The Proposed Aggregator Bank is A Trojan Horse for the New “United States Bank.”

Hugh Wood, Atlanta, GA.

Five Months after US Treasury Sec. Paulson asked for TARP Funds (and at this writing not having used not a dime to buy toxic assets), he now proposes yet another solution – A new US Government Owned “Aggregator Bank.” [1] While this idea comes not from the RTC but from the Swedish Banking Crisis of 1990-1993, it has the potential to go far afield of its stated purpose.

Sweden’s bank crisis began with Swedish bank deregulation in the late 1980s. Deregulation rapidly eased credit. Easy credit allowed intensive investment in Swedish real estate. Like our (US) recent housing bubble, Swedish real estate prices soared in the late 1980s. As easy credit pushed prices higher Swedish banks loaned more krona against quickly appreciating hard Swedish real estate assets. When the Swedish real estate market collapsed the asset “values” deflated quickly. Swedish borrowers and their creditors, the Swedish banks, found themselves suddenly illiquid. [2] Does this sound vaguely familiar?

Sweden eventually mopped up the mess, but it cost them 2% of their entire GNP for a number of years. One of the RTC similar vehicles Sweden used in its bank/credit disaster cleanup was a toxic asset holding bank called Securum. “Securum was the Swedish state company founded in 1992 during the financial crisis in Sweden 1990-1994 for the purpose of taking on and unwinding bad debts from the partly state-owned Nordbanken bank.” [3] Securum, like the former (now dissolved) RTC, completed it assignment and was dissolved in 1997. [4]

Sec. Paulson, and soon to be Treasury Sec. Tim Geithner, New York Federal Reserve Chairman, now propose we create a US version of Securum – the new US Aggregator Bank.

This may work. My fear is that, given our unique US History in banking, our new US “Aggregator Bank,” will never be “dissolved.”

The First Bank of the United States Charter expired during political infighting in James Madison’s administration. Madison revived it as the Second Bank of the United States. President Andrew Jackson killed the Second Bank of the United States by Veto in 1832. [5].

We were free of a centralized banking system until the Panic of 1907 brought us the semi public/private Federal Reserve Banking System in 1913. The Federal Reserve (the de facto Third Bank of the United States) is not a true government entity and is not under the complete “control” of the United States Government. “Reserve Banks, as privately owned entities, receive no appropriated funds from Congress,” Lewis v. United States, 680 F.2d 1239 (1982).

Examining the organization and function of the Federal Reserve Banks, and applying the relevant factors, we conclude that the Reserve Banks are not federal instrumentalities for purposes of the FTCA, but are independent, privately owned and locally controlled corporations. [ & & &] Each Federal Reserve Bank is a separate corporation owned by commercial banks in its region. The stockholding commercial banks elect two thirds of each Bank's. Id.

None of this (not a government entity) would be true for the new “Aggregator Bank,” It would be 100% owned by the Federal Government. Its initial purpose would be as a dump to process toxic assets, but at some point and at some day in the future it will have completed its toxic clean up function.

Then what will happen to this new Bank?

Consider: Here is this baby Bank -- This 100% owned “Bank,” created for the Executive Branch, funded by Congress, to do with it as they see fit. [6]

If the Federal Reserve does not truly fit as a square peg into the round hole of being the “Third United States Bank” then this 100 percent owned entity could easily become the Third Bank of the United States.

No one will recognize it as the Third United States Bank at its birth, because it is being born into a toxic cesspool.

But when the cesspool of toxic assets clears, will it be dissolved? Probably not.

The RTC concluded, but it was not a US 100% owned “Bank.”

No amount of “sunset,” language in its Charter will overcome the allure and economic drug addiction of granting the Executive Branch, funded by a willing Congress, its own (wholly owned) banking Toy. Am I deluded? Perhaps. However, this risk of giving the Executive Bank it own 100% owned banking Toy is so great that it is a risk worth discussing publically in this current, “worst economic crisis since the Great Depression.” [7]

Should I be skeptical? Secretary Paulson told us in September of 2008 he needed 700bn dollars to clean up toxic assets. Did he clean up any toxic assets? No. He bought stock in failing US Banks. Did those banks clean up any toxic assets? No. Has the Secretary purchased any toxic assets? No. The Secretary has not purchased a dime of toxic assets. Yet, we are on the hook for 350bn of the first half of TARP.

While murky, Treasury now proposes to use the second half of TAPP to purchase toxic assets. How? In a shiny new government owned bank.

When we fronted Sec. Paulson 700bn, no new bank was discussed. Now, we urgently need a 100% government owned bank for toxic assets.

Perhaps I am misinformed.

Perhaps I have not read the proper government pamphlets.

But, let me say that as I walk around and look at this shiny new “Aggregator” Bank and kick it Aggregator tires, I get the uneasy feeling in my stomach that I am, in fact, looking at the new unrevealed Third Bank of the United States.

Hoping that I am wrong and Treasury is not foisting a Trojan Horse Bank on the Public, I leave you with the words of President Andrew Jackson in his veto of the Second Bank of the United States.

The bill " to modify and continue " the act entitled "An act to incorporate the subscribers to the Bank of the United States " was presented to me on the 4th July instant. Having considered it with that solemn regard to the principles of the Constitution which the day was calculated to inspire, and come to the conclusion that it ought not to become a law, I herewith return it to the Senate [Vetoed], in which it originated, with my objections. President Jackson's Veto Message Regarding the Bank of the United States; July 10, 1832. [8]


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Notes

[1] U.S. ‘Bad Bank’ Plan Gets Momentum to Revive Lending, By Robert Schmidt and Craig Torres
Jan. 16 (Bloomberg) – “Renewed questions about U.S. banks' viability are pushing regulators toward a new plan that would remove toxic assets from bank balance sheets, in what may become the biggest effort yet to unfreeze lending.
President-elect Barack Obama's advisers see an increasingly grave banking crisis and are considering proposals far more sweeping than any steps that have been taken so far, according to people who've discussed the outlook with them.
"They need to do something dramatic," said Harvard University Professor Kenneth Rogoff, a former chief economist at the International Monetary Fund, and member of the Group of Thirty counselors on financial matters, a panel that includes Treasury Secretary-designate Timothy Geithner and Lawrence Summers, incoming director of the National Economic Council.
Officials at the Federal Reserve and other agencies are focusing on the option of setting up a so-called bad bank that would acquire hundreds of billions of dollars of troubled securities now held by lenders. That may allow banks to reduce write-offs, free up capital and begin to increase lending. Paul Miller, a bank analyst at Friedman Billings Ramsey & Co. in Arlington, Virginia, estimates that financial institutions need as much as $1.2 trillion in new aid.
Other steps that may be under consideration include providing further guarantees for toxic assets that remain on the banks' books, as officials did for Citigroup Inc. in November and with a $118 billion backstop for Bank of America Corp. today, or purchasing selected investments. Federal Deposit Insurance Corp. Chairman Sheila Bair yesterday played down the alternative of nationalizing lenders.”

