On Wednesday, the government tapped nine financial firms to run toxic asset programs. The firms were selected from a pool of over 100 applicants. They will have 12 weeks to raise $500 million each. The investments will be matched by the Treasury Department and further supplemented from debt financing. The financial firms chosen to take part in this scaled down program aimed at helping banks include:

Image: sxc.hu

• BlackRock (BLK, Fortune 500)
• AllianceBernstein (AB)
• Oaktree Capital Management
• Invesco (IVZ)
• Angelo, Gordon & Co.
• Marathon Asset Management
• RLJ Western Asset Management
• The TCW Group
• Wellington Management Company

CNNMoney’s David Ellis says:

Under the program, the government will run auctions between the banks selling assets and investors buying them. The aim is to effectively create a market. The goal is to help cleanse the balance sheets of many of the nation’s largest banks and help get credit flowing again.

The goverment investment will be up to $30 billion to help the program get started. In addition to the nine firms, 10 women-owned and minority-owned asset management firms were also seleted to take part as partners.

The economy has been anything but hospitable in recent times, with the collapses of major financial institutions, small banks, and plenty of business around the country creating a chaotic economic situation. However, Wall Street does not seem to be going away any time soon, despite an environment that should spell its demise, or at least its weakening.
 
While plenty of Wall Street firms have gone under, plenty more have sprung up in their wake to take advantage of a potentially profitable situation. Analysts are concerned, though, that too many entrants into Wall Street could harm the entire business. One competitive tactic is to undercut your competitor’s prices, driving global profits downward.
 
One example of a newer entrant into the Wall Street fray is Wells Fargo, the San Francisco-based bank that has traditionally kept far away from Wall Street. After its acquisition of Wachovia, though, Wells Fargo has now established a plan to become a top Wall Street investment bank. Wells Fargo will have plenty of competition, though, in every aspect of the move toward Wall Street.

Wall Street (Image: Flickr)

According to a report by the U.S. Treasury Department, the banks that received billions of dollars of taxpayer money from the TARP fund have actually been less forthcoming with credit than before. The report shows that the total amount of all outstanding loans from the banks that received taxpayer money has fallen 0.8 percent in a month’s time.
 
This means that the total amount of money involved in lending contracts has shrunk from $5.28 trillion to $5.24 trillion from February to March in the 500 financial institutions that received taxpayer money. Commercial loans have fallen 1.2 percent $2.35 trillion in everywhere from the smallest banks to the major financial institutions.
 
This report, which was released today, marks the first time that the Treasury Department has given concrete information about the lending status of the smaller banks affected by the TARP fund. The Treasury Department has been releasing such information about the 21 largest financial institutions.

Image: Flickr

Five California banks have received orders from the Federal Deposit Insurance Corp. to make a variety of changes. These orders come off the back of increasing public pressure for transparent business practices, especially in the wake of the economic crisis.
 
California has been hit especially hard by the softening economy and this development emphasizes the fact that the troubled state will have to make concessions. The orders from the FDIC include mandates for stricter lending policies, different management, and even new capital.
 
Of the 24 such orders issued across the country, California received about a fifth of them, but the effected banks are as varied as they are widespread. Several of the banks had already been on the road to complying with the FDIC orders when the economic situation collapsed. For the banks still struggling to adapt to the FDIC’s terms, time may be running short.

Image: Flickr

Is your bank stressed? The tests are in and 10 out of 19 banks tested did not pass. Here’s some of the opinion swirling around the stress tests.

Douglas McIntyre at Daily Finance broke down the three categories of stressed (or not so stressed) banks, and how they will proceed from here.

Based on the leaked information and how the banks stocks have traded over the last week, Wall Street believes that most banks are in relatively good shape. What should concern investors is that, if the economy does not get better soon, then the “stress tests” were not rigorous enough and the banks will have to go through another round of recapitalization later this year or early in 2010.

The Baseline Scenario looked at the stress tests from a PR spin perspective.

The public relations campaign packaging the bank stress tests is kicking into high gear and our professional information managers are really hitting their stride.  They face, of course, a classic spin problem: you need to get the information out there, but you don’t want to be too definitive on the first day or soon after – if you’re easy on the banks, that looks bad; if you’re tough on the banks, that might be dangerous.

Simon Maierhofer speculated on the stress tests’ effect on the market.

As we’ve found out, just the perception that a bank isn’t safe can create a run on the bank. Such a run on the bank (defined as too many customers withdrawing their money at the same time) is exactly what “killed” Washington Mutual. Regardless of the results, we can be sure that the government will do what it takes to avoid a run on any of the banks undergoing the stress test.

George Stephanopoulos bottom lined it: Obama won’t need more TARP money from Congress this year.

