My comment: No comment. Just peace and best wishes.
Xi Geithner Says Bank-Rescue Plans May Reach $2 Trillion http://www.bloomberg.com/apps/news?pid=20601087&sid=aEzPekVa3eEE&refer=home Feb. 10 (Bloomberg) -- Treasury Secretary Timothy Geithner pledged government financing for as much as $2 trillion of efforts to spur new lending and address banks’ toxic assets, seeking to end the credit crunch hobbling the economy. “Instead of catalyzing recovery, the financial system is working against recovery,” Geithner said in unveiling the Obama administration’s overhaul of the government’s financial-bailout plans in Washington today. “At the same time, the recession is putting greater pressure on banks. This is a dangerous dynamic, and we need to arrest it.” The main components of the Treasury’s package today are a joint public- and private-sector fund to buy as much as $1 trillion of illiquid assets and a $1 trillion program to supply new credit to consumers and businesses. The administration also will inject additional taxpayer funds into banks, imposing tighter restrictions that will include limits on dividend payments, acquisitions and executive pay. “I want to be candid: this strategy will cost money, involve risk, and take time,” Geithner said today. The initial bailout effort, which he helped administer in his previous job as head of the Federal Reserve Bank of New York, was “essential” while “inadequate” to support the financial system and the secondary-lending market, he said. Stocks Slide Stocks dropped as investors expressed concern about a lack of specifics on plans for addressing toxic assets. The Standard & Poor’s 500 Stock Index slumped 3.8 percent to 837.09 at 11:40 a.m. in New York. The S&P 500 Bank index fell 10 percent, with Bank of America Corp. down 17 percent. Regional lender Huntington Bancshares Inc., based in Columbus, Ohio, slid 19 percent to $2.11. Today’s overhaul of the Treasury’s $700 billion financial- rescue fund is aimed at addressing the failures of the first phase of the program, which has yet to spur a wave of new lending to companies and consumers. Geithner’s warning about the cost of the effort followed signals yesterday by President Barack Obama that the administration is open to seeking more money. “We don’t know yet whether we’re going to need additional money or how much additional money we’ll need until we’ve seen how successful we are at restoring a sense of confidence in the marketplace,” Obama said in his news conference last night in Washington. Deciding on Plan Officials debated the financial-recovery plan for weeks, and encountered the same issues that former Treasury Secretary Henry Paulson did in trying to deal with the toxic assets. Paulson abandoned an effort to buy the securities after failing to find a quick mechanism for pricing them. He opted for buying stakes in banks as the centerpiece of the first $350 billion of the financial- bailout program. Geithner today outlined the Public-Private Investment Fund, with an initial capacity of $500 billion that could grow to $1 trillion, to provide financing for private investors to buy distressed securities. “We are exploring a range of different structures for this program, and will seek input from market participants and the public as we design it,” the Treasury chief said today. This fund will be targeted to the legacy loans and assets that are now burdening many financial institutions.” Fear at Banks The illiquid securities, mainly tied to mortgages, have spooked investors away from putting new money into banks and made lenders loath to extend new credit. Rather than borrow at the Fed’s target rate for overnight funds -- now as low as zero percent -- to lend, banks have instead parked a surplus of $793 billion of cash at the central bank itself. The Treasury will also work with the Federal Reserve to finance as much as $1 trillion in new consumer and business loans. The newly established Consumer and Business Lending Initiative is modeled on an earlier program to support new credit. Under today’s plan, regulators will subject banks to new tests to determine whether they have enough capital. The Treasury, Fed and other supervisors in the President’s Working Group on financial markets will develop guidelines for the examinations, which are aimed at ensuring that the country’s largest banks can withstand a worsening economy. Banks that don’t have sufficient capital will be given additional taxpayer funds in the form of convertible preferred securities. Participants will have their dividends and political lobbying efforts restricted, along with limits on stock buybacks, acquisitions, executive compensation and so-called golden parachutes. Luxury spending provisions must also be disclosed. The Treasury’s new investments in banks will be placed in a new entity called the Financial Stability Trust, Geithner said. Today’s package includes $50 billion for measures to stem mortgage foreclosures. Banks receiving federal funds will be required to participate in efforts to mitigate foreclosures. The Treasury and Fed will work to reduce monthly payments and establish loan-modification guidelines. On Feb 10, 3:47 pm, "[email protected]" <[email protected]> wrote: > 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&refe... > > 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. 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