See also,
Obama team weighs government bank to ease crisis. By Tim Ahmann
WASHINGTON (Reuters) – “The incoming Obama administration is considering setting up a government-run bank to acquire bad assets clogging the financial system, a person familiar with the Obama team's thinking said on Saturday.
The U.S. Federal Reserve, Treasury and Federal Deposit Insurance Corp have been in talks about ways to ease a banking crisis that is once again deepening -- and a government-run "aggregator bank" is among the options.
Outgoing Treasury Secretary Henry Paulson and FDIC Chairman Sheila Bair both said on Friday a government bank was one of a number of ideas U.S. regulators had been discussing.
The source said advisers to President-elect Barack Obama, who takes office on Tuesday, were also considering the idea of an aggregator bank among a range of options that could be pursued.”

[2] It may have been (also) the European Exchange Rate Mechanism [ERM] that came into effect in 1992 that has some significant effect on the collapse.

[3] Wiki.

[4] England, Peter, The Swedish Banking Crisis its Roots and Consequences, Oxford Review of Economic Policy (1999), Vol. 15, No. 3, at 94.

[5] President Jackson's Veto Message Regarding the Bank of the United States; July 10, 1832; The Avalon Project of the Yale Law School. http://avalon.law.yale.edu/19th_century/ajveto01.asp

[6] We know Congress has the “power” to create a wholly government owned US Bank. McCulloch v. Maryland, 17 U.S. 316 (1819), 17 U.S. (4 Wheat.) 316; 4 L. Ed. 579; (1819). “Although, among the enumerated powers of government, we do not find the word "bank" or "incorporation," we find the great powers, to lay and collect taxes; to borrow money; to regulate commerce; to declare and conduct a war; and to raise and support armies and navies. . . . But it may with great reason be contended, that a government, entrusted with such ample powers . . . must also be entrusted with ample means for their execution. The power being given, it is the interest of the nation to facilitate its execution. . . .”

[7] “You know, we are at a defining moment in our history. Our nation is involved in two wars, and we are going through the worst financial crisis since the Great Depression.” Barak Obama, Presidential Debate, University of Mississippi, September 26, 2008.

[8] President Jackson’s Veto Message, Op. Cit.

Experts Say: Bring Back the 1933 Home Owners Loan Corporation. Really?

Experts Say: Bring Back the 1933 Home Owners Loan Corporation. Really?

Here is a reprint of an Article that appeared the Prestigious Economic Journal the RGE Monitor.

Dr. Paul Davidson asserts in his article, that the 2008 700bn (and growing) bailout, may soften the recession. However, it will not solve the banking liquity crisis unless other measures are taken.

He asserts, as a Nation, we must immediatly do two things:

1) We must bring back some form of the 1933 Home Owners Loan Corporation (HOLC) Fn.1; then,

2) We must enact a stimulus plan large enough to get the US through this recession.

Then, after a new HOLC is established and a new stimulus plan is in place, Dr. Davidson asserts the SEC must make significant changes. He postulated that to prevent this massive and overseas and domestic illiquidity from occurring again (I thought that is what we said in the last depression.), the SEC must enact three (3) new Rules. Those three (3) new Rules are:

1) A new SEC Rule that mandates that any "securities" sold (for ease of reference) such as the illiquid securities backed by various tranches of home mortgages, be marked "these do not have a public market." Or, they should be marked with some words or notice to that effect. He asserts that the public and investors be given notice that the securities do not have a quick liquid market;

2) The SEC must stop the sale of securities that originated in the private market. Think about it new Rule, it makes sense. The derivatives that brought the world to a halt were backed by not very credit worthy US homeowners refinancing homes at unsustainable rates; and,

3) The SEC (or Congress at the urging of the SEC) must reinstate a version of the 1933 Glass-Steagall Act. Fn.2 He asserts that banks need to be banks. They should not be banks and underwriters at the same time.

Hugh Wood, Atlanta, GA

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Evaluating Toxic Assets - And Where Do We Go Next

Dr. Paul Davidson

Remember that the original Paulson bailout plan and the major function of the revised TARP rescue legislation is an attempt to prevent massive insolvencies in financial institutions that have, on their balance sheets, "securitized" assets (e.g., Mortgage Backed securities [MBS, CDOs, credit default swaps ,etc] that had become virtually illiquid as the market for these "securitized" have failed.

There are three points that I wish to discuss. One: what was the cause of the failure of these securitized markets? Two: what policies do we need to put in place to present toxic asset problem from recurring again? Three, even with the passage of the TARP "rescue" (bailout) plan, the U.S. economy is experiencing a recession. What should the government due to constrain the downturn until a new Administration takes office next January? I have written an article entitled "Securitization, Liquidity, and Market Failure" that was published in the May/June 2008 issue of CHALLENGE . It explains at length why these securitized markets were bound to ultimately fail.

In the good old days, before "securtization ", when a bank made a loan, especially a mortgage loan, the loan contract was basically an illiquid asset that was listed on the asset side of the bank's balance sheet. What value was put on these illiquid assets on the balance sheet? If there was no market for these illiquid assets -- one cannot mark to market the asset!! So they assets were typically carried on the balance sheet at the value of the outstanding loan -- until, it was paid off -- or defaulted on!

Now a good neoclassical theorist would have said that the value of the outstanding loan contract is the computed present value of the future stream of cash receipts including the discounted value of the pay off of the principle (in the case of an interest only loan). Of course, the implicit neoclassical assumption underlying this type of present value calculation is that the future was "known" at least with statistical reliability, i.e., the future is determined as an ergodic stochastic process. If the future stream of payments are known with statistical reliability, then anyone who took a course in economics can calculate the "objective" actuarial present value. (And remember under the rational expectations hypothesis - the subjective probability distribution equals the objective probability distribution that governs future outcomes.) If, however, the future is uncertain, i.e., nonergodic, then the present value depends on the subjective evaluation as to whether all the contractually payments specified (in monetary terms) to specific dates are actually going to be met by the borrower. A large down payment on a mortgage loan created a cushion for the banker in case a future, unpredicted, default occurred.

