Posted on 07/21/2009 8:04:52 AM PDT by Ooh-Ah
US bail-out efforts are having a significant impact on some credit markets, the Treasury and Federal Reserve said in a report on Monday, just as the watchdog for the rescue effort attacked a lack of transparency.
Neil Barofsky, special inspector-general for the troubled asset relief programme, said that the various US schemes to shore up banks and restart lending exposed federal agencies to a risk of $23,700bn – a vast estimate that was immediately dismissed by the Treasury.
He added in his own report to Congress that “disagreements remain” between the office of the special inspector-general for the troubled asset relief programme (Sigtarp) and Treasury over a scheme to shift toxic assets and that there were “fundamental vulnerabilities . . . relating to conflicts of interest and collusion, transparency, performance measures, and anti-money laundering”.
The Treasury said the estimate for total liabilities was “inflated” and not “useful”, including programmes that have never been used or were winding down and ignoring assets acquired by the government – such as equity in banks and carmakers – that offset the risk.
The dispute over the design of the huge intervention in the private sector – and extent of taxpayer exposure – will get a further airing on Wednesday when Mr Barofsky appears before a congressional hearing.
It comes as the Financial Stability Oversight Board, made up of the Treasury, Fed and other regulators, released a broadly positive quarterly report into the financial rescue effort.
The board noted a sharp rise in the issuance of consumer credit asset-backed securities, which it attributed partly to the $1,000bn term asset-backed securities loan facility. Talf allows institutions to post ABS as collateral for federal loans with the aim of restoring the flow of household credit.
But aside from a more positive tone, one of the most striking differences between the latest report and the previous one in March is the focus on the “considerable stress” in commercial real estate.
The Fed has begun to open up Talf to commercial mortgage-backed securities to try to influence credit conditions in the commercial real estate market. The report draws attention to a new potential credit crunch when $500bn worth of real estate mortgages need to be refinanced by the end of the year.
Even as Talf starts to wind down for consumer-related securities, the heightened anxiety around commercial real estate may keep the programme running beyond its current expiry date of December.
Minutes of discussions of the board members, including Tim Geithner, Treasury secretary, and Ben Bernanke, chairman of the Fed, show the team discussing whether to extend Talf to CMBS and other assets such as small business loans and whether to increase the size of the programme. Much of the expansion is being carried out.
The expansion of the various programmes into new and riskier asset classes is one of the main bones of contention between the Treasury and Mr Barofsky. The Treasury points out that it has sought to improve the rigour of the programmes in line with Sigtarp’s recommendations and says its efforts are important in bringing life back into frozen credit markets.
Turbo Tax Timmy Geithner, Treasury Secretary, and Helicopter Ben Bernanke, Chairman of the Fed, in denial mode. They will not admit errors or flaws in bailout/TARP till their actions have wrecked the economy totally.
Related
http://market-ticker.denninger.net/archives/1245-CNBC-Attempts-Assasination-on-Barofsky.html
Looks like another IG will have lost the confidence of the Kenyan in Chief because of being dazed and confused and will out on the street.
Is he talking abut government motors 1 and II, they both will be out of business within ten years.
And you keep hearing fools say we are at are near the bottom of the fall in real estate. BS.
Saw the CNBC report with Barofsky...the Pump&Dump talking heads were not able to refute the numbers and looked like they had been sucking on lemons!
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