The Status of the US TARP / Bailout Funds

8/9/2019 The Status of the US TARP / Bailout Funds

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Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com.ValuEngine is a fundamentally-based quant research firm in Princeton, NJ. ValuEngine

covers over 5,000 stocks every day.

A variety of newsletters and portfolios containing Suttmeier's detailed research, stock picks,and commentary can be found HERE.

May 12, 2010 The Status of the US TARP / Bailout Funds

The financial bailout continues including TARP and Conservatorship of Fannie Mae and FreddieMac. Risk Aversion solidified even more on Tuesday. I re-iterate the logical reasons for lastThursdays Flash Crash, and whats needed to prevent these events in the future.

This table courtesy of Propublica.org summarizes the total bailouts in the United States: Even thoughthe too big to fail banks have repaid TARP there is still $244.9 billion outstanding at banks and otherfinancial institutions. Fannie and Freddie at $144.9 billion and growing are clearly becoming the biggesthits to taxpayer wallets. Look at the dismal outlays for Main Street as Foreclosure Relief is a paltry $90million. Not shown is the TARP specific outstanding balance which totals $184.1 disbursed mostly tocommunity and regional banks.


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Statistics from Fannie Mae shows continued mortgage deterioration, which should lead to another dipin Housing Prices keeping the pressures on community and regional banks.

Since May 5th

Fannie & Freddie cost taxpayers another $19 billion.According to Fannie Mae home prices in the United States are down 18.4% since the peak.Fannie Mae Seriously Delinquent Single-Family Mortgage Delinquencies rose to 5.47% at the endof Q1 2010 versus 5.38 at the end of 2009 and 3.15% a year ago, which is a sign that The GreatCredit Crunch is deepening.Fannie Mae Real Estate owned totaled 109,989 properties at the end of Q1 2010 versus 62,371 ayear ago. Acquisition growth has been accelerating from 49,121 in 2007, 94,652 in 2008, 145,617on 2009 and 61,929 in Q1 2010, which is an annual rate of 247,716. Alt-A mortgages on the books of Fannie Mae totals $238.3 billion.

The US Banking System faces a continued need to De-leverage

Since the end of 2001 GDP in the United States is up 38.6%, while Total Assets in the banking systemare up 66.6%. This over-leverage exits even as de-leveraging totaled 5.3% in 2009.

Commercial Real Estate Loans (nonfarm / nonresidential) are up 91.6% since the end of 2001 to$1.1 trillion. This category will be facing writedowns likely starting in Q1 2010.Construction & Development Loans are still up 96% since the end of 2001 despite being de-leveraging of 6.2% in 2008 and 23.6% in 2009.Home Equity Loans are up 258.9% since the end of 2001 despite a decline of 18.3% in 2009.

Homes were used as piggy banks to the tune of sequential increases of 39.1% in 2002, 35.0% in2003 and $41.8% in 2004. This is a major reason for 23.3% of homeowners being underwater,which is another worsening housing statistic.Fannie Mae is not alone in the growth in REO. I do not have Freddie Mac statistics yet, but amongFDIC insured financial institutions REO is up 795.8% since the end of 2001 to a record $41.4billion worth of properties.Noncurrent Loans are up 526.4% since the end of 2001.Notional Amount of Derivative Contracts are up 370% since the end of 2001, and we have manytime bombs ticking in this category as the too big to fail banks lobby for loose financialregulations.


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Risk Aversion gained some MOJO on Tuesday.

US Treasury yields are back down. Gold is at a new high for the move. Oil is back down with the euro.Because of Monday's 400 point Dow gain stocks became more overvalued.

The 3-Year US Treasury Auction This was a strong auction for this $38 billion issue as the level was1.414 stronger than where the WI was trading at 1:00 PM. The bid to cover was a strong 3.27 times theauction size and the Indirect Bids were 51% well above the 30% to 40% neutral zone. I give thisauction an A given that the recent trading range for the 3-Year is 1.463 on Monday to 1.025 lastThursday.

Todays focus is the $24 billion in 10-Year Notes My semiannual pivot is 3.675 with my quarterlypivot at 3.467 and the May 6th low yield at 3.266.

Courtesy of Thomson / Reuters

Comex Gold held my semiannual pivot at $1186.5, which is a key to the scenario calling gold thecurrency of last resort. My weekly pivot is $1206.7 with monthly resistances at $1217.3 and $1270.1.The euro rebound faded and early big gains could not alleviate an oversold condition.


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Nymex Crude Oil had a small bounce as my annual pivot at $77.05 provided a magnet. The lack of abigger rally in crude oil questions the global growth story.



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The Major Equity Averages had one of their stronger rebounds in history, but the Dow, S&P 500 andthe NASDAQ stayed shy of their 50-day simple moving averages at 10,853, 1171.50 and 2412respectively. In Dow terms there are 1423 points between the Feb 5th low at 9,835 and the April 26th

high at 11,258 in about ten weeks. We fell from the high back close to that low in just eight days.


The Common Sense Cause of the Flash Crash of last Thursday

My Take on Thursdays Massacre - The stock market had been suffering from a Case ofComplacency ignoring overvalued and overbought conditions for stocks that led to short-coveringaround the April 26 highs. The bulls were ignoring the debt crisis in Greece calling it contained. Thebulls were fully invested and did not have bids in the system and short-covering bids were limited.

The bottom line is when the short base is reduced and the bulls are fully invested, there are nobids below the market. Therefore the only way is down hard when the crowd wants to exit.

What we need is circuit breakers in stocks traded on the computer platforms. I am an engineer

by education with a Master of Science in Operations Research Systems Analysis. I designed simulationprograms in the late 1960s into 1972. I know how computerization can be biased by the programmersdesign. I have always opined that Black Box Trading should be banned.

The fall-out from Thursdays meltdown will only take more average investors out of the market calling ita Wall Street rigged game.

High Frequency Trading needs a human touch or automated safeguards and the transparency to knowthat below a certain bid or above a certain offer theres a price gap of x%. Knowing this informationthese gaps are likely to be filled by willing flash traders. If not there has to be a y% threshold where thesystem stops trading on a stock until liquidity returns.


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Thats todays Four in Four. Have a great day.

Richard SuttmeierChief Market Strategistwww.ValuEngine.com(800) 381-5576

As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. Ihave daily, weekly, monthly, and quarterly newsletters available that track a variety of equity and other data parameters aswell as my most up-to-date analysis of world markets. My newest products include a weekly ETF newsletter as well as theValuTrader Model Portfolio newsletter. I hope that you will go to www.ValuEngine.com and review some of the sampleissues of my research.

I Hold No Positions in the Stocks I Cover.

The Status of the US TARP / Bailout Funds

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