For assets that are liquid, as I specify in my JOHN MAYNARD KEYNES (Palgrave, New York, 2007) book and the securitization" article in CHALLENGE, there must be an well-organized and orderly markets. Liquidity requires a market maker to assure orderly markets-- so that a holder can always make a fast exit and sell their holdings of any liquid asset at a price not much different that the previous transaction price.

The break down of regulations separating banks who make illiquid loans and investment bankers whose function is to float new issue assets in orderly (liquid) markets is the basis of the current crisis. Starting in the late 1970s some Federal Reserve Bank decisions were made that encouraged securitization of illiquid bank loans to a limited extent. But ultimately the firewall between banks and investment banks was destroyed with the repeal of the Glass Steagall Act in 1999-- by an act where Phil Gramm was the senior sponsor of the repeal. [See my January 2008 Schwartz CEPA Policy Note entitled "How to Solve The U.S. Housing Problem and Avoid a Recession: A Revived HOLC and RTC"]

Thus beginning with decisions made almost three decades ago the seeds were planted and the ultimate fruition occurring in 1999 with the repeal of the Glass Steagall Act, more and more illiquid assets were securitized -- but without a credible market maker for these securitized assets. Securitization may have made underlying illiquid assets look like they were liquid assets -but they were not always going to be liquid -- thus they could become toxic - when some unforeseen event occurs that induces herd behavior for a fast exit.

These securitized assets have no well organized, orderly market with a market maker. Given the housing problem, there is no orderly market price to evaluate the worth of these toxic assets. No one knows exactly how to evaluate the MBS, and other exotic financial assets on the balance sheet of holders. The SEC had made a rule of mark -to-market for traded securities. In these days, however, the last market price in the disorderly markets of these TOXIC assets might have been "a fire sale price" , for example, at 50 to 70 per cent discount. Accordingly if the financial institutions holding these assets marks these assets to market, they will be insolvent. The original Paulson plan [only 3 pages long] gave Paulson the right to buy these illiquid assets at a price not to exceed the price the holder originally paid. If the price was at or near the original holders's purchase price, this would improve balance sheets tremendously and take away the fear of insolvency.

But this would mean the holders of these assets might get away scot free after making horrible investment decisions. [After all, neoclassical economists would say that if you make a bad decision, the market should punish you -- and if that means bankruptcy so be it. It will prevent the moral hazard problem in the future.]

On 9/30/08, the SEC suggested possible new accounting principles for evaluating these essentially toxic [illiquid] assets using "fair value" instead of mark to market.. The SEC news release is as follows:
SEC Office of the Chief Accountant and FASB Staff Clarifications on Fair Value Accounting FOR IMMEDIATE RELEASE 2008-234

Washington, D.C., Sept. 30, 2008 - The current environment has made questions surrounding the determination of fair value particularly challenging for preparers, auditors, and users of financial information. The SEC's Office of the Chief Accountant and the staff of the FASB have been engaged in extensive consultations with participants in the capital markets, including investors, preparers, and auditors, on the application of fair value measurements in the current market environment.

There are a number of practice issues where there is a need for immediate additional guidance. The SEC's Office of the Chief Accountant recognizes and supports the productive efforts of the FASB and the IASB on these issues, including the IASB Expert Advisory Panel's Sept. 16, 2008 draft document, the work of the FASB's Valuation Resource Group, and the IASB's upcoming meeting on the credit crisis. To provide additional guidance on these and other issues surrounding fair value measurements, the FASB is preparing to propose additional interpretative guidance on fair value measurement under U.S. GAAP later this week.

While the FASB is preparing to provide additional interpretative guidance, SEC staff and FASB staff are seeking to assist preparers and auditors by providing immediate clarifications. The clarifications SEC staff and FASB staff are jointly providing today, based on the fair value measurement guidance in FASB Statement No. 157, Fair Value Measurements (Statement 157), are intended to help preparers, auditors, and investors address fair value measurement questions that have been cited as most urgent in the current environment.
* * *.HOW is that for determining "fair value"? What will the Secretary of the Treasury use to decide fair market value?

Mitigating the current recession.

The bailout bill may buy some time to prevent a complete collapse of the financial system - but it will not prevent the recession that the US has already entered. What is needed is at several additional policy actions;
(1), To prevent any further houses becoming vacant due to foreclosure, another HOME OWNERS LOAN CORPORATION [HOLC] (similar to the one created in the Roosevelt Administration) is needed. The HOLC would buy up mortgages (at a discount) and renegotiate new mortgages with home owner-occupiers at monthly payments they can afford possibly (a) by lengthening the life of the mortgage perhaps to 40 years,(b) by reducing principle, and c) by lowering interest rates. If the homeowner- occupier still can not make monthly payment requirements on a renegotiated mortgage, the HOLC should rent the house on a month to month lease to the occupier at a rent he/she can afford until it can be sold for at least the value of the mortgage that the taxpayers bought out. (See my Schwartz CEPA Policy Note)

This will at least limit if not end the fall in housing prices. Until housing prices recover, the economy will remain in a funk .
(2) A quick, temporary stimulus plan should be done in order to limit the depressing effects of the recession and to carry the economy over until at least February 2009 when a new Administration can develop investment policies`in repairing infrastructure, alternative energy R&D, tax sharing with local and state municipalities, etc. For example, as suggested by Warren Mosler, a temporary payroll tax holiday effective immediately and lasting until February 28, 2009 should be enacted. This is equivalent to giving most wage earners a wage increase of over 6 %. It will also provide business firms with a reduction in their costs of production in a period where working capital loans are difficult to obtain.

Policies to prevent future toxic assets

Given the current experience of failed toxic asset markets, it would appear that the SEC has been lax in pursuing its stated mission of investor protection. Accordingly the United States Congress should require the SEC to enforce diligently the following rules:

1. Public notice of potential illiquidity for securities traded in markets that do not have a credible market maker. Since the mandate of the SEC is to assure orderly public financial markets, and "require that investors receive financial and other significant information concerning securities being offered for public sales, and prohibit deceit, misrepresentations, .... in the sale of securities", it is would seem obvious that all public financial markets that are organized without the existence of a credible market maker should, either (1) be shut down because of the potential for disorderliness, or (2) at a minimum, information regarding the potential illiquidity of such assets should be widely advertised and made part of essential information that must be given to each purchaser of the asset being traded.