That clears the congressional decks for the rest of the Obama agenda — especially health care.

And click here for Mike Keefe’s cartoon on stress tests.

Image Credit: Anonymous9000, Flickr

The bank crisis continues with four more banks closing on Friday. In 2008, 25 U.S. banks failed for the entire year. However with Friday’s bank failures that number was surpassed for 2009, bringing this year’s total to 29. The four regional banks that failed on Friday include: First Bank of Idaho, American Southern Bank, Michigan Heritage Bank and First Bank of Beverly Hills. The four failures will cost the FDIC’s deposit insurance fund $698.4 million.

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First Bank of Idaho had deposits of $374 million and $488.9 million in assets. They were the first bank in the state of Idaho to fail in more than 20 years. U.S. Bank of Minneapolis acquired the bank’s deposits and will re-open its seven branches under the new name on Monday.

American Southern Bank is in Georgia. The state has had 10 bank failures (the most of any state) since the beginning of last year. The single office will reopen on Monday as a branch of Bank of North Georgia.

The three offices of the Michigan Heritage Bank will reopen on Monday as branches of Level One. The government will mail customers of First Bank of Beverly Hills (Calabasas, Calif.) checks on Monday for their insured funds.

If customers of any of the failed banks have questions, they can find out more information on the FDIC website’s Failed Bank List.

A lot of the buzz seems to be swirling around regulatory issues this week.

• Becker and Posner discussed mark-to-market rules and how they might be applied in the future.
• Huffington Post called for a financial regulatory overhaul.
• Illinois Senator Dick Durbin proposed a consumer-oriented regulatory agency to police financial products: the Financial Product Safety Commission. Cool idea, if your 401(k) is full of melamine.
• Truthout weighs in on big banks, huge bailouts, gigantic potential losses.
• Imus gives us 60s throwback activist Dick Gregory, who thinks his taking time off food will solve complex economic crises.
• I covered the tax ramifications of mortgage debt forgiveness over on Business Pundit.

Image Credit: Flickr

The NAACP filed lawsuits on Friday against HSBC and Wells Fargo, two of the largest mortgage lenders in the country. The suits, which were filed in U.S. District Court in central California, allege that the lenders gave subprime rates to African-Americans who qualified for better rates, and gave better rates to Caucasian customers with similar credit histories.

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The lenders are accused of “systematic, institutionalized racism” in their sub-prime lending. The lawsuits are not seeking damages, rather they just want to see the books and have the problem fixed.

As expected, both companies are denying the allegations.

HSBC spokeswoman Kate Durham said the company does not comment on litigation, but she added, “We stand by our lending practices.”

Wells Fargo spokeswoman Melissa Murray issued a statement saying, “The NAACP’s allegations are totally unfounded and reckless. We have never tolerated, and will never tolerate, discrimination in any way, shape or form in any of our business practices, products, or services.”

Source: Wire Reports

This story is about a young chiropractor named Barton. He graduated from chiropractic college over $100,000 in debt, with no personal finances to get a loan., and a young wife and baby. But he was determined to start his chiropractic practice. He went to bank after bank. Each bank turned him down. Some said “no” more or less politely, but they all said, “No way you can get a loan.” He had little support from his family and no personal funds to use as collateral.  He had no experience, but he certainly had a will to succeed.

He was turned down by 9 (yes, 9) banks. But he didn’t give up. He kept on talking to banks, trying to get them to sign on with him and give him a chance.  Although he told me he was often discouraged, he didn’t give up.  With the 10th bank, he was welcomed, and the banker said, “Sure, we can give you a loan.”

That was four years ago. Today he is a successful chiropractor.  He had to hire another chiropractor to help him because he has so many patients.  And he has been able to succeed in a very tough city with lots of other chiropractors. If he had given up after the 2nd, or 4th, or even the 9th bank, he wouldn’t have been where he is today.

One of my favorite quotes, by Marilyn vos Savant, sums up the need for persistence in starting a business: “Defeat is often a temporary condition. Giving up is what makes it permanent.”

Image source: Newscom

The Bank of England cut their interest rates by half a percentage point on Thursday. With the recession deepening in the country, the bank lowered its rate (which already at an all-time low) to just 0.5 percent.

Bank of England

In an attempt to pump money into the economy and fight the recession, the Bank of England also decided to buy £75 billion ($105 billion) worth of private and public securities over the next three months. With growing unemployment, a declining housing market and problems in the financial services sectors, England’s economy has been hit worse than most other countries in Europe.

Bank of England had already dropped interest rates to the lowest in its 315-year history just last month. They also had begin buying short-term securities, but the new decision is to purchase £75 billion of longer-term securities.

Source: Bank of England, Image: Flickr