac has modified 3,500 loans, reducing average monthly payments by 23% (380/month).

Subsidy is direct spending vs. Maximizng loan modifications.

Reform Topics at Leader’s Summit: 20 largest economies, 77% of global GDP

global imbalances

regulartory effetive

fostering ocoo

reforming intl instittuion

Compensation and risk management practices, oversight of mort origina ans ecd, credit rating, OTC derivatives insrrastr, reg,

Markets are global, regulatory regimes are national.

Heart of problems– over a period of years, persistent global imbalances lead to low interest rates and global search for returns.

Low US savings, but lack of consumption and accumllation of resrevces in asia and oil-exporting countries, and infrastructure in Europe. Must address these global imbalances.

Full post as published by Bailout Report on November 12, 2008 (boomark / email).