The Obama administration said Tuesday its new plan for rescuing America's crippled banking and financial sectors could top $1 trillion in a complex formula of cash infusions from government and the private sector.
Treasury Secretary Timothy Geithner revealed the massive rescue effort just hours after President Barack Obama said at his first White House news conference that Congress risked turning ``a crisis into a catastrophe'' if it fails to approve a separate $800-plus billion economic stimulus program. The plan has faced stiff opposition from Republican lawmakers.
The new financial bailout plan brought forward by Geithner grows out of a $700 billion rescue program put in place in October, under the Bush administration, as the depth of the country's critical financial sector troubles surfaced with a collapse of the housing market.
``Right now critical parts of our financial system are damaged,'' Geithner said in unveiling the new plan. ``Instead of catalyzing recovery, the financial system is working against recovery and that's the dangerous dynamic we need to change.''
Half of the bailout money was allocated by former President George W. Bush's administration, but that spending has come under heavy criticism for a lack of transparency and the failure of banks to put the money into the frozen credit market.
The second half of the $700 billion is now in the hands of the Obama administration, which plans to greatly expand the effort to unclog credit markets that provide loans to consumers and businesses. Funding for this effort would see a huge increase from $20 billion up to $100 billion, according to administration officials.
If a total of $100 billion from the bailout fund was used, it would be enough to support an additional $1 trillion in lending support through a Federal Reserve program that was announced in November but has yet to begin operations.
The administration also announced that the program would be expanded beyond consumer and small business loans to provide aid to the troubled commercial real estate sector.
The administration also announced a program to create a partnership between the government and the private sector to get private investors to buy bad assets that are currently weighing down the balance sheets of banks. Congressional aides who were briefed on this plan said that Treasury officials said it could involve between $250 billion and $500 billion in government support.
As Geithner put forward the new bailout package, the Senate, despite nearly unanimous Republican opposition, was expected to approve a $838 billion stimulus bill later Tuesday. Senate approval would set the stage for possibly contentious negotiations with the House on a final compromise on legislation. Congressional leaders hope to get the bill to Obama's desk in a few days.
Obama defended the stimulus plan in his press conference Monday night, saying the federal government ``is the only entity left with the resources to jolt our economy back to life.''
``The plan is not perfect,'' the president said. ``No plan is. I can't tell you for sure that everything in this plan will work exactly as we hope, but I can tell you with complete confidence that a failure to act will only deepen this crisis as well as the pain felt by millions of Americans.''
Obama goes to Fort Myers, Florida, a metropolitan area among the hardest-hit by mortgage foreclosures, for another town-hall meeting Tuesday like the one he held Monday in Elkhart, Indiana, to promote his economic plan.
Just three weeks after his inauguration was celebrated jubilantly around the world, Obama has run into the jarring difficulties of governing. He failed to win over the Republicans he courted for his economic plan. Some of his supporters have wondered if he has yielded too much ground in the pursuit of bipartisanship.
Yet Obama's approval ratings remain high — 67 per cent according to a Gallup Organization poll released Monday. He is trying to tap into that popularity to win public and congressional support for his economic recovery plan as the country faces its worst economic crisis in 80 years.
``This is not your ordinary, run-of-the-mill recession,'' Obama said in his address Monday night, issuing a dire warning of the consequences if Congress fails to agree on a stimulus package. He cited Japan's failure to take bold actions in time to reverse a recession that turned the 1990s into a ``lost decade'' with no economic growth.
Despite painting a dire picture of the American economy, Obama said the US could well be in better shape by next year, as measured by increased hiring, lending, home values and other factors.
``If we get things right, then, starting next year, we can start seeing significant improvement,'' Obama said.
Agencies
Showing posts with label bailout. Show all posts
Showing posts with label bailout. Show all posts
Tuesday, February 10, 2009
Tuesday, January 13, 2009
Will the Rs 2000 crore government package bailout out Satyam?
Speculation is rife that the government is considering a package of up to Rs 2,000 crore to bailout the crisis-ridden Satyam Computer but no confirmation could be obtained.
Shortly after the Prime Minister Manmohan Singh's review meeting on Satyam on Tuesday, there was media speculation that government would be considering a financial assistance ranging between Rs 500 crore and Rs 2,000 crore but the PMO office declined to comment on it.
"We have nothing to say on this," a top PMO official said when asked about if the government was considering giving financial aid to Satyam which is confronting a cash crisis.
