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Entries in Bailout (24)

Monday
Mar252013

Bailout Plan Could Avert Economic Collapse in Cyprus

Hemera/Thinkstock(NEW YORK) -- Cyprus has seemingly avoided economic disaster by agreeing late Sunday to a bailout plan which will provide the island nation with a bailout of approximately $13 billion.

Time was of the essence, as failing to reach an agreement could have spelled the collapse of Cyprus' banking system, leading next to bankruptcy, with a potential ripple effect throughout the entire European continent.

Last week, the Cypriot parliament roundly rejected the first proposal from the European Union and International Monetary Fund, which would have tacked surcharges of up to ten percent on virtually all bank accounts.

The new deal calls for shrinking the banking system, in fact, the Cyprus Popular Bank will be shut down and viable assets taken over by the Bank of Cyprus.

To help pay for the bailout, bank depositors with more than 100,000 euros will endure losses while those under that amount will be protected.

If lawmakers approve the plan, it will mean immediate pain for Cypriots and the likely end of their country as an offshore tax haven.

Copyright 2013 ABC News Radio

Tuesday
Jan082013

AIG May Join Suit over US Bailout

STAN HONDA/AFP/Getty Images(NEW YORK) -- The giant insurance company AIG, which was saved from collapse by a $182 billion taxpayer-funded bailout, is reportedly considering joining a lawsuit against the government.

According to The New York Times, the complaint claims shareholders were cheated by the terms of the bailout, which included high interest rates and billions in payments to AIG's Wall Street clients.

The newspaper reports the lawsuit was filed in 2011 by 87-year-old former boss Maurice Greenberg, a major investor who ran AIG for more than four decades. 

The lawsuit claims the terms of rescue were too harsh, and that shareholders were deprived of tens of billions of dollars, which violated the Fifth Amendment prohibiting seizure of private property for “public use, without just compensation."

According to The Times, AIG board members will meet on Wednesday in New York to hear a presentation about joining the shareholder suit.

Copyright 2013 ABC News Radio

Tuesday
Nov272012

New Bailout Package for Greece Approved

iStockphoto/Thinkstock(NEW YORK) -- Greece will not be defaulting on its loans anytime soon.  

After weeks of difficult talks, Greece’s European partners and the International Monetary Fund agreed on Tuesday to release a bailout payment.  The proposal allows the country to reduce its oppressive level of debts, and the new loan makes it more likely that Greece will stay in the single currency eurozone.

The interest rate Greece will be charged will be lowered.  The country will also be given more time to pay its loans.

Under the terms of the agreement, the Greek government will receive loan payments of about $57 billion to be paid in four installments.  But Greece must stick to its deficit targets to qualify for the bailout.

Copyright 2012 ABC News Radio

Tuesday
Jul102012

Stock Markets Up on News of Spanish Bailout Agreement

Comstock/Thinkstock(NEW YORK) -- Global stock markets are mostly higher Tuesday morning after European finance ministers made progress on easing Spain's banking crisis.

They agreed to make as much as $30 billion available to Spanish banks by the end of this month.  The rescue had been called for after the banks were weakened by toxic loans from a collapsed property market.

After the agreement was announced, yields on 10-year Spanish government bonds fell below 7 percent.  The news also pushed European markets and U.S. stock futures up.

The finance ministers will need the approval of their respective governments before they can finalize the agreement on July 20, when they return to Brussels.

Copyright 2012 ABC News Radio

Saturday
Jun232012

Greece Seeks at Least Two-Year Extension on Bailout 

iStockphoto/Thinkstock(NEW YORK) -- A policy document drafted by Greece's governing coalition says the country will seek at least a two-year extension from its creditors for the bailout program, Bloomberg News reports.

A document received in an email from the Greek government on Saturday shows that New Democracy, Pasok and the Democratic Left agree to eliminate plans to cut 150,000 public-sector jobs. It also included proposals to reduce sales tax for bars, restaurants, cafes and the agricultural industry and raise the income tax limit, Bloomberg says.

