Secretary Hank Paulson - Articles - Zimbio

Hank Paulson warns of unpleasant surprises

Wed, 8 May 2008 16:47:00 GMT

posted by MichaelFowke
Hank Paulson, the US Treasury secretary, has been speaking to the Financial Times about the credit crisis. On the whole, it is good news. Hank reckons the credit crisis is almost over, but he warns of 'unpleasant surprises'. Now, anyone not as familiar with the cosmos as I am would think that these unpleasant surprises would be connected to the markets in some way. Oh dear oh dear. How wrong some

Citigroup, JPMorgan in Market Talks With Treasury

Fri, 13 Oct 2007 16:23:00 GMT

posted by chero

Citigroup Inc. and JPMorgan Chase & Co. are leading a group of banks that are in talks with the U.S. Treasury about a plan to revive the asset-backed commercial paper market.

Discussions over the past two weeks addressed structured investment vehicles, units set up by banks to finance purchases of assets including subprime mortgage debt, said a government official and a banker with knowledge of the deliberations. Under one plan being considered by the banks, lenders would establish a fund of as much as $100 billion to buy assets from the SIVs, said two people familiar with the negotiations who declined to be identified because the talks are continuing.

``If the firms get together to improve the quality, that's a good development,'' said Mark Amberson, who runs the $5 billion Russell Money Fund for the Russell Investment Group in Tacoma, Washington. ``It would be a positive credit event if you wind up with a better vehicle.''

Policy makers are concerned that investors remain reluctant to acquire the paper even if the loans that back them are sound, said the official, who declined to be identified. Setting up a fund would allow SIVs, which own $320 billion of assets, to avoid having to sell their holdings at fire-sale prices and further roil the credit markets.

As losses in securities linked to subprime mortgages started to spread in July, investors retreated from high-risk assets. SIVs that issued commercial paper to buy the securities found they could no longer roll over the debt, forcing them to sell about $75 billion of their assets.

Shrinking Market

The amount of asset-backed commercial paper outstanding tumbled to $899 billion in the week ended Oct. 10, from a high of $1.14 trillion at the end of June, according to the Federal Reserve.

Treasury Secretary Henry Paulson, the former Goldman Sachs Group Inc. chief executive officer with 32 years of experience on Wall Street, met with Citigroup CEO Charles Prince, JPMorgan chief Jamie Dimon and other executives from the country's biggest banks during the bi-annual meeting of the Financial Services Forum in Washington on Oct. 10. Lloyd Blankfein, Paulson's successor at Goldman, was also at the meeting according to a person familiar with the session.

``We are always meeting with market participants,'' Treasury spokeswoman Jennifer Zuccarelli said in Washington, declining to confirm any specific discussions.

Treasury Approach

Treasury is playing a ``a facilitator's role,'' said Joseph Mason, an associate professor of business at Drexel University in Philadelphia and a former financial economist at the Office of the Comptroller of the Currency. ``We have a Treasury secretary that is familiar with Wall Street and who they trust.''

The talks are the latest effort by policy makers to help restore liquidity to credit markets, a campaign started by the Fed in August, when it cut the charge on direct loans. Fed officials have said this month that while there are signs of improvement, some markets remain under stress.

``Some markets have been experiencing illiquidity,'' San Francisco Fed President Janet Yellen said in an Oct. 9 speech in Los Angeles, referring to mortgage-backed securities and asset- backed commercial paper. ``This illiquidity has become an enormous problem for companies that specialize in originating mortgages and then bundling them to sell as securities.''

As yields on asset-backed commercial paper climbed amid the exodus from the market, some companies found their access to borrowing cut off. Countrywide Financial Corp., the biggest U.S. mortgage lender, had to tap an entire $11.5 billion bank line on Aug. 16 after being unable to fund itself with commercial paper.

Interest Rates

Speculation on ``a bank consortium being formed to address the funding of SIV assets'' helped reduce the interest rates on loans that banks make to each other in dollars in Europe, Jacqueline Cavuoto, a Bear Stearns Cos. analyst in New York, wrote in a note to clients.

