Bank Bailout Redux

Treasury Secretary Timothy Geithner will be unveiling the Obama administration’s new bailout plan this morning. The plan is said to be a “three-pronged rescue program,” that is meant to “ease the credit crunch, including a public-private initiative to take bad assets off of banks’ balance sheets,” and provide “mortgage loan and foreclosure relief and a new consumer lending initiative.”

Also “according to the summary,” obtained by CNBC, “the Treasury plan also includes measures to ‘increase transparency and accountability to protect taxpayers,'” and “restrictions on executive pay, and new tighter reporting requirements for banks receiving government aid.”

I’ve been appalled by the reports of corporate excess with the earlier bailout funds. Restrictions on what banks can do with taxpayer bailout money is welcome in my book, as is greater transparency.

President Obama did not address the issue of bank Bailout redux in his press conference last night, instead he told reporters he would allow Geithner his “moment in the sun” today, when he unveils the new program.

Word has it that there was some “spirited internal debate that pitted the Treasury secretary, Timothy F. Geithner, against some of the president’s top political hands,” over the issue of the bailout. Geithner won out. His plan has got to be better than the last bank bailout or we’re all sunk.

Via the NY Times here’s details on the “multi-pronged program” that Geithner laid out in his speech:

— A Public Private Investment Fund, jointly run by the Treasury and the Federal Reserve, with financing from private investors, to buy up hard-to-sell assets that have bogged down banks and financial institutions for the past year. Mr. Geithner said the new fund, often described as a “bad bank” for holding toxic assets, would start with $500 billion with a goal of eventually buying up to $1 trillion in assets.

— Direct capital injections into banks, which would come out of the remaining $350 billion in the Treasury’s rescue program.

— A vast expansion of lending program that the Treasury and Federal Reserve had already announced, which is aimed at financing consumer loans. The two agencies had originally announced their intention to finance as much as $200 billion in loans for student loans, car loans and credit card debt. Instead the program will be expanded to as much as $1 trillion.

The Federal Reserve in separate announcement elaborated on the lending program, saying “it “could broaden” the plan to include both commercial and residential mortgage-backed securities.”

Both Geithner’s speech and the FED’s announcement were “met with a negative reaction on Wall Street.” The Dow dropped by 285 points less than an hour later.

[Originally published at TaylorMarsh.com]

Bookmark and Share

Bookmark the permalink.

Comments are closed.