The New Democracy party won the nation's general election on June 17 on promises to renegotiate parts of the $163 billion bailout from the European Union and International Monetary Fund and keep Greece in the euro. Pasok and the Democratic Left then joined the winning party to form the new government coalition.

Copyright 2012 ABC News Radio

Monday
Jun112012

Spain's Bank Bailout Could Ease Europe's Debt Crisis

Hemera/Thinkstock(MADRID) -- Deep worries about Europe's financial crisis are expected to ease somewhat following the announcement last weekend that Spain's banks would receive a multi-billion dollar bailout.

Similar to what happened in the U.S. four years ago, the Spanish banking sector was in a deep hole because the bottom had dropped out of that country's housing market.

Luis de Guindos, Spain's finance minister, insisted that the bailout from Europe, figuring to be around $125 billion, would not come with any austerity measures.

The move comes just a week before crucial elections in Greece that will decide whether the country exits from the euro, the troubled single currency shared by 17 nations.

Spain is the fourth EU nation after Portugal, Ireland and Greece getting bailed out by the continent. World markets are expected to act favorably upon the news of the monetary boost to Spanish banks.

Copyright 2012 ABC News Radio

Saturday
Jun092012

Spain's Economy Minister Says Country Will Seek European Bailout 

iStockphoto/Thinkstock(NEW YORK) -- Spain's Economy Minister said in a press conference on Saturday that the country will seek a European bailout for its banks, Bloomberg News reports.

Luis de Guindos said that the aid provided will be on much more favorable terms than what would presently be possible in financial markets. He also said that euro-region finance ministers would announce the amount of funding provided, but did not say when. Spain is asking for as much as 100 billion euros, the news agency said.

Guindos said the bailout is not a "rescue" and that banks receiving aid will have to submit to conditions, according to Bloomberg.

Copyright 2012 ABC News Radio

Thursday
May102012

Obama Calls Romney's Auto Bailout Claim an ‘Etch-a-Sketch Moment’

Richard Ellis/Getty Images(WASHINGTON) -- President Obama on Wednesday roundly dismissed GOP rival Mitt Romney’s claim to credit for the resurgence of the U.S. auto industry as “one of his Etch-A-Sketch moments,” in an exclusive interview with ABC News’ Robin Roberts.

During a visit to Lansing, Mich., on Tuesday, Romney said the idea of a managed bankruptcy for GM and Chrysler had been his idea at the height of the economic crisis in 2009.

“So I’ll take a lot of credit for the fact that this industry’s come back,” Romney said.

Obama has argued that the managed bankruptcy could not have been possible without his decision to authorize a multi-billion dollar infusion of taxpayer cash to keep the companies afloat.  Romney opposed federal government aid.

“I don’t think anybody takes that seriously,” Obama told Roberts of Romney’s claim.  “People remember his position, which was, ‘Let’s let Detroit go bankrupt’ and his opposition to government involvement in making sure that GM and Chrysler didn’t go under.”

“And I -- every businessperson and economist out there understands that at the time I had to make the decision, there was no private sector option.  Nobody was opening up their wallets to lend money to GM and Chrysler,” the president said.

While a few conservative economists have rejected the notion that government funds were required, the consensus of leading economists is that the situation was so dire that the companies could not alone acquire necessary funds to proceed through the process.

“The companies would have shut down and the bondholders would have been wiped out,” said Mark Zandi, chief economist at Moody’s Analytics.  “Nearly all analysts at the time felt at the time that without government bailout -- GM and Chrysler would have been liquidated.”

Obama, who has made the revival of the auto industry a cornerstone of his re-election campaign, said a President Romney would have allowed the companies to succumb.

“We would have lost probably a million jobs throughout the Midwest,” he told Roberts.  “So the people who are in the Midwest -- you know, you go take a poll of folks in Detroit who buy that argument -- I don’t think they’re going to be persuaded.”

Romney has argued that had the companies been pushed into managed bankruptcy without government assistance, they would have restructured and returned to profitability more quickly than they have.