The one-month London interbank offered rate, a benchmark for corporate borrowing, has fallen 5 basis points in the past two days, to 5.06 percent. A basis point is 0.01 percentage point. The rate reached 5.82 percent on Sept. 7, up half a percentage point from July, as demand for short-term funds soared.

Fed officials have been monitoring businesses' access to borrowing, where any decline could hurt plans for hiring and spending. Fed Bank of Boston President Eric Rosengren cited the jump in Libor in the past two months as a concern.

Libor Influence

``This tightens credit for a variety of U.S. borrowers, since many loans to businesses and many floating rate mortgages are tied to the Libor rate,'' the Boston Fed chief said Oct. 10 in a speech in Portland, Maine.

Holdings by SIVs have dropped to about $320 billion from about $395 billion of assets in July, Moody's Investors Service said this month.

``SIVs are all losing money right now,'' said Chris Low, chief economist at FTN Financial in New York. ``If any one of the conduits dumps'' their holdings of distressed securities, ``it could trigger selling by the others as well, and that's the scenario they're to avoid,'' he said.

Citigroup said Oct. 11 its trading chief Thomas Maheras is leaving after almost $6 billion of fixed-income losses, and named former Morgan Stanley executive Vikram Pandit to oversee trading, investment banking and alternative investments.

OH MY GOD!! REALLY?!! NO WAY, BEN BERNANKE, HANK PAULSON AND GEORGE BUSH SAID ECONOMY IS FUNDAMENTALLY STRONG!!! DON'T WORRY, BERNANKE WILL SAVE US.

Tue, 6 Feb 2008 00:24:00 GMT

posted by dagg988

Recession is here - economists

A weak report about the services sector has caused some experts to declare that the economy has already entered downturn.

By Chris Isidore, CNNMoney.com senior writerFebruary 5 2008: 12:47 PM EST

NEW YORK (CNNMoney.com) -- A growing number of top economists believe that the U.S. economy has now toppled into recession.

Alarm bells were set off Tuesday by a grimreport on service businesses, which make up the majority of the U.S. economy.

The Institute of Supply Management said that activity in the service sector declined for the first time in nearly five years. This report also indicated that employers are cutting staff.

The survey covers the retail, transportation and health care industries as well as hard hit areas such as finance, real estate and construction.

Some economists argued that the normally low-profile ISM services reading, coupled with the government's report Friday showing the first monthly net loss in jobs in more than four years, is proof that recession is now a reality.

"My forecast had been that the recession would begin this quarter, but the hard data wasn't there yet," said Keith Hembre, chief economist of First American Funds. "But now we're seeing that. The service sector is a much larger component of the economy [than manufacturing] and this is very much a recession reading."

The National Bureau of Economic Research is the official arbiter of whether the economy has entered recession. But the NBER typically does not declare a recession until well after one has begun. READ MORE

Money & Politics: The Subprime Solution

Thu, 14 Mar 2008 05:13:00 GMT

posted by scottpasinski

Congressional Banking Chairmen push for stronger government role in subprime fix; Foreclosures reached record levels in Q1 of 2007; Frank Dudd announce plan to allow FHA to insure refinanced mortgages; Treasury Secretary Paulson urges tighter standards for lenders, mortgage brokers; Analysis by John Taylor of National Community Reinvestment Coalition; Analysis by Robert Davis of American Bankers Association

Money & Politics: Reaction To Treasury Department To Overhaul Financial Regulation; Blueprint For Housing Crisis

Mon, 1 Apr 2008 05:13:00 GMT

posted by scottpasinski

Paulson back regulatory overhaul broader Fed role; Blueprint establishes a Mortgage Origination Commission; Analysis by Lyle Gramley, Former Fed Governor; Analysis by Bruce Marks of Neighborhood Assistance Corp.; Analysis by Rep. Eric Cantor, (R) Virginia