The draconian action suggested in (1) above is likely to meet with severe political resistance, as the financial community will argue that in a global economy, with the ease of electronic transfer of funds, a prohibition of this sort would merely encourage investors looking for higher yields to deal with foreign financial markets and underwriters to the detriment of domestic financial institutions and domestic industries trying to obtain capital funding.
In my KEYNES [2007] book, I have proposed an innovative international payments system, that could prevent US residents from trading in foreign financial markets that the U.S. deemed detrimental to American firms that obeyed SEC rules while foreign firms did not follow SEC rules. If, however, we assume that the current global payments system remains in effect, and there is a fear of loss of jobs and profits for American firms in the FIRE industries, then the SEC could permit the existence of public financial markets without a credible market maker as long as the SEC required the organizers of such markets to clearly advertise the possible loss of liquidity that can occur to holders of assets traded in these markets.

A civilized society does not believe in "caveat emptor" for markets where products are sold that can have terribly adverse health effects on the purchaser. Despite the widespread public information that smoking is a tremendous health hazard, government regulations still require cigarette companies to print in bold letters on each package of cigarettes the caution warning that "Smoking can be injurious to your health". In a similar manner, any purchases on an organized public financial market that does not have a credible market maker can have serious financial health effects on the purchasers. Accordingly, the SEC should require the following warning to potential purchasers of assets traded in a market without a credible market maker: "This market is not organized by a SEC certified credible market maker. Consequently it may not be possible to sustain the liquidity of the assets being traded. Holders must recognize that they may find that their position in these markets can be frozen and they may be unable to liquidate their holdings for cash."
Furthermore, the SEC should set up strictly enforced rules regarding the minimal amount of financial resources relative to the size of the relevant market that an entity must possess in order to be certified as a credible market maker. The SEC will be required to re-certify all market makers periodically , but at least once a year.

2. Prohibition against securitization that attempts to create a public market for assets that originated in private markets - The SEC should prohibit any attempt to create a securitized market for any financial instrument or a derivative backed by financial instruments that originates in a private financial market (e.g., mortgages, commercial bank loans, etc)

3. Congress should legislate a 21 century version of the Glass Steagall Act. The purpose of such an act should force financial institutions to be either an ordinary bank lender creating loans for individual customers in a private financial market, or an underwriter broker who can only deal with instruments created and resold in a public financial market.
Paul Davidson

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Dr. Davidson is the Editor of the Journal of Post Keynesian Economics and member of the Editorial Board of Ekonomia. He is the author, co-author, or editor of 22 books. He is the author of over 210 articles. His research interests include: International monetary payments and global employment policies; monetary theory, income distribution, energy economics, demand and supply for outdoor recreation, Post Keynesian economics. Dr Davidson is listed in Who's Who In Economics, Who's Who In The East, Who's Who In The South and Southwest, American Economists of The Late Twentieth Century, Dictionary of International Biography, Men of Achievement, and Contemporary Authors.

Holly Chair of Excellence in Political Economy, Emeritus, University of Tennessee, Knoxville

* Ph.D. - University of Pennsylvania
* M.B.A. - City College of New York
* B.S. - Brooklyn College

Footnote 1

The Home Owners' Loan Corporation (HOLC) was a New Deal agency established in 1933 by the Homeowners Refinancing Act under President Franklin D. Roosevelt. Its purpose was to refinance homes to prevent foreclosure. It was used to extend loans from shorter loans to fully amortized, longer term loans (typically 20-25 years). Through its work it granted long term mortgages to over a million people facing the loss of their homes.
The HOLC stopped lending circa 1935, once all the available capital had been spent. HOLC was only applicable to nonfarm homes, worth less than $20,000. HOLC also assisted mortgage lenders by refinancing problematic loans and increasing the institutions liquidity. When the HOLC ended its operations and liquidated assets in 1951, HOLC turned a small profit.[1][2]
HOLC is oft-cited as the originators of mortgage redlining. Recent research has suggested that the institution itself did not redline or discriminate on the basis of borrowers' race and ethnicity. The racist attitudes and language found in the appraisal sheets and Residential Security Maps created by the HOLC likely gave federal support to existing private sector bias and racial antipathy (Crossney and Bartelt 2005; Crossney and Bartelt 2006).
Wiki

Footnote 2

The Glass-Steagall Act of 1933 established the Federal Deposit Insurance Corporation (FDIC) in the United States and included banking reforms, some of which were designed to control speculation.[1] Some provisions such as Regulation Q, which allowed the Federal Reserve to regulate interest rates in savings accounts, were repealed by the Depository Institutions Deregulation and Monetary Control Act of 1980. Provisions that prohibit a bank holding company from owning other financial companies were repealed on November 12, 1999, by the Gramm-Leach-Bliley Act, which passed the U.S. Senate in one form on a party-line vote of 54 (53 Republicans and 1 Democrat) to 44 (all Democrats) and on a 343-86 vote in a different form in the House of Representatives, before being resolved by a joint conference committee; the conference report was approved by both houses of Congress (Senate: 90-8-1, House: 362-57-15) and signed by President Bill Clinton.[2][3] wiki

Hugh Wood, Esq.
Wood & Meredith, LLP
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Atlanta (Tucker), GA 30084
www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
Phone: 404-633-4100
Fax: 404-633-0068

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Old TARP: Banks Want The Old Bailout Back

Two months after Treasury Secretary Henry Paulson pulled the plug on his plan to buy troubled mortgage assets, the financial industry is pushing the government to reconsider.

Since the Troubled Asset Relief Program, or TARP, took effect in October, Treasury has spent $267 billion buying preferred stock in financial institutions and auto companies, the agency said Thursday.

Paulson has said the capital infusions have stabilized the financial sector.
But the economy has taken a sharp turn for the worse in recent months, as credit has become less available and companies and consumers have cut back on their spending.
Meanwhile, U.S. banks continue to hold hundreds of billions of dollars of mortgage-backed securities that, if downgraded, could lead to another round of damaging writedowns.
That's why some observers want the Treasury to return to the premise of the original bailout and move toxic assets off banks' balance sheets.

