Instead of catalyzing recovery, the financial system is working against recovery. And at the same time, the recession is putting greater pressure on banks. This is a dangerous dynamic, and we need to arrest it. It is essential for every American to understand that the battle for economic recovery must be fought on two fronts. We have to both jumpstart job creation and private investment, and we must get credit flowing again to businesses and families. ... We believe that access to public support is a privilege, not a right. When our government provides support to banks, it is not for the benefit of banks, it is for the businesses and families who depend on banks... and for the benefit of the country. Government support must come with strong conditions to protect the tax payer and with transparency that allows the American people to see the impact of those investments. We believe our policies must be designed to mobilize and leverage private capital, not to supplant or discourage private capital. When government investment is necessary, it should be replaced with private capital as soon as possible. ... Our work begins with a new framework of oversight and governance of all aspects of our Financial Stability Plan. ...These new requirements, which will be available on a new website FinancialStability.gov will give the American people the transparency they deserve.
We believe that access to public support is a privilege, not a right. When our government provides support to banks, it is not for the benefit of banks, it is for the businesses and families who depend on banks... and for the benefit of the country. Government support must come with strong conditions to protect the tax payer and with transparency that allows the American people to see the impact of those investments.
We believe our policies must be designed to mobilize and leverage private capital, not to supplant or discourage private capital. When government investment is necessary, it should be replaced with private capital as soon as possible. ...
Our work begins with a new framework of oversight and governance of all aspects of our Financial Stability Plan. ...These new requirements, which will be available on a new website FinancialStability.gov will give the American people the transparency they deserve.
um ... BWAHAHAHAHHAHAHAHA. 'K.
Under this framework, we are establishing three new programs to clean up and strengthen the nation's banks, bring in private capital to restart lending, and to go around the banking system directly to the markets that consumers and businesses depend on. ... First, we're going to require banking institutions to go through a carefully designed comprehensive stress test, to use the medical term. ...assessment about the risk on balance sheets ...access a new funding mechanism that uses funds from the Treasury as a bridge to private capital. The capital will come with conditions....
First, we're going to require banking institutions to go through a carefully designed comprehensive stress test, to use the medical term. ...assessment about the risk on balance sheets ...access a new funding mechanism that uses funds from the Treasury as a bridge to private capital. The capital will come with conditions....
Bad Bank: three parts Ch 11 (RFC), one part Ch 7 (yer RTC).
The Treasury's investments in these institutions will be placed in a new Financial Stability Trust. Second, alongside this new Financial Stability Trust, together with the Fed, the FDIC, and the private sector, we will establish a Public-Private Investment Fund. This program will provide government capital and government financing to help leverage private capital to help get private markets working again. This fund will be targeted to the legacy loans and assets [?!!] that are now burdening many financial institutions. ...We believe this program should ultimately provide up to one trillion in financing capacity, but we plan to start it on a scale of $500 billion [oops], and expand it based on what works.
Second, alongside this new Financial Stability Trust, together with the Fed, the FDIC, and the private sector, we will establish a Public-Private Investment Fund. This program will provide government capital and government financing to help leverage private capital to help get private markets working again. This fund will be targeted to the legacy loans and assets [?!!] that are now burdening many financial institutions. ...We believe this program should ultimately provide up to one trillion in financing capacity, but we plan to start it on a scale of $500 billion [oops], and expand it based on what works.
Fresh coat of paint for Geithner's FRBNY babies, birthed by TALF. To mix metaphors.
Third, working jointly with the Federal Reserve, we are prepared to commit up to a trillion dollars to support a Consumer and Business Lending Initiative. This initiative will kickstart the secondary lending markets, to bring down borrowing costs, and to help get credit flowing again. In our financial system, 40 percent of consumer lending has historically been available because people buy loans, put them together and sell them. Because this vital source of lending has frozen up, no financial recovery plan will be successful unless it helps restart securitization markets for sound loans made to consumers and businesses - large and small. This lending program will be built on the Federal Reserve's Term Asset Backed Securities Loan Facility, announced last November, with capital from the Treasury and financing from the Federal Reserve. ... Our focus will be on using the full resources of the government to help bring down mortgage payments and to reduce mortgage interest rates. We will do this with a substantial commitment of resources already authorized by the Congress under the Emergency Economic Stabilization Act.
