Here are the numerous bailout-related news items I didn't get to this week. (emphasis mine)


Marcy Gordon from the Associated Press reports that 4 insurers seek to buy thrifts for part of bailout:

Four insurance companies on Friday asked the government to allow them to buy thrifts so they can qualify to receive federal money under the financial rescue program.

Hartford Financial Services Group Inc., Genworth Financial Inc., Lincoln National Corp. and Aegon NV, a Dutch company that owns U.S. insurer Transamerica, each asked the Office of Thrift Supervision for permission to acquire an existing savings and loan.

The deadline for filing applications was Friday. The Treasury Department agency said it received submissions from those four firms to become thrift holding companies by acquiring savings and loans.

Insurers that own thrifts, which are federally regulated, are eligible to apply for a piece of the $250 billion the government is spending to buy shares in banks and other financial companies. Thrifts differ from banks in that, by law, they must have at least 65 percent of their lending in consumer loans such as mortgages.

The New York Times reports that 110 banks have asked for $220b under bailout plan:

At least 110 banks have requested about $220 billion from the Treasury Department' s rescue fund, and many more are expected to have submitted applications before Friday' s deadline.

The figures, from banks' own statements and analyst reports, indicate the requests are closing in on the $250 billion the Treasury set aside from the $700 billion fund to purchase stock in banks.

Analysts at Keefe, Bruyette & Woods estimated that 62 banks have received full or preliminary approval from the Treasury for $173 billion from the Troubled Asset Relief Program. The government said Monday that American International Group Inc. also would receive $40 billion from the program.

Another 48 banks have applied for about $6.5 billion, according to the Keefe, Bruyette & Woods report. Several banks that have filed applications said they haven' t yet decided whether to accept any funds.

The tally doesn' t include requests from four life insurance companies that are seeking regulatory approval to purchase savings and loans in order to become eligible for government funds.

The Wall Street Journal reports that cit looks to transform into bank:

Commercial lender CIT Group Inc. said it has applied to become a bank holding company, looking to access part of the Federal Reserve's $700 billion in funds being pumped into financial companies and to participate in the Treasury Department's $250 billion capital-infusion program.
…
Numerous other financial firms, including Morgan Stanley, Goldman Sachs Group Inc. and American Express Co., have been applying for bank-holding status so they can participate in the government's plan and get access to other sources of capital. For example, getting approval would allow CIT to borrow at the Fed's discount window if it faces liquidity problems.

Washington Post reports about a quiet windfall for u.s. banks:

The financial world was fixated on Capitol Hill as Congress battled over the Bush administration's request for a $700 billion bailout of the banking industry. In the midst of this late-September drama, the Treasury Department issued a five-sentence notice that attracted almost no public attention.


But corporate tax lawyers quickly realized the enormous implications of the document: Administration officials had just given American banks a windfall of as much as $140 billion.

The sweeping change to two decades of tax policy escaped the notice of lawmakers for several days, as they remained consumed with the controversial bailout bill. When they found out, some legislators were furious. Some congressional staff members have privately concluded that the notice was illegal. But they have worried that saying so publicly could unravel several recent bank mergers made possible by the change and send the economy into an even deeper tailspin.

"Did the Treasury Department have the authority to do this? I think almost every tax expert would agree that the answer is no," said George K. Yin, the former chief of staff of the Joint Committee on Taxation, the nonpartisan congressional authority on taxes. "They basically repealed a 22-year-old law that Congress passed as a backdoor way of providing aid to banks."

Washington Post reports that bailout lacks oversight despite billions pledged:

In the six weeks since lawmakers approved the Treasury' s massive bailout of financial firms, the government has poured money into the country' s largest banks, recruited smaller banks into the program and repeatedly widened its scope to cover yet other types of businesses, from insurers to consumer lenders.

Along the way, the Bush administration has committed $290 billion of the $700 billion rescue package.

Yet for all this activity, no formal action has been taken to fill the independent oversight posts established by Congress when it approved the bailout to prevent corruption and government waste. Nor has the first monitoring report required by lawmakers been completed, though the initial deadline has passed.

“It' s a mess,” said Eric M. Thorson, the Treasury Department' s inspector general, who has been working to oversee the bailout program until the newly created position of special inspector general is filled. “I don' t think anyone understands right now how we' re going to do proper oversight of this thing.”