New TARP has failed, bring back TARP classic
Leading the charge for a return to what some might refer to as "TARP classic" is SIFMA, the Securities Industry and Financial Markets Association trade group that's based in Washington.
"We need to get the markets moving again," said Tim Ryan, SIFMA's CEO. "We have no problem with capital injections, but if you do capital injections without taking care of the bad assets, it just causes the problem to go into hibernation."

Ryan is a former Treasury official and onetime director of the Resolution Trust Corp., or RTC. The RTC oversaw the cleanup of the savings-and-loan crisis in the early 1990s. Ryan said the lesson he took from that experience is that the only way to make sure banks start lending again is to get rid of the bad assets.

Others share that assessment. The Organisation for Economic Co-operation and Development said in a paper issued this week that a study of financial crises over the past three decades suggests that isolating bad assets is a key to a successful response to a major market meltdown.
And the congressional panel overseeing the TARP wrote Friday in a report to Congress that events such as November's federal bailout of Citigroup (C, Fortune 500) highlight how the toxic asset problem has continued to fester.

Citi received $25 billion of TARP money in October. But despite Treasury's insistence that banks receiving TARP funds were healthy, Citi shares promptly plunged.

That forced the government to come to its rescue for a second time in November, with a $20 billion preferred stock injection and a $306 billion loan guarantee.

"These events suggest that the marketplace assesses the assets of some banks well below Treasury's assessment," the panel, chaired by Harvard professor Elizabeth Warren, concluded.
Of course, simply acknowledging the toxic asset problem doesn't make fixing it any easier. Critics of the original TARP questioned how the government would arrive at prices for assets that lack liquid markets, and Ryan conceded that pricing will present a challenge. But he said the government is the only entity with the scale to solve it.

"We all know pricing is going to be difficult," Ryan said. "But until we know what these assets are worth and get some transactions going, we're going to be stuck right where we are."
Bad assets aren't going away

Brian Olasov, a managing director at law firm McKenna Long & Aldridge in Atlanta who has worked on Wall Street and in commercial real estate lending, agreed.
"The RTC was imperfect, but it played an important role in getting markets going again," said Olasov. "What it ended up doing was developing a pricing technology for nonperforming loans, and that's the role the government could play again."

Not everyone buys the RTC analogy, though. Bill Isaac, who was the chairman of the Federal Deposit Insurance Corp. from 1981 to 1985, said the RTC simply replicated the FDIC's bank-resolution process.

He said the RTC was an appropriate response to the mass bank failures of the 1980s - more than 3,000 institutions failed during that decade, he said -- but he questioned how that experience translates to the present day.

"I think the whole bit about buying assets is highly impractical," said Isaac, now the chairman of the Secura Group bank consultancy in Sarasota, Fla. "The pricing issues are practically overwhelming."

A related problem stems from the uncertain health of the banks. Markets for distressed securities are locked up, observers said. That's partly due to banks not wanting to sell at the prices being offered because doing so would oblige them to take additional writedowns against their capital.

"The problem is that you don't know how deep the hole is for the banks," said Michael Bleier, an attorney at Pittsburgh law firm Reed Smith who oversaw the 1988 restructuring of Mellon Bank, a predecessor to Bank of New York Mellon (BK, Fortune 500).

Money could be an issue too. While $350 billion more in TARP funds are available to Treasury upon congressional approval, House Democrats have signaled in recent days that the toxic asset program isn't their top priority.

Rep. Barney Frank, D-Mass., introduced legislation Friday that calls for the Treasury to spend at least $50 billion starting in April to cut foreclosures.
Frank, the chairman of the House Financial Services committee, said congressional leaders have been consulting closely with the Obama administration.

He also laid out additional restrictions on recipients of TARP funding and called for closer oversight of the program. But he did not mention any plans to address toxic assets.
Whatever the priorities in Congress, the bad asset problem isn't going away. Oppenheimer analyst Meredith Whitney warned in a report this week that she expects downgrades of mortgage-backed securities to hit bank profits in the soon-to-be-reported fourth quarter of 2008 - and to force the banks, which have already sold hundreds of billions of dollars in stock, to raise more capital.

Despite the shifting winds in Washington and the lack of attention the toxic asset problem is currently getting, Ryan said he remains hopeful that legislators and administration officials will take appropriate action.

"We've been talking to all the right people, and they've been listening," Ryan said. "We think this new group can see the need to act." Colin Barr, senior writer, Fortune, Jan 9, 2009.

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Depression? Its not 1931. Its 1694. Really!

Bank of England Founded 1694

Oh! I have been so far off in my attempt to determine what financial year we are reliving in this present recession (depression). I have variously argued it is a repeat of 1937 (the last year Toyota posted a loss) and 1931 (the last year Wall Street fell close to 40% in one year.)

However, how far I was off and how desperate these financial times must be.

Its not 1937; its 1694. I thought that was a typo. But no, we have to go back to 1694 to find these interest rates at the Bank of England.

We have to go back to 1913 (the founding of the US Federal Reserve) to find a collapsed rate.

We have to go back to 1882 to the founding of the Bank of Japan (at the end of the to Meiji Restoration) to find anything close to today’s rate. In fact, there is no rate in history near the current 0.001% interest rate presently offered by the Bank of Japan. Why have an interest rate at that return?

1694? Really. It was the year Voltaire was born. Born - not died.

Perhaps, given the last 700bn the feds just floated, the automaker bailout and the 1.35T stimulus package proposed by Barak Obama, Voltaire’s quote was prescient.

"In general, the art of government consists of taking as much money as possible from one class of citizens to give to another. " Voltaire

CNN's poll today asked its readers when they thought the economic downturn would break. To my astonishment, and perhaps horror, 61% of participants said it would not end until after Obama served four (4) years.

Some clients have asked me (I'm not their financial advisor) what they should do now. Some have lot millions of dollars in their stock portfolios. For the first time in my entire life, I now argue that they should sit on the sidelines in cash. For a while (and this is not market timing) they should just watch common stocks. True, stocks have gone up every year from the 1930s to the present (well, near the present). However, this data is/are [pick whichever Latin plural floats your boat; both are now considered standard] showing that the current downturn is not a normal post WWII financial downturn.

We have never seen this downturn before in our lifetime. We have to look backwards 315 years to the founding of the Bank of England to find a similiar financial time.

Welcome to a voyage into the financial unknown.

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Hugh Wood, Esq.