Copyright 2012 ABC News Radio

Thursday
Mar082012

US Government Sells $6B in AIG Shares

STAN HONDA/AFP/Getty Images(WASHINGTON) -- The U.S. government will further cut its stake in American International Group Inc. after its bailout more than three years ago, getting back a slice of the $182 billion in taxpayer money injected into what was once the world’s largest insurer.

The Treasury Department launched a sale of AIG stock Thursday, expecting about $6 billion for almost 207 million shares at $29 a share.  AIG made losing bets on mortgage-backed securities at the height of the financial crisis, wiping out the company.

New York-based AIG is buying about $3 billion of the shares, expecting steady future profits. The company agreed to buy over 103 million shares at $29 a share, or 23 cents more than the government’s break-even price of $28.72.  The government’s move will reduce its ownership in the firm from 77 percent to about 70 percent.

“We’re continuing to move forward to wind down TARP and exit our stakes in private companies as soon as practicable,” assistant Treasury Secretary for Financial Stability, Tim Massad, said in a statement. “Today is another important step in our efforts to recover the taxpayer’s investment in AIG.”

In 2008, the government initiated a record bailout package of more than $182 billion during the financial crisis. Congress authorized the $700 billion Troubled Asset Relief Program, or TARP, in October 2008 to provide relief to AIG, banks and auto companies.

The Treasury first began selling AIG stock in May 2011, in its effort to exit from ownership of the company.

The stock offering priced on Thursday and an agreement to fully repay Treasury’s preferred equity interest on Wednesday are expected to provide at least $14.5 billion in proceeds toward repaying the taxpayers’ investment in AIG, therefore reducing the Treasury’s remaining investment in AIG to $37.8 billion.

Copyright 2012 ABC News Radio

Monday
Mar052012

Federal Bankruptcy Judge: Bailout Was Only Way to Save Chrysler

KAREN BLEIER/AFP/Getty Images(NEW YORK) -- The federal judge who presided over Chrysler’s bankruptcy told ABC News in an exclusive interview that the ailing company could not have survived without taxpayer money.

“The record before the Court was clear that there were no other sources of lending,” said Arthur J. Gonzalez, who served as chief judge of the U.S. bankruptcy court for the Southern District of New York.

The bailouts of GM and Chrysler remain a political hot potato in Midwestern states such as Illinois, Indiana, Michigan and Ohio, which are heavily dependent on the U.S. auto industry.

President Obama is taking credit for saving more than a million jobs because of the bailouts, while Republican candidates have voiced their opposition to the government loans.  GOP front-runner Mitt Romney insists, “It was the wrong way to go,” and that General Motors and Chrysler should have gone through “a private bankruptcy process.”

But Gonzalez, who retired from the federal bench on March 1, told ABC News: “One thing is clear, without government support in one fashion or another, there were no sources of funding.”

Gonzalez, now a law professor at New York University, said Chrysler -- then the weakest of the Big 3 automakers -- did not have the ability to secure financing on its own and “it was not generating sufficient cash to operate without an outside source of financing.”

During the 2009 bankruptcy, Chrysler closed dealers, shut factories and demanded pay cuts and other concessions from union autoworkers.  The United Auto Workers' retiree health fund took an ownership stake in return for more than $10 billion that Chrysler owed it.  Fiat, the Italian automaker, also got a stake for providing technology and agreeing to run the new company.  It later paid the U.S. Treasury nearly $2 billion to take majority ownership.

The former chief judge also denied that the speedy bankruptcy hearing somehow prevented private investors from stepping up, pointing out that the government and Chrysler’s creditors had been seeking a solution for 18 months, to no avail.

“The notion that the speed of the process may have missed a potential buyer has no basis in the record,” he said.

Now, the new Chrysler is accelerating on the road to recovery, earning $225 million in its most profitable quarter since emerging from bankruptcy.

The company has paid back all but $1.3 billion of the $12.5 billion that Uncle Sam loaned it under Presidents Bush and Obama.

Copyright 2012 ABC News Radio







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