JP Morgan has no plans to repay bailout money

JP Morgan announced a 2.1 billion dollar profit for the first quarter, unlike it’s rival Goldman Sachs the banking giant did not mention any plans to repay the government money. According to Eric Dash’s report on Washington Post’s website. JP Morgan has reportedly made nearly $6 billion dollars in the first quarter, $2.1 billion was categorized as profit, and $4.2 billion was set aside as a cushion, a CUSHION?! While millions of taxpayers are struggling to get by, the banking giant is cozily enjoy its “cushion”. Obviously, the CEO’s of the bank are a bit forgetful-they don’t remember that they need to repay the $25 billion taxpayers money that they got from the government. Allegedly, when a survey of the nation’s 19 major banks comes out next month, the government might pump more money into the banking system! (New York Times) One might wonder, how long can we keep feeding the bad bankers? Posted byPosted by yanli On Redstate Blog

Life Insurance Companies Get Bail Out!

Peter Barnes and Joanna Ossinger

FOXBusiness

Life insurers, which have come under financial strain in recent months amid as their capital levels have declined and credit markets have frozen, may soon be eligible to receive government bailout money.

A financial industry source close to the TARP process told FOX Business that the Treasury Department would give money from the Troubled Asset Relief Program to certain eligible insurers.

Under the Bush Administration, Treasury had considered providing TARP funds to life insurance companies, but the review was interrupted by the auto industry rescue and the transition to the Obama Administration. Now the assistance is under review again, by the Obama Treasury team, as the life insurance industry faces increasing financial troubles.

The financial industry source close to the TARP process suggested the new review is in its preliminary stages and that some assistance for life insurers cannot be ruled out.

Life insurers that are bank holding companies have been eligible to receive TARP money, but haven’t been approved yet by Treasury. A source tells FOX Business that life-insurer applications total $20 billion from about half a dozen firms.

Prudential Financial (PRU: 22.08, 0, 0%), which already owns a thrift, has applied for TARP funds.

A number of insurers applied last fall to buy small bank holding companies in an effort to become eligible for TARP money, going so far as to say the acquisition was contingent on it obtaining them bank holding company status and TARP funds.

Genworth Financial (GNW: 2.1, 0, 0%), Hartford Financial Services (HIG: 8.45, 0, 0%) and Lincoln National (LNC: 6.93, 0, 0%) all pursued that strategy. They’re at various points in applying for TARP funds, according to a report published in the Wall Street Journal on Tuesday.

Life insurers are suffering more than health and property/casualty insurers amid the downturn because of their asset mix, which generally includes mortgage-backed securities and even sometimes stocks or other risky investments.

Because life-insurance liabilities are generally longer-dated -- a life policy might be paid 20 or 30 years down the line, whereas a health-insurance policy would likely start getting claims almost right away -- life insurers could take the opportunity to add some risk to boost their returns. That strategy would pay off during bull markets, but hurt the insurer in deep downturns such as this one.

Bernanke Burns More Tax Payer Billions in Banks Capital Assistance Program

Bernanke has fired yet another misguided missile to stabilize the banking system. His new program is called the Capital Assistance Program and supposedly it will restore confidence in banks and get them to lend. Here is a description of the program:

The purpose of the CAP is to restore confidence throughout the financial system that the nation's largest banking institutions have a sufficient capital cushion against larger than expected future losses, should they occur due to a more severe economic environment, and to support lending to creditworthy borrowers. Terms

• Capital provided under the CAP will be in the form of a preferred security that is convertible into common equity at a 10 percent discount to the price prevailing prior to February 9th.
• CAP securities will carry a 9 percent dividend yield and would be convertible at the issuer's option (subject to the approval of their regulator).
• After 7 years, the security would automatically convert into common equity if not redeemed or converted before that date.
• The instrument is designed to give banks the incentive to replace USG-provided capital with private capital or to redeem the USG capital when conditions permit.
• With supervisory approval, banks will be able to request capital under the CAP in addition to their existing CPP preferred stock.
• With supervisory approval, banks will also be allowed to apply to exchange the existing CPP preferred stock for the new CAP instrument.

CAP Facts 1) Amazingly CAP fact sheet states the securities will yield a 9% dividend. However, any bank troubled enough to need the CAP is likewise too troubled to be able to pay a 9% dividend. Banks can't get a 9% return on borrowed money everyone knows it. Instead, expect preferred shares to be converted to common at inflated prices. 2) Digging a bit deeper into the fact sheet we see the " Conversion price is 90% of the average closing price for the common stock for the 20 trading day period ending February 9, 2009. " Think February 9 was selected at random? Think again. The first box in the charts below is the 20 days ending February 9. Compare to what has happened since. Click Here to Read Full Article