Wood & Meredith, LLP

3756 LaVista Road

Suite 250

Atlanta (Tucker), GA 30084

http://www.woodandmeredith.com/

hwood@woodandmeredith.com

http://www.hughwood.blogspot.com/

Phone: 404-633-4100

Fax: 404-633-0068

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UK interest rates cut to lowest Rate Since 1694
Bank of England cuts interest rates to lowest level in bank's 315-year history
Jane Wardell, AP Business Writer
Thursday January 8, 2009, 11:37 am EST

LONDON (AP) -- The Bank of England on Thursday cut interest rates to the lowest level in its 315-year history, taking it into uncharted territory as it attempts to ward off a prolonged recession.
The half point cut in interest rates -- to 1.5 percent -- sees the central bank nearing the limits of conventional monetary policy after trims totaling 3.5 percentage points since the beginning of October and as Britain faces its bleakest year since the early 1990s recession.
The bank's nine-member monetary policy committee said the world economy "appears to be undergoing an unusually sharp and synchronized downturn."
"Measures of business and consumer confidence have fallen markedly," it said in a statement accompanying its decision. "World trade growth this year is likely to be the weakest for some considerable time."
The half a percentage point cut was less dramatic than the 1.5 point trim it announced in November, and lower than the 1 point cut expected by some economists -- but still brings the rate down to the lowest level since the Bank of England was founded in 1694.
The move follows aggressive cuts by other central banks. The U.S. Federal Reserve has already slashed its key interest rate to a record low, at a range of zero to 0.25 percent, while the Bank of Japan has dropped its rate to almost nothing, at 0.1 percent.
The Bank of England's latest decision widens the gap between Britain and the euro zone, where the European Central Bank also recently cut rates to the current 2.5 percent. The ECB is now facing increasing pressure to plump for a larger downward move when it announces its monthly decision on Jan. 15.
But analysts warned that the expected future cuts both in Britain and the euro zone will have an increasingly diminishing effect.
"There is no doubt that further rate cuts will take place in the coming months, and we expect to see base rates at around 0.5 per cent by the summer," said Ben Read, an economist at the London-based Centre for Economics and Business Research. "However, with rates now at an all-time low, the marginal impact of any further rate cuts will be minor."
That leaves Britain facing a difficult period of slow or stagnant economic growth and potential deflation.
House prices have suffered their worst year on record, the huge services sector is shrinking at record pace and several major retailers have collapsed as consumers curb spending.
A warning in the Bank of England's latest credit conditions survey that lending to households and businesses is set to fall further in the first quarter of this year is likely to lead to more house price falls, corporate failures, and rising unemployment.
After a period of surging inflation -- inflation is currently running at 4.1 percent -- policy makers are now more worried about inflation falling below the government's 2 percent target or turning negative. Deflation, a sustained drop in prices, can be disastrous for an economy by discouraging people from spending as wages fall and unemployment rises.
Whether the lower rates will have the desired impact of jump-starting the economy is debatable, as many banks and other lenders have been slow to pass on previous cuts.
Nationwide, the country's biggest building society, has already said it plans to invoke a "collar" clause enabling it to stop reducing rates on most of its tracker mortgages, which are designed to follow the benchmark interest rate.
In contrast, banks have been quick to pass on the lower rates to savers, who have watched the value of their nest eggs decline in real terms. Lower savings are unlikely to encourage consumer spending and impede mortgage lenders' ability to attract deposits.
"The market is still not functioning properly and is likely to lead to a fragmented approach by lenders, as they try to balance the interests of savers and borrowers and other pressures on their businesses, in responding to today's announcement," said Michael Coogan, director-general of the Council of Mortgage Lenders.
The pound rose after the announcement to 89.28 pence per euro and $1.5181 as the cut fell short of the larger cut expected by many economists. Cutting interest rates can undermine a currency as investors seek higher returns elsewhere.
Meanwhile, Treasury chief Alistair Darling moved to quash speculation that the government was planning to print money to ease the impact of recession after he told the Financial Times in an interview published Wednesday that he was considering a policy of "quantitative easing."
"Nobody is talking about printing money," he told reporters after a Cabinet meeting on Thursday. "There's a debate to be had about what you do to support the economy as interest rates approach zero, as they are in the United States. But for us that is an entirely hypothetical debate."
Prime Minister Gordon Brown has said that with interest rates close to zero, the government should take fiscal action, hinting at further tax cuts and increased government spending

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Veterans of '90s Bailout Hope for Profit in New One

WASHINGTON - A tight-knit group of former senior government officials who were central players in the savings and loan bailout of the 1990s are seeking to capitalize on the latest economic meltdown, enjoying a surge in new business in their work now as private lawyers, investors and lobbyists.
With $700 billion in bailout money up for grabs, and billions of dollars worth of bad debt or failed bank assets most likely headed for sale or auction, these former officials are helping their clients get a piece of the bailout money or the chance to buy, at fire-sale prices, some of the bank assets taken over by the federal government.

"It is a good time to be me," said John L. Douglas, a partner in Atlanta at the law firm Paul Hastings and a former lawyer for bank regulators who helped create the agency that administered the last federal bailout, the Resolution Trust Corporation.

Some of these former federal officials, like L. William Seidman, the first chairman of the R.T.C., are serving as advisers - sharing ideas with Treasury Secretary Henry M. Paulson Jr. and the transition team for President-elect Barack Obama - even while they are separately directing investors or banks on how to best profit from this advice.

"It is an enormous market," said Mr. Seidman, who has already joined two such potential money-making efforts and is evaluating proposals to participate in a third. "I am enjoying this."

David B. Iannarone, a former R.T.C. lawyer who is managing partner at a firm that handles defaulted commercial real estate loans, said, "The people who worked on this back in the early 1990s are back in vogue."
The agency was set up by the government in 1989 to sell off what ultimately grew to $450 billion worth of real estate and other assets assembled from 747 collapsed savings banks.

What is obvious to former R.T.C. officials is that, like the last go around, a great deal of money will be made by a select group of investors and business operators, particularly those with government contacts. The former government officials said in interviews that much of what is motivating them is a desire to help the nation recover from this latest stumble. But they acknowledge they intend to be among the winners who emerge.

"Fortunes will be made here, no doubt about it," said Gary J. Silversmith, one of more than a dozen former R.T.C. officials interviewed who now are involved in enterprises seeking to profit from bank bailouts.

The busiest money-making arena so far for these R.T.C. alumni is in helping distressed banks line up cash infusions from the Treasury, as they seek a piece of the bailout.

Robert L. Clarke, controller of the currency under the first President Bush and a former Resolution Trust board member, has been advising banks throughout the South on how to get their share of the bailout money.

