"Geithner Comments; CNBC Retracts." That sums up what's happened since Monday night in the ultra-high stakes financial rescue situation.
CNBC is retracting its report from Monday night which threatened to upend Wall Street expectations regarding Treasury Secretary Tim Geithner's TARP II address.
In sum up the words of one well-informed financial observer*, CNBC really put its foot in it:
Geithner Comments; CNBC Retracts; Insurers Still In As Targeted Acquirers of Bad-Bank Assets (But Not Clear As Next Recipients of Direct Capital Infusions); Wither Goeth Ring-Fencing?
A preview of Treasury Secretary Tim Geithner's comments on the Obama administration's new bank stabilization and foreclosure mitigation plan has been released and is available here.
Meanwhile, CNBC has retracted its story of last evening which threatened to upend Wall Street expectations regarding impending Obama administration announcement of one or more "bad banks'" creation to help facilitate the removal of toxic or illiquid assets from commercial bank balance sheets (see Reuters story below).
Still in question, however, is the network's parallel assertion that insurers will be denied participation in TARP's capital infusion program, which other news sources had signaled might be imminent.
And still more eleventh-hour confusion appeared to surround whether the Paulson Treasury's program to "ring-fence" and partially guarantee troubled assets at specific institutions might be extended as part of the new Geithner/Summers "TARP Take II" stabilization plan expected to be revealed at 11 a.m. this morning.
As CNBC now acknowledges, the modified bad bank approach (wherein a new entity and the TALF program might each help to finance and guarantee the purchase of private assets by hedge funds and other private investors, not purchase the assets themselves) is still the centerpiece of the Geithner/Summers plan.
[We would observe that, with the new administration engaging in semantics to try to shift characterization of the new entity or entities as a "bad bank" or banks, perhaps the market news network failed to realize it was being spun.]
On the issue of life companies' access to TARP capital under the Capital Purchase Program, we have long been skeptical of when or on what terms such an event might occur. So we'll remain on point for clarity re when and if troubled insurers may be greenlighted for access to the (in our view mixed-bag) federal financial safety net
Nevertheless, we remain confident that insurers will be expected to play a major role in purchasing assets via the bad bank (likely facilitated in doing so by floor-price or default guarantees provided by the government) -- and, as such, the industry may yet inevitably gain fresh attention to its own capital, accounting and liquidity concerns.
Separately, regarding whether Geithner will announce the extension of Paulson's ring-fencing Asset Guarantee Program (AGP), while one explanation for its recent dropping from discussion might be that it would just be a continuation of an existing program (and thus not merit much fanfare) another could be that it is essentially being de-emphasized or abandoned. Specifically, amid at least some media coverage reflecting criticisms of the AGP as being too generous to specific large banks (i.e., in its first and only usages' guaranteeing over $300b for Citi and $100b+ for BAC), we could foresee such criticisms taking on additional weight -- particularly given the recent unfavorable light shone on Paulson's alleged "over-paying" for assets by the TARP oversight committee.
As a result, it would not come as a shock to us if Geithner quietly announces he may be in the process of dropping the "ring-fencing"/AGP authority -- which was never supposed to be widely used in the first place, and which would be at least partially mimmicked by the floor-price guarantees now envisioned as part of the new public-private bad bank, in any event.
And here's a Reuters story which uses the same fact set, albeit with less edge.
All in all, it's another big dent in CNBC's already shaky credibility this year (Steve Jobs/Mac misreports, Bartiromo non-disclosure, on-air infighting, etc).
* This item was forwarded to me by a fellow Cable Gamer, and so I am not 100% sure of its authorship. But if you, the author of these words, wish to be credited with saying them, drop me a line at thecablegame@gmail.com and I will be sure to give you full credit--name above the title, even!
