My comment: As I told some months ago, just before the former bailout, it just buys time, it delays the problem a few months. If then I told that $800bn would delay it until February or March (more or less), this time it will delay it until June or July, more or less.
The bad news is that a good action such as the stimulous package, will lose a huge part of its power if they withdraw funds from the real and healthy economy that the stimulous package creates to give them to unhealthy banks. In my opinion, either nationalization of banks (and use that authority to force them to behave according to government plans) or "let them die or survive by themselves" would be better than a fresh bailout. Peace and best wishes. Xi http://www.bloomberg.com/apps/news?pid=20601087&sid=aHbjGJDSNnIs&refer=home Feb. 10 (Bloomberg) -- Treasury Secretary Timothy Geithner said the U.S. financial system is badly damaged and needs more government help to avoid a collapse that could devastate an already battered economy. “The financial system is working against recovery, and that’s the dangerous dynamic we need to change,” Geithner said in remarks prepared for delivery today at a speech in Washington. “Without credit, economies cannot grow, and right now, critical parts of our financial system are damaged.” In the speech, Geithner lays out the administration’s overhaul of the $700 billion bank rescue plan it inherited. He acknowledged that “the American people have lost faith in the leaders of our financial institutions” and are skeptical of the rescue spending so far. The Obama administration’s strategy has three main components: more capital for banks, financing for as much as $1 trillion of consumer and business loans, and public financing for private investors willing to buy distressed assets, people familiar with the plan said. “This comprehensive strategy will cost money, involve risk, and take time,” Geithner said. The initial bailout effort, which he helped administer in his previous job as head of the Federal Reserve Bank of New York, was “essential” and also “inadequate” to support the financial system and the secondary lending market, he said. “In our financial system, 40 percent of consumer lending has historically been available because people buy loans, put them together and sell them,” Geithner said. “Because this vital source of lending has frozen up, no plan will be successful unless it helps restart securitization markets for sound loans made to consumers and businesses -- large and small.” TARP Renamed Geithner will also give the $700 billion Troubled Asset Relief Program a new name: the Financial Stability Plan. His announcement is scheduled for 11 a.m. in Washington. Among the plan’s other components is $50 billion for measures to stem mortgage foreclosures, a Republican aide and a Democratic congressional aide said after Treasury officials briefed lawmakers and staff members yesterday. “We are going to have to work with the banks in an effective way to clean up their balance sheets so that some trust is restored within the marketplace,” President Barack Obama said in his first prime-time news briefing yesterday. At “any given bank they’re not sure what kinds of losses are there. We’ve got to open things up and restore some trust.” New Tests Regulators plan to subject banks to new tests to determine whether they have enough capital, people familiar with the matter said. The Treasury, Federal Reserve and other supervisors in the President’s Working Group on financial markets will develop guidelines for the examinations. Banks that don’t have sufficient capital under various scenarios for losses on their assets will be able to get additional taxpayer funds in the form of convertible preferred securities, people familiar with the matter said. The new capital injections would have tougher conditions than the Treasury’s first round of as much as $250 billion of bank-stake purchases. Participating banks will be subject to lending requirements and restrictions on new acquisitions and dividends. The administration is also aiming to differentiate the next phase of the financial plan by bringing in private investors. It plans a public- private investment fund to take on older toxic assets. Officials have not yet decided on the specific mechanics of the facility, which will be introduced in lieu of the so- called bad bank of earlier proposals. Investment Fund The scope of the investment fund is expected to be a range of as much as $500 billion, backed by roughly $50 billion in public funding, people familiar with the matter said. To kick-start new lending, the Financial Stability Plan will expand a Federal Reserve program for consumer and business loans to as much as $1 trillion from the current $200 billion. The Term Asset-Backed Securities Lending Facility will be backed by as much as $100 billion of Treasury funds in case of losses. Fed officials have yet to start up the TALF, which was intended to be under way this month and could now be renamed. It will lend funds to investors in securities backed by student, credit-card and auto loans. Eligible debt will be expanded today to include commercial mortgage- backed securities, and more types of lending may be added later, people familiar with the matter said. The Federal Deposit Insurance Corp. is also set to expand its debt- guarantee program, created late last year to ensure banks’ access to credit markets, the people said. The agency is looking at 10-year guarantees for some kinds of assets. The new approach comes four months after the start of the $700 billion TARP, which both Democrats and Republicans have criticized as ineffective. The task Geithner faces is reviving a U.S. banking system throttled by $752 billion in credit losses and an economy that lost almost 600,000 jobs last month. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "World-thread" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/world-thread?hl=en -~----------~----~----~----~------~----~------~--~---