"I have been absolutely inundated," said Mr. Clarke, who now works at Bracewell & Giuliani, the law firm based in Houston affiliated with the former New York mayor and presidential candidate Rudolph W. Giuliani.

Mr. Clarke's labor on behalf of his clients has included calling federal regulators to urge them to reconsider plans to reject applications for federal bailout money. He would not identify the banks, saying it might undermine public confidence in them.

But Mr. Clarke said his intervention, in at least some cases, has been successful.

Eugene Ludwig, the comptroller of the currency under President Bill Clinton during the final stages of the savings-and-loan cleanup, runs Promontory Financial Group, a banking consultant group whose clients include struggling banks.

"I must get an e-mail a day from people who I worked with back then about what to do about the current mess," Mr. Ludwig said. "It is not so much capitalizing on it as really just, how do we contain the flames?"

Many of the former federal officials like Mr. Ludwig have stayed in the field, working as lawyers or contractors who buy up and resell seized bank properties. What is remarkable now is just how busy they are.

"It is a great time to be a banking lawyer," said Thomas P. Vartanian, a partner in the Washington office of Fried Frank, who is the former general counsel to the Federal Savings and Loan Insurance Corporation, which led a bank bailout effort in the 1980s.

The planned sale by the F.D.I.C of the assets of IndyMac, the failed bank, has turned into an alumni event of sorts for veterans of the R.T.C. era, including John J. Oros, who was chairman of a financial industry council that advised bank regulators during the savings and loan crisis. Now he is a partner in J. C. Flowers, one of the private equity firms negotiating to buy part of IndyMac.
In the space of one weekend in September he explored buying out the troubled insurer A.I.G. and worked with Bank of America on an aborted acquisition of Lehman Brothers. Then he advised Bank of America on its last-minute switch to buy Merrill Lynch before Lehman's collapse hammered Wall Street.

Although the financial meltdown is a disaster for the country, Mr. Oros said, "the opportunity going forward is unprecedented. It is fantastic. It is as if I had been training for this for the last 40 years of my career."

The biggest profits will most likely be made, the former federal bank officials agreed, by those who figure out a way to benefit from what could turn into one of the greatest fire sales of bad debt and bank assets in American history.
Through September of this year, 25 banks had failed, compared with three in 2007. An additional 171 are on the Federal Deposit Insurance Corporation's list of troubled banks, more than double the watch list at the end of last year.
As a result of these failures, and other related industry troubles, billions of dollars' worth of real estate or at least mortgage-backed securities and other "illiquid" financial instruments will most likely need to be sold off at discounted prices to investors who stand to profit if they can sell the assets at a higher price once the economy recovers.

The question right now is just how this unloading of bad debt will take place.
So far, the federal government is relying on financial institutions to find a way on their own to sell off bad debts or assets they end up with as a result of foreclosures. But some financial industry players are arguing that a modern-day R.T.C. should be established, to help set prices for this bad debt, and speed the move toward a recovery.

The R.T.C. alumni are prepared to profit through either route.
Mr. Seidman, for example, has been hired as an adviser to SecondMarket, a company based in New York that early next year will start a virtual marketplace that intends to resell some of the trillions of dollars worth of distressed mortgage-backed securities, the financial instruments that helped fuel the surge in housing prices.

Mr. Seidman has already set up meetings between company executives and federal regulators, including at the F.D.I.C., said Barry E. Silbert, the company's founder.

Mr. Silversmith, meanwhile, who during the savings and loan crisis helped arrange the sale of thrift assets, has teamed with Barry Fromm, the chief executive of Value Recovery Holding, one of the big government contractors who handled these sales. The two in recent weeks have held meetings with some of Mr. Silverstein's former colleagues, including James Wigand, the deputy director in charge of the F.D.I.C. division that sells seized assets, to work on a plan to get ahold of some of the new wave of properties the federal government intends to put on the market as a result of recent bank failures.

Many of the investors who built legendary fortunes during the savings and loan crisis - like Sam Zell, the chief executive of the Tribune Company, and Joseph E. Robert Jr., the chief executive of J. E. Robert Companies - are also looking for ways to get back into or expand their distressed assets trade.
Mr. Zell, who has fared less well in his Tribune investment, recalled the instinct for capitalizing on the misfortune of others that earned him the sobriquet "the grave dancer" when he started buying up properties from failed savings and loans.

"When I started the first opportunity fund in 1988, I was the only one bidding - if they didn't sell to me, they didn't sell to anyone," Mr. Zell recalled.
Now, he said, "The best opportunity right now is in the debt area, mortgages. We have been buying all along."

R.T.C. experience is certainly no guarantee of success, the agency veterans acknowledge.

Peter Monroe, who was president of the R.T.C. oversight board from 1990 to 1993, has already bought about 300 distressed properties in Detroit, through a venture capital company he formed called Wilherst Oxford. Figuring out a way to profit from the investment - even though some of the houses cost him only a few hundred dollars - has proven to be a challenge.

"It is like a high-hurdle race: you can get going fast, but you have to jump over one hurdle after the other," Mr. Monroe said. "It has turned out to be more complicated than even I expected."

12292008 By Eric Lipton and David D. Kirkpatrick / New York Times

Home to Grandfather's House for Christmas

We trekked some 400 miles across country to be with my elderly father on Christmas Day. While to the adults much of the trip is packing, waiting in line and traffic, to a nine (9) year old, it is still magic.

Out of the gifts, the travel arrangements, the packing, the thing I will remember the most about this Christmas (2008) was my son's encounter with Santa Clause. After having met with "Santa," he remembered he had "forgotten" a very significant present. My weak statement that, "Santa probably knows about that game you want," went nowhere.

We went back, stood in line, and "told" "Santa," about the very special game that must come on Christmas Day.

Its so trite, so hackneyed (nice word for a Christmas story), but I watched him tell Santa with all the "importance of being earnest" that Santa must "add" this one game to his list.

Santa dutifully said that he would and that Parker should have known that Santa already knew his Christmas List - responding to my 'wink' 15 feet away.

And, I reminded Santa that we would be at "Grandfather's house" on Christmas Day. Santa, apparently the "hi tech" Santa, shrugged it off and said that his elves now take care of all the GPS and routing details. And, in the world of UPS and USPS online "tracking," it made perfect sense to my 9 year old.

So, we left Santa -- well certain that the "game" would arrive at Grandfather's house on Christmas Day.