Meanwhile, official sources indicated that the government appointed Satyam board has written a letter to the finance ministry raising concerns about the liquidity crunch in the troubled company.
Talking to reporters after the first meeting of the new board in Hyderabad, HDFC chairman Deepak Parekh, who is member of the board, had said "working capital issues require immediate attention and we will work with the team to tide over this situation.
Satyam has 53,000 employees and needs over Rs 500 crore a month to meet the staff cost.
Commerce Minister Kamal Nath, who attended PM's review meeting, had said yesterday that the government was open to consider a financial package for Satyam.
Agencies
Shortly after the Prime Minister Manmohan Singh's review meeting on Satyam on Tuesday, there was media speculation that government would be considering a financial assistance ranging between Rs 500 crore and Rs 2,000 crore but the PMO office declined to comment on it.
"We have nothing to say on this," a top PMO official said when asked about if the government was considering giving financial aid to Satyam which is confronting a cash crisis.
Meanwhile, official sources indicated that the government appointed Satyam board has written a letter to the finance ministry raising concerns about the liquidity crunch in the troubled company.
Talking to reporters after the first meeting of the new board in Hyderabad, HDFC chairman Deepak Parekh, who is member of the board, had said "working capital issues require immediate attention and we will work with the team to tide over this situation.
Satyam has 53,000 employees and needs over Rs 500 crore a month to meet the staff cost.
Commerce Minister Kamal Nath, who attended PM's review meeting, had said yesterday that the government was open to consider a financial package for Satyam.
Agencies
Thursday, January 1, 2009
Top Citi bosses like Pandit to forego 2008 bonuses
Citigroup Inc.'s Indian American chief executive Vikram Pandit and chairman Win Bischoff would forego bonuses for 2008, the ailing banking giant announced as it formalised its bailout agreement with the US government.
Bonuses for other top executives will be "reduced substantially," Pandit said in a memo to Citigroup employees Wednesday.
Citigroup has received $45 billion in federal capital infusions and a government-financed arrangement to insulate it from hundreds of billions of dollars in potential losses after the bank lost three-quarters of its market value.
"The harsh realities of 2008, primarily our earnings results, mean that our bonus pool is dramatically lower," Pandit said.
Citigroup, the biggest recipient of US bailout funds, completed an agreement for a $20 billion government investment, Pandit said in the memo. That was on top of an earlier $25 billion and a US guarantee on $306 billion in troubled assets.
Pandit is cutting 52,000 jobs worldwide after four straight quarters of losses tied to bad loans and failed investments with the last quarter alone accounting for a loss of 2.8 billion dollars.
Citigroup expects "major challenges" to continue into 2009, Pandit said, describing the proposed actions as part of a major overhaul of executive compensation to confront the problems for the company and banking sector.
The new plan may also include "clawbacks" to "recoup executive compensation that over time proves to be based on inaccurate financial or other information," according to the memo.
"The most senior leaders should be affected the most," Pandit said. "Win and I believe this is fair, in light of the challenges of the year and the need for compensation elsewhere in the organization."
The memo said bonuses for the "senior leadership committee "will be reduced substantially." Members of Citi's executive committee would see bonuses "cut even more" and in some cases given as deferred compensation.
Pandit said the principles to guide the company's executive pay would include "pay for performance" and "meritocracy," adding that "compensation will vary based on each person's performance - again, relative to the overall performance of the company."
Severance compensation will be subject to "significant new limitations" for executives and that the top five executives "no longer can receive severance," said Pandit, who became Citigroup CEO in December 2007.
Those affected executives are Pandit, Bischoff, Chief Financial Officer Gary Crittenden and Vice Chairmen Lewis Kaden and Stephen Volk.
Pandit noted that former treasury secretary Robert Rubin, an advisor to the company who has no direct management responsibilities, "has elected to take no bonus for the second consecutive year."
"The overall objective for all of us at Citi is to build shareholder value, serve our clients and customers superbly well and create growth opportunities for our employees," he said.
"Adherence to the principles of compensation outlined above is fundamental to achieving these goals."
Pandit, 51, received 1 million shares from Citigroup as part of a "sign-on" bonus in January, in addition to a $2.5 million "retention equity award," the company said in March. He was paid $250,000 in salary in 2007.