In our financial system, 40 percent of consumer lending has historically been available because people buy loans, put them together and sell them. Because this vital source of lending has frozen up, no financial recovery plan will be successful unless it helps restart securitization markets for sound loans made to consumers and businesses - large and small.
This lending program will be built on the Federal Reserve's Term Asset Backed Securities Loan Facility, announced last November, with capital from the Treasury and financing from the Federal Reserve. ...
Our focus will be on using the full resources of the government to help bring down mortgage payments and to reduce mortgage interest rates. We will do this with a substantial commitment of resources already authorized by the Congress under the Emergency Economic Stabilization Act.
Especially the Secretary's gaping discretionary powers to value and to spend $1.5T on "troubled assets".
The success of our financial stability plan is going to require an unprecedented level of cooperation, here in the United States and around the world. Federal Reserve Chairman Ben Bernanke, FDIC Chair Sheila Bair, John Dugan, the Comptroller of the Currency, and John Reich the head of the Office of Thrift Supervision, are here today. I want to thank them for helping to shape this plan, and their commitment to making it work.
Expanding membership of the President's Working Group (PWG). See "Blueprint for a Modernized Financial Regulatory Structure." Short-term Recommendations concern standardizing mortgage products, establishing fed reg and licensing of insurance products, then consumer revolving and other primary market contracts; securitized domestic debt for sale in global capital markets.
Sad. Diversity is the key to economic and political evolution.
We believe that access to public support is a privilege, not a right. When our government provides support to banks, it is not for the benefit of banks, it is for the businesses and families who depend on banks... and for the benefit of the country. Government support must come with strong conditions to protect the tax payer and with transparency that allows the American people to see the impact of those investments. We believe our policies must be designed to mobilize and leverage private capital, not to supplant or discourage private capital. When government investment is necessary, it should be replaced with private capital as soon as possible.
We believe our policies must be designed to mobilize and leverage private capital, not to supplant or discourage private capital. When government investment is necessary, it should be replaced with private capital as soon as possible.
FT.com | Willem Buiter's Maverecon
Many (probably most, possibly all but a handful) high-profile, large border-crossing universal banks in the north Atlantic region are dead banks walking - zombie banks kept from formal insolvency only through past, present and anticipated future injections of public money. They have indeterminate but possibly large remaining stocks of toxic - hard or impossible to value - assets on their balance sheets which they cannot or will not come clean on. This overhang of toxic assets acts like a tax on new lending. Banks are required, by regulators or by market pressures, to hoard capital and liquidity rather than engaging in new lending to the real economy. The public financial support offered in the form of capital injections (in the US mainly through preference shares and other non-voting equity), guarantees for assets and for liabilities (old and new), insurance of toxic assets (as provided to Citigroup by the US sovereign) and possibly in the future through direct purchases by the state of toxic assets (using TARP money in the US) and the creation of one or more publicly owned `bad banks' has been a complete failure. The bad bank proposals the Obama administration and other governments are considering are non-starters, for the simple reason that they require the valuation of assets whose true value (even on a hold-to-maturity basis) can only be guessed at.
Many (probably most, possibly all but a handful) high-profile, large border-crossing universal banks in the north Atlantic region are dead banks walking - zombie banks kept from formal insolvency only through past, present and anticipated future injections of public money. They have indeterminate but possibly large remaining stocks of toxic - hard or impossible to value - assets on their balance sheets which they cannot or will not come clean on.
This overhang of toxic assets acts like a tax on new lending. Banks are required, by regulators or by market pressures, to hoard capital and liquidity rather than engaging in new lending to the real economy. The public financial support offered in the form of capital injections (in the US mainly through preference shares and other non-voting equity), guarantees for assets and for liabilities (old and new), insurance of toxic assets (as provided to Citigroup by the US sovereign) and possibly in the future through direct purchases by the state of toxic assets (using TARP money in the US) and the creation of one or more publicly owned `bad banks' has been a complete failure.
The bad bank proposals the Obama administration and other governments are considering are non-starters, for the simple reason that they require the valuation of assets whose true value (even on a hold-to-maturity basis) can only be guessed at.