And, off to packing, the smell of pine trees, cinnamon sticks, Holiday Muzak®, grapefruit from someplace called "Indian River," a holiday party where last years pants didn't fit quite as well as the year before, a Holiday Card that said they donated your Christmas Gift to the Welcome Wagon®, or some other equally obscure organization and then ...

We were off ...

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Over the river and through the woods
To Grand[father's] house we go.
The horse knows the way
To carry the sleigh
Through the white and drifted snow, Oh!
Over the river and through the woods
Oh, how the wind does blow.
It stings the nose
And bites the toes
As over the ground we go.

Over the river and through the woods
Trot fast my dapple gray.
Spring over the ground
Like a hunting hound
On this Thanksgiving Day, Hey!
Over the river and through the woods
Now Grand[father's] face I spy.
Hurrah for the fun,
Is the pudding done?
Hurrah for the pumpkin pie.

[Mother Goose. Public Domain.]

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When we finally got in eyesight of Grandfather's House (my father, Parker's Grandfather), I was surprised to see Christmas Lights all around.

Apparently, the people who take care of Grandfather put up some Christmas lights.

They were not the biggest; they were not the brightest and they were not the most impressive.

However, out of all the lights this Christmas, they were, in some odd way, the most meaningful and most inviting.

Merry Christmas and Happy Holidays to you all.

Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084
http://www.woodandmeredith.com/
hwood@woodandmeredith.com
Phone: 404-633-4100
Fax: 404-633-0068

US Treasury, Desperate to Restart Housing, Offers to Subordinate Tax Liens

In an economic move that can only be put on a par with depression-era creativity to restart the flagging (if not comatose) housing industry, the US Treasury today offered to subordinate IRS Tax Liens to speed the sale of houses.

While we all dislike the IRS (it's the national pastime), its job is to collect unpaid federal taxes. Yet, this subordination offer speaks volumes concerning the depth and length of the present (or coming) housing depression.

Consider: A home seller is nearing foreclosure on his or her ("he") existing home, meaning that he cannot service the debt on the existing home. He cannot pay the full tenor of the current mortgage and he cannot pay the taxes he owes to the federal government. Almost certainly, there are many other unpaid debts.

The feds now, not as a matter of hardship, but as a matter of economic policy associated with the stalled TARP program and its ancillary fallout, offer to subordinate federal tax liens.

Did I read that correctly? As a matter of stated tax policy the feds will now routinely (until the economy recovers and all jobs in Lake Wobegon begin to pay above average wages) subordinate federal tax liens? Say it ain’t so.

So, in a refinance to save a home, a US homeowner borrows more money at more favorable rates to pay off a unaffordable mortgage and subordinates unpaid federal taxes to boot?

Its great for the housing industry, but it is also a stark indicator of the depth of this coming economic trench.

How deep?

Welcome to 1934. Cole Porter's Anything Goes just opened on Broadway.


"Reno Sweeney: [singing] In olden days a glimpse of stocking / Was looked on as something shocking, / Now, Heaven knows, / Anything goes!"


The feds voluntarily offering to subordinate tax liens at the refi table. Pinch me. What will they think of next.

Hugh Wood, Atlanta, GA

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December 16, 2008

WASHINGTON - The Internal Revenue Service today announced an expedited process that will make it easier for financially distressed homeowners to avoid having a federal tax lien block refinancing of mortgages or the sale of a home.

If taxpayers are looking to refinance or sell a home and there is a federal tax lien filed, there are options. Taxpayers or their representatives, such as their lenders, may request that the IRS make a tax lien secondary to the lien by the lending institution that is refinancing or restructuring a loan. Taxpayers or their representatives may request that the IRS discharge its claim if the home is being sold for less than the amount of the mortgage lien under certain circumstances.

The process to request a discharge or a subordination of a tax lien takes approximately 30 days after the submission of the completed application, but the IRS will work to speed those requests in wake of the economic downturn.

"We don't want the IRS to be a barrier to people saving or selling their homes. We want to raise awareness of these lien options and to speed our decision-making process so people can refinance their mortgages or sell their homes," said Doug Shulman, IRS commissioner.

"We realize these are difficult times for many Americans," Shulman said. "We will ensure we have the resources in place to resolve these issues quickly and homeowners can complete their transactions."

Filing a Notice of Federal Tax Lien is a formal process by which the government makes a legal claim to property as security or payment for a tax debt. It serves as a public notice to other creditors that the government has a claim on the property.

In some cases, a federal tax lien can be made secondary to another lien, such as a lending institution's, if the IRS determines that taking a secondary position ultimately will help with collection of the tax debt. That process is called subordination. Taxpayers or their representatives may apply for a subordination of a federal tax lien if they are refinancing or restructuring their mortgage. Without lien subordination, taxpayers may be unable to borrow funds or reduce their payments. Lending institutions generally want their lien to have priority on the home being used as collateral.

To apply for a certificate of lien subordination, people must follow directions in Publication 784, How to Prepare an Application for a Certificate of Subordination of a Federal Tax Lien. Again, there is no form but there must be a typed letter of request and certain documentation. The request should be mailed to one of 40 Collection Advisory Groups nationwide. See Publication 4235, Collection Advisory Group Addresses, for address information.

Taxpayers or their representatives may apply for a certificate of discharge of a tax lien if they are giving up ownership of the property, such as selling the property, at an amount less than the mortgage lien if the mortgage lien is senior to the tax lien. The IRS may also issue a certificate of discharge in other circumstances if the taxpayer has sufficient equity in other assets, can substitute other assets, or is able to pay the IRS its equity in the property. Without a tax lien discharge, the taxpayer may be unable to complete the home ownership change and the ownership title will remain clouded.

To apply for a tax lien discharge, applicants must follow directions in Publication 783, Instructions on How to Apply for a Certificate of Discharge of a Federal Tax Lien. There is no form but there must be a typed letter of request and certain documentation. The request should be mailed to one of 40 Collection Advisory Groups nationwide. See Publication 4235 for address information.

The IRS also urges people to contact the agency's Collection Advisory Group early in the home sale or refinancing process so that it can begin work on their requests. People sometimes delay informing lenders of the tax liens, which only serves to delay the transaction.

Currently, there are more than 1 million federal tax liens outstanding tied to both real and personal property. The IRS issues more than 600,000 federal tax lien notices annually.

& & &

Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084

www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
Phone: 404-633-4100
Fax: 404-633-0068

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