Pandit got $165 million from Citigroup in 2007 when he sold Old Lane Partners LP, the hedge fund he co-founded and ran. Citigroup closed New York-based Old Lane in June and took a $202 million writedown on its $800 million investment.
Source: Agencies
Bonuses for other top executives will be "reduced substantially," Pandit said in a memo to Citigroup employees Wednesday.
Citigroup has received $45 billion in federal capital infusions and a government-financed arrangement to insulate it from hundreds of billions of dollars in potential losses after the bank lost three-quarters of its market value.
"The harsh realities of 2008, primarily our earnings results, mean that our bonus pool is dramatically lower," Pandit said.
Citigroup, the biggest recipient of US bailout funds, completed an agreement for a $20 billion government investment, Pandit said in the memo. That was on top of an earlier $25 billion and a US guarantee on $306 billion in troubled assets.
Pandit is cutting 52,000 jobs worldwide after four straight quarters of losses tied to bad loans and failed investments with the last quarter alone accounting for a loss of 2.8 billion dollars.
Citigroup expects "major challenges" to continue into 2009, Pandit said, describing the proposed actions as part of a major overhaul of executive compensation to confront the problems for the company and banking sector.
The new plan may also include "clawbacks" to "recoup executive compensation that over time proves to be based on inaccurate financial or other information," according to the memo.
"The most senior leaders should be affected the most," Pandit said. "Win and I believe this is fair, in light of the challenges of the year and the need for compensation elsewhere in the organization."
The memo said bonuses for the "senior leadership committee "will be reduced substantially." Members of Citi's executive committee would see bonuses "cut even more" and in some cases given as deferred compensation.
Pandit said the principles to guide the company's executive pay would include "pay for performance" and "meritocracy," adding that "compensation will vary based on each person's performance - again, relative to the overall performance of the company."
Severance compensation will be subject to "significant new limitations" for executives and that the top five executives "no longer can receive severance," said Pandit, who became Citigroup CEO in December 2007.
Those affected executives are Pandit, Bischoff, Chief Financial Officer Gary Crittenden and Vice Chairmen Lewis Kaden and Stephen Volk.
Pandit noted that former treasury secretary Robert Rubin, an advisor to the company who has no direct management responsibilities, "has elected to take no bonus for the second consecutive year."
"The overall objective for all of us at Citi is to build shareholder value, serve our clients and customers superbly well and create growth opportunities for our employees," he said.
"Adherence to the principles of compensation outlined above is fundamental to achieving these goals."
Pandit, 51, received 1 million shares from Citigroup as part of a "sign-on" bonus in January, in addition to a $2.5 million "retention equity award," the company said in March. He was paid $250,000 in salary in 2007.
Pandit got $165 million from Citigroup in 2007 when he sold Old Lane Partners LP, the hedge fund he co-founded and ran. Citigroup closed New York-based Old Lane in June and took a $202 million writedown on its $800 million investment.
Source: Agencies
Wednesday, December 31, 2008
GM cuts financing costs; GMAC expands lending
General Motors Corp and its financing affiliate GMAC on Tuesday announced programs to make it easier for car and truck buyers to get financing, a day after GMAC agreed to sell the government a $5 billion stake.
Through Jan. 5, GM will offer interest rates of zero percent to 4.9 percent on loans of up to five years on various 2008 model year vehicles, and 3.9 percent to 5.9 percent on some 2009 vehicles. Many of the vehicles also carry cash discounts of $500 to $4,250.
The move is a bid to capitalize on GMAC's separate plan to provide auto financing to more U.S. consumers. GMAC will extend loans to retail buyers with credit scores of 621 or higher. In October it had restricted loans to borrowers with scores of 700 or higher.
Many analysts consider borrowers with credit scores of 620 or lower to be "subprime." Dealer wholesale financing is unchanged, GMAC said.
GMAC is owned by GM and private equity firm Cerberus Capital Management LP [CBS.UL].
The changes may help bolster sales at GM, the nation's largest automaker, following a 41 percent plunge in November.
GMAC has traditionally provided the bulk of financing for GM's retail customers and the floorplan financing that dealers rely on to carry car and truck inventory.
Mark LaNeve, GM's sales and marketing chief, said the lower financing costs will encourage customers to "get back into the game."
Source: Agencies
Through Jan. 5, GM will offer interest rates of zero percent to 4.9 percent on loans of up to five years on various 2008 model year vehicles, and 3.9 percent to 5.9 percent on some 2009 vehicles. Many of the vehicles also carry cash discounts of $500 to $4,250.