Reuters reports that record loss forces freddie mac to tap $100 bln fund:

Freddie Mac reported a $25.3 billion quarterly loss on Friday as the housing slump worsened, forcing the second-largest provider of U.S. home loan funding to draw on a $100 billion Treasury Department lifeline.

The company attributed much of the record loss to a write down of tax-related assets, essentially conceding it will not return to profitability soon. Writing down the assets left the company with a negative net worth, in which liabilities exceed its assets, requiring it to tap the Treasury backstop.
…
The companies' regulator has submitted a request for the Treasury Department to provide $13.8 billion for Freddie Mac to erase the shareholder equity deficit.

The McLean, Virginia-based company said it expects to receive the money from Treasury by Nov. 29.

The Mercury News reports that san jose mayor seeks slice of bailout pie:

As cities around the United States start to scramble for a share of the $700 billion federal bailout package, San Jose Mayor Chuck Reed said Friday that he's working with leaders of other large California cities to make sure they're not left behind.

The stimulus package Congress passed last month wasn't designed to dole out money to governments, so it's far from clear whether San Jose will get a piece. But with $1.6 billion in unfunded retiree health care obligations, plus $500 million worth of local and regional road work to be done and $750 million in federal help sought to bring BART to the South Bay, Reed noted the city has a full slate of needs.
…
Reed created a minor furor Friday when he told an Associated Press reporter he would seek 2 percent of the bailout, or $14 billion, for San Jose — an eye-popping figure, given that the city's entire annual budget is $3.3 billion. Reed later told the Mercury News that his remark was "off the cuff," and based on the fact that the city contributes more than 2 percent of the nation's gross domestic product.

The Wall Street Journal reports that a showdown looms over auto bailout:

Congress and the Bush White House appear headed for a showdown next week over how best to assist Detroit's troubled auto makers.

Senate Majority Leader Harry Reid plans on Monday to move forward with a bill that would give the auto industry access to the $700 billion Troubled Asset Relief Program set up by the government in October to help ailing banks and other financial firms.

The Bush administration and many Senate Republicans disagree with such an approach. Instead, President George W. Bush late Friday urged Congress to speed up release of $25 billion in already approved loans to the auto industry. Mr. Bush asked Congress to ease requirements that those loans be used to help the industry retool to meet higher fuel-economy standards, a move opposed by many Democrats.

The Star Ledger reports about a bonanza for lobbyists:

In this moment of economic malaise, it's comforting to know that at least one group of hard-working Americans is destined for a payday from the big federal bailout program -- Washington's legendary lobbyists. It's enough to bring a tear to the eye.

Lobbyists are swarming like locusts at the Treasury Department as Secretary Henry Paulson and his merry men ponder how to cut up the $700 billion bailout pie. Rare is the interest group or industry, large or small, that doesn't have a hired K Street gun pleading its case at Treasury's door.
…
The National Marine Manufacturers Association, for one, believes its members deserve a dollop of the dole. Otherwise, the association argues, boat financing firms won't be able to pony up the credit that boat dealers need to stock their showrooms. At a time like this, the sight of yachts for sale can only lift the nation's spirits.

The Hispanic Chamber of Commerce had a face-to-face with Paulson, seeking contracts in accounting, legal and assorted white-collar services in addition to maintenance and other blue-collar jobs. Still another Hispanic business group is lobbying specifically for plumbers (Jose the plumber?) and home heating contractors.

Even the car dealerships have a lobbyist in line at the Treasury Department, on the theory, presumably, that what's good for the automaker is good for the auto peddler. Insurance costs on the cars they can't sell are killing them, they claim.

CalculatedRisk reports that federal reserve assets increased $139 billion this week:

Some day the Fed's balance sheet will shrink ... hopefully ... but for now the assets are increasing rapidly. The assets on the Fed's balance sheet have more than doubled from under $1 trillion at the beginning of 2008 to about $2.214 trillion now.

Dallas Fed President Richard Fisher commented last month that he expects the assets to grow to $3 trillion by the end of this year.

"I would not be surprised to see them aggregate to $3 trillion—roughly 20 percent of GDP—by the time we ring in the New Year."

Here is the Federal Reserve report released today.



The Federal Reserve assets increased $139 billion this week to $2.214 trillion.

My reaction: The dollar is totally doomed. Buy gold.