CNBC - 'Bad Bank' Is Dropped From Financial-Rescue Package

Discussion in 'Wall St. News' started by Cdntrader, Feb 9, 2009.

  1. 'Bad Bank' Is Dropped From Financial-Rescue Package
    Topics:Barack Obama | Treasury Department | Banking
    Sectors:Financial Services | Banks
    By: Albert Bozzo, Senior Features Editor | 09 Feb 2009 | 06:19 PM ET
    Text Size

    The Obama administration’s wide-ranging plan to stabilize the financial system no longer includes creating a "bad bank" but will still contain measures to buy up toxic assets from financial institutions, according to a source familiar with the plan.

    In addition, funding for the bank-rescue plan is unlikely to exceed the $350 billion currently available under the TARP, this source said.

    “They have to have enough to calm the markets, but there might not be as many details as previously thought,” he said.

    A Treasury Department source said the plan was essentially complete with only minor “tweaks” being applied. The plan will be presented to members of Congress this evening, according to sources.

    The package will be unveiled Tuesday by Treasury Secretary Timothy Geithner at 11 am EST. will carry the speech live.

    CNBC will also interview Geithner after the speech at 12 Noon EST. It will be his first television interview since becoming Treasury Secretary

    There’s been great speculation in recent days about both the measures and terms involved in the bank-rescue plan. In particular, there’s been great uncertainty about the inclusion of the "bad bank" concept, where the government would set up an aggregate bank and buy up billions of dollars of bad debt from banks.

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    At the moment, the idea of involving private capital in the purchase of bad assets “is gaining speed,” said the source, who is familiar with the discussions. In that way, the government might simply encourage firms to buy the assets or provide some sort government subsidy covering some of the costs.

    “You don’t need as many dollars," the source explained, and “the market sets the price.” Such a model would also reduce the likelihood of bank nationalization by demonstrating that the “company is strong enough to attract private capital."

    The latest version of the plan no longer addresses any immediate aid to insurance companies with thrift units that have applied for capital injections under the existing TARP. That idea appeared to be gaining support on Saturday.

    The core of the plan for aid to the financial sector remains largely the same at this point.
    Timothy Geithner

    In addition to asset purchases, the government will continue capital injections into needy firms as well as the "ring fence" concept recently applied to Citigroup [C 3.95 0.04 (+1.05%) ] and Bank of America [BAC 6.89 0.76 (+12.4%) ], which provides guarantees and insurance to cover bad assets remaining on firms’ books.

    Of the $350 billion in Tarp money, some $50 billion to $100 billion will go to stemming foreclosures, according to the source. The Obama administration has previously pledged to commit that much in a letter to Congress, but it has been unclear where that money would come from.

    Aid to homeowners is a key priority to Democrats in the House of Representatives, who faulted former Treasury Secretary Henry Paulson for his administration of the TARP because they felt it was too lenient on and generous to Wall Street.

    They expected firms receiving government aid to lend more to consumers. Many of them now want such firms to be required to participate in foreclosure mitigation efforts.

    That Congressional support is seen as key to both the Obama administration’s forthcoming initiatives as well as those that may be needed in the future, which would include the authorization of new funding.

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    “There has to be some sort of sales job to the people before we go out on the limb and appropriate new money,” said a senior Congressional staffer “Any new money will be largely leveraged on how they do with this money.”

    Geithner is also expected to announce plans to widen the scope of a Federal Reserve program worth up to $200 billion that seeks to encourage private investors to buy consumer-credit backed debt. The program is known as TALF, or term auction lending facility.

    In a statement Monday, the Treasury said that senior officials from Treasury, the Federal Reserve Board and the Federal Deposit Insurance Corporation would hold a media briefing on the plan at 11:45 a.m. ET.

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    Treasury Secretary Geither met with the Democrats at their caucus retreat in Williamsburg, Virginia Saturday and discussed foreclosure and mortgage loan issues but the details remain unknown at this time.

    Geithner will testify before the Senate Banking Committee Tuesday afternoon after his speech and CNBC interview. will carry the event live.

    Revisiting Private Capital

    Word that the government’s discussions included the private capital concept first surfaced Saturday, but the idea of some kind of private sector involvement dates back to right after Paulson first proposed a government auction of assets last fall.

    Rep. Jeb Hensarling (R.-Texas), who was among those in Congress pushing for it in the original TARP legislation, called the current private capital idea "feasible" because there's a lot of it "sitting on the sidelines."

    Hensarling, added, however, that he still favors his insurance-based model, wherein firms participating in the asset transactions pay fees.

    "In a pure vacuum, I would tend to lean toward an insurance-based model," said Hensarling, who voted against the original legislation and is a member of TARP’s Congressional Oversight Panel.
  2. Banks should Z@@M!!!
  3. achilles28


    Problem > Reaction > Solution

    Remove the problem and the "solution" is no longer necessary.

    Drag the problem out for as long as possible, and all sorts of legislation, power grabs and trillions in ineffectual handouts can be dressed up as honest half-measures to a retarded public.

    Crisis is a political weapon to consolidate power. Jefferson said that (parenthetically).

    Maintain, hype and exaggerate crisis, and the lawmakers have tremendous power to cede to their King Makers (Wallstreet/Banks/War Machine).
  4. achilles28


    btw, if Socialism is the preferred road to solve this mess, then a bad bank/nationalization of assets would have cleared most of this up.

    For 2 Trillion.

    Instead we're at 11 Trillion, and counting.

    Plus a Treasury and Private Federal Reserve with near unlimited power to intervene in financial markets and grant loans to Corporations, under their sole discretion.

    Thats Commie Banking. Print money and give it to your friends.

    But hey, maybe thats what America needs? We've tried "Free Markets", and they don't work. Back to the drawing board...
  5. Daal


    They figured they would run out of room :p
  6. Financial Bailout Now Has Revised Form of 'Bad Bank'
    Topics:Barack Obama | Treasury Department | Banking
    Sectors:Financial Services | Banks
    By: Albert Bozzo, Senior Features Editor | 09 Feb 2009 | 09:20 PM ET
    Text Size

    The Obama Administration's financial-rescue plan is now expected to include a new form of "bad bank" that would essentially combine public and private resources to take bad assets off of banks' books, sources told CNBC.

    Earlier, reported that the Treasury had dropped the "bad bank" concept, but sources said a new version of that plan has emerged instead.
  7. Hahaha

    According to CNBC on Monday, the world is flat.
    On Tuesday, the world is reported to be round.
    Gasparino comes out and his sources say it's flat again.
    And the next week, after much confusion, it is round once again.

    What does CNBC do better than pump and dump rumours on a daily basis?

    The actual people planning this stuff must have a good laugh at reporters fumbling mad over hearsay.
  8. How about an ETF for the assets we can call it CRAP
  9. really
  10. Crappy Mae
    #10     Feb 9, 2009