The move is a bid to capitalize on GMAC's separate plan to provide auto financing to more U.S. consumers. GMAC will extend loans to retail buyers with credit scores of 621 or higher. In October it had restricted loans to borrowers with scores of 700 or higher.
Many analysts consider borrowers with credit scores of 620 or lower to be "subprime." Dealer wholesale financing is unchanged, GMAC said.
GMAC is owned by GM and private equity firm Cerberus Capital Management LP [CBS.UL].
The changes may help bolster sales at GM, the nation's largest automaker, following a 41 percent plunge in November.
GMAC has traditionally provided the bulk of financing for GM's retail customers and the floorplan financing that dealers rely on to carry car and truck inventory.
Mark LaNeve, GM's sales and marketing chief, said the lower financing costs will encourage customers to "get back into the game."
Source: Agencies
Saturday, December 20, 2008
Finally bailout approved: Automakers to get $17.4 bn
Citing danger to the national economy, the Bush administration approved an emergency bailout of the US auto industry on Friday, offering $17.4 billion in rescue loans in exchange for concessions from the deeply troubled carmakers and their workers.
The government will have the option of becoming a stockholder in the companies, much as it has with major banks, in effect partially nationalizing the industry.
At the same time, Treasury Secretary Henry Paulson said Congress should release the second $350 billion from the financial rescue fund that it approved in October to bail out huge financial institutions. Tapping the fund for the auto industry basically exhausts the first half of the $700 billion total, he said.
President Bush said, "Allowing the auto companies to collapse is not a responsible course of action." Bankruptcy, he said, would deal "an unacceptably painful blow to hardworking Americans" across the economy.
One official said $13.4 billion of the money would be available this month and next, $9.4 billion for General Motors Corp. and $4 billion for Chrysler LLC. Both companies have said they soon might be unable to pay their bills without federal help. Ford Motor Co. has said it does not need immediate help.
Bush's plan is designed to keep the auto industry running in the short term, passing the longer-range problem on to the incoming administration of President-elect Barack Obama.
Bush said the rescue package demanded concessions similar to those outlined in a bailout plan that was approved by the House but rejected by the Senate a week ago. It would give the automakers three months to come up with restructuring plans to become viable companies.
If they fail to produce a plan by March 31, the automakers will be required to repay the loans, which they would find very difficult.
"The time to make hard decisions to become viable is now, or the only option will be bankruptcy," Bush said. "The automakers and unions must understand what is at stake and make hard decisions necessary to reform."
He said the companies' workers should agree to wage and work rules that are competitive with foreign automakers by the end of next year.
And he called for elimination of a "jobs bank" program — negotiated by the United Auto Workers and the companies — under which laid-off workers receive unemployment benefits and supplemental pay from their companies for 48 weeks. If they remain laid off beyond that, they move to a jobs bank in which the company provides about 95% of their pay and benefits. Until the most recent contract, people could remain in the jobs bank for years. Early this month, the UAW agreed to suspend the program.
Under terms of the loan, GM and Chrysler must provide the government with stock warrants giving it the option to buy GM and Chrysler stock at a specific price.
In addition, the automakers would be required to agree to limits on executive pay and eliminate some perks such as corporate jets.
Paulson said that with the help for the carmakers, the government will have allocated the first half of the largest government bailout program in history.
He said he was confident that the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. have the resources to address a significant market crisis if one should occur before Congress approves the use of the second half of the rescue fund.
Paulson said he would discuss the process with congressional leaders and Obama's transition team "in the near future.
Source: Agencies
The government will have the option of becoming a stockholder in the companies, much as it has with major banks, in effect partially nationalizing the industry.
At the same time, Treasury Secretary Henry Paulson said Congress should release the second $350 billion from the financial rescue fund that it approved in October to bail out huge financial institutions. Tapping the fund for the auto industry basically exhausts the first half of the $700 billion total, he said.
President Bush said, "Allowing the auto companies to collapse is not a responsible course of action." Bankruptcy, he said, would deal "an unacceptably painful blow to hardworking Americans" across the economy.
One official said $13.4 billion of the money would be available this month and next, $9.4 billion for General Motors Corp. and $4 billion for Chrysler LLC. Both companies have said they soon might be unable to pay their bills without federal help. Ford Motor Co. has said it does not need immediate help.