He backs the idea of the State creating new institutions - "good banks" - rather than nationalise the old bad banks.
the old "bad banks" will eventually fail and will have to be taken over by the FDIC
Remember the spate of confusion in the interboobz, when MSM introduced the word "conservator"? Suddenly commentator were investigating the word "receivor", but abandon any discursion of the word "restructure"? Receivor and conservator are legal terms. The fiduciary duties of these agents are quite different with respect to remediating a bankruptcy determination ("fail").
Historically, that is until the criminal bush began to legislate, the FDIC's function was always receivor of bankrupt FDIC-insured deposit institutions. In the event of failure (Ch 7 determination), FDIC liquidates all the banks operating and financial assets to pay ("to resolve") creditors' claims (including FDIC advance to account holders), and transfers deposit accounts to another deposit bank. Unmarketable financial assets such as securities may be held to close the books but, ultimately, charged-off to end litigation. The RTC was a special purpose entity of the FDIC created especially to manage the massive number of S&L bankruptcies; operations ceased 1994.
These procedure pretty much changed when Bush Treasury instructed FDIC to "take over" the Pritzker family S&L in 2001. FDIC is still managing Superior Bank FSB operations -- above and beyond action to satisfy outstanding settlement.
By contrast Mr Bush appointed Mr Lockhart conservator of Fannie Mae and Freddi Mac, pursuant to execution of the Housing and Economic Recovery Act of 2008. His duty is to "restructure" these corporations' debt obligations despite contradictory directions by WH and FRB executives to the management of those two organizations. That is mitigate risk exposure by sale or maturity within a specified period versus increase spending on whole and securitized high LTV jumbo mortgages.
Finally, Lehman was never a (demand, commercial, retail) deposit bank insured by FDIC or an FRB reserve bank establishment. It's business was securities brokerage, and even Bernanke cannot be such a colossal, demented asshole to insure ex post the value of its trades.
Knowing all this, somehow, the US Treasury most certainly could implement plans to establish a "good" bank with deposit accounts and performing loans for the simple reason that the premise of confidence in the full faith and credit of the US is not for profit.
OTOH, commercial bankers would never stand idle by USG market power and competition for profitable clients. And that reality is also one of the greatest barriers to USG entry into medical insurance, i.e. single-payer. Politicians are skeered of assissination.
Which is why Barry will pass a rich ol' man. Diversity is the key to economic and political evolution.
Or did you mean "salvaging the unsalvageable"?
You saw what good it did letting Lehman go bust. Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
Were Geitner to use even $100 billion for creation of new banks and even if a 6% capital reserve were required, he would create $2 trillion of new, unimpaired loan capability.
That's right, over time. After all the jackass did commit $500B ($150B more than the TARP balance) PLUS another $500B ("we are prepared to commit up to a trillion dollars to support a Consumer and Business Lending Initiative" whatever that's suppose to entail) PLUS continued risk exposure created by FRB credit facility operations in order to service bad, bad banks' debt load.
10% of that would make a sweet start-up carburator. Diversity is the key to economic and political evolution.
Wall St runs the world, and if Wall St shows weakness the US is finished as a superpower.
Rescuing the little people from ruin is a nice, but optional, bonus.
This is a pasty over-fed finger stuck into a leaking dam, not an attempt to deal seriously with the imminent threat of flooding.
Any other response is - literally - inconceivable.
And the 2009 Nobel Prize for economic analysis goes to... "Life shrinks or expands in proportion to one's courage." - Anaïs Nin
The goal is to protect the financial monopoly owned by Wall St, at - literally - almost any cost.
Geitner and the Big Six banks should comprise the subjects of the first great auto da fe of the clean-up. Then they need to create a significant investigatory and prosecutorial entity to go after all of the miscreants, down to the level of the office managers of mortgage broker offices and the vice presidents of banks that originated and then sold sub-prime and option ARMs in L.A., Miami, Las Vegas, etc. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
If states are already considering going their own way now, what happens a year from now when there's even less money to go around at street level, unemployment is even higher, and there are no obvious prospects for improvement?
There's a point where the cancerous bloat eats the victim to the point where both die. Wall St is a tick which has just popped. Trying to put the flying body parts back together again doesn't seem like a useful pastime.
I'm more interested in what happens next, and how long it's going to take.
It's all about show trials... Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