Bush's plan is designed to keep the auto industry running in the short term, passing the longer-range problem on to the incoming administration of President-elect Barack Obama.
Bush said the rescue package demanded concessions similar to those outlined in a bailout plan that was approved by the House but rejected by the Senate a week ago. It would give the automakers three months to come up with restructuring plans to become viable companies.
If they fail to produce a plan by March 31, the automakers will be required to repay the loans, which they would find very difficult.
"The time to make hard decisions to become viable is now, or the only option will be bankruptcy," Bush said. "The automakers and unions must understand what is at stake and make hard decisions necessary to reform."
He said the companies' workers should agree to wage and work rules that are competitive with foreign automakers by the end of next year.
And he called for elimination of a "jobs bank" program — negotiated by the United Auto Workers and the companies — under which laid-off workers receive unemployment benefits and supplemental pay from their companies for 48 weeks. If they remain laid off beyond that, they move to a jobs bank in which the company provides about 95% of their pay and benefits. Until the most recent contract, people could remain in the jobs bank for years. Early this month, the UAW agreed to suspend the program.
Under terms of the loan, GM and Chrysler must provide the government with stock warrants giving it the option to buy GM and Chrysler stock at a specific price.
In addition, the automakers would be required to agree to limits on executive pay and eliminate some perks such as corporate jets.
Paulson said that with the help for the carmakers, the government will have allocated the first half of the largest government bailout program in history.
He said he was confident that the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. have the resources to address a significant market crisis if one should occur before Congress approves the use of the second half of the rescue fund.
Paulson said he would discuss the process with congressional leaders and Obama's transition team "in the near future.
Source: Agencies
Thursday, November 27, 2008
Has salary for AIG CEO been cut?
Under pressure from Attorney General Andrew M Cuomo of New York, the American International Group that it would pay its chief executive, Edward M Liddy, only $1 a year and that it was freezing the salaries and eliminating bonuses for its seven other top executives.
In addition, the troubled insurance company said its next 50 highest-ranked executives would not receive salary increases through 2009.
AIG’s cutbacks on executive pay came after Cuomo questioned last week whether the company actually planned to give out raises and bonuses to top executives, especially in light of the federal government’s $150 billion bailout of the company.
The company said it was taking steps to ensure that no government money would be used for bonuses and cash awards to its 60 top executives.
Source: NYT News Service
In addition, the troubled insurance company said its next 50 highest-ranked executives would not receive salary increases through 2009.
AIG’s cutbacks on executive pay came after Cuomo questioned last week whether the company actually planned to give out raises and bonuses to top executives, especially in light of the federal government’s $150 billion bailout of the company.
The company said it was taking steps to ensure that no government money would be used for bonuses and cash awards to its 60 top executives.
Source: NYT News Service
Wednesday, November 26, 2008
Will Citi bailout end fancy pay?
Citigroup's top executives could forego some of their compensation as a condition of the bank’s bailout, but that may not satisfy critics who want firm limits on the earnings of leaders at companies getting government help. Citigroup, the latest financial institution lining up for federal help to shore up its finances, must submit an executive pay plan for government approval as part of its rescue. The plan should focus on rewarding long-term performance and contain “appropriate limitations,” the bailout agreement says.
A Citigroup spokesperson, Stephen Cohen, said on Monday that details of the pay plan were being worked out, and that no deadline for its submission has yet been announced. He declined to comment on which executives from the bank, which is getting $20 billion in new capital and an agreement from the government to shoulder the bulk of potential losses from $306 billion of toxic assets, would be subject to the pay rules.
Government officials have said more details on the compensation arrangement would be available next week. Citigroup’s chief financial officer, Gary Crittenden, said on CNBC television on Monday that the pay plan would affect 2008 compensation for some executives but offered few other details besides saying, “I know it will be done the right way.”
Source: Reuters
A Citigroup spokesperson, Stephen Cohen, said on Monday that details of the pay plan were being worked out, and that no deadline for its submission has yet been announced. He declined to comment on which executives from the bank, which is getting $20 billion in new capital and an agreement from the government to shoulder the bulk of potential losses from $306 billion of toxic assets, would be subject to the pay rules.
Government officials have said more details on the compensation arrangement would be available next week. Citigroup’s chief financial officer, Gary Crittenden, said on CNBC television on Monday that the pay plan would affect 2008 compensation for some executives but offered few other details besides saying, “I know it will be done the right way.”
Source: Reuters
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