Costly bank rescue plan aims to increase trust

Politico ^ | 2/10/2009 | Politico Staff

[Danae]

Treasury Secretary Tim Geithner on Tuesday unveiled a new bank rescue plan that includes a "new consumer business lending initiative to leverage up to $1 trillion dollars to kick start the secondary lending markets."

The department also announced plans for "a new website, FinancialStability.gov, to detail where federal funds are going and whether they are succeeding in stabilizing the financial system and promoting new lending." The administration has already begun posting contracts on the Internet.

Here are details of the program, as released by the Obama administration:

[Danae]

1. To stabilize the system and restore confidence in our markets, for the first time ever federal bank regulators will come together to institute uniform standards to help clean up and strengthen banks, and conduct “stress tests” to ensure the nation’s largest banks can withstand a worsening economy. Those banks that need it will be given a capital buffer to ensure they can keep lending to families and businesses until they can attract additional private capital and weather economic downturns.

2. To revitalize lending and increase much-needed credit flowing to consumers and businesses, Treasury and the Fed are creating a new consumer business lending initiative to leverage up to $1 trillion dollars to kick start the secondary lending markets, which will bring down borrowing costs for responsible borrowers and help get credit flowing again.

3. To get financial markets working again, we will create a new Public-Private Investment Fund which provide government capital and financing to leverage private capital to buy up the “toxic assets” that are dragging down lending. This would allow financial institutions to cleanse their balance sheets while letting private sector buyers determine the price for previously illiquid assets.

4. To keep people in their homes and curb the housing crisis, Treasury will work with the Federal Reserve to commit $50 billion to reduce monthly payments and establish loan modification guidelines for government and private programs. The Financial Stability plan will also require all firms receiving federal funds participate in foreclosure mitigation plans to stem the housing crisis. ++++++++++++++++++++++

More at link.

(pardon me, but where is the Fix for the REAL problem, people with houses they can't afford? Who bought on inflated housing prices that now have houses that are worth significant percentages LESS than when they bought? Where is the real fix here?)

[Uncle Ike]

Geithner just announced the formal inauguration of “Managed Economy”....

‘Full Power of the Government”, indeed....

[AmericanVictory]

Will it be as effective as the government taking such a large role in housing lending?

[Uncle Ike]

” Will it be as effective as the government taking such a large role in housing lending? “

It probably will be, since part of the ‘program’ is to use gummint to force more of it.....

[Uncle Ike]

By the bye —

Dow down some 150 points *since* Geithner started talking....

[goodnesswins]

And we just made the move to take all our money out of Bank of America....eff you, Geithner & Obama

[goodnesswins]

Yep...Dow down about 288 now....

[Zeddicus]

Fatal irony. This brilliant plan to “increase trust” results in a 285-pt drop in the DOW, and this headline on bloomberg: “U.S. Stocks Drop, Led by Financial Shares, as Geithner Announces Bank Plan”

We’re going down by the bow, fast, and the captain is making sure only his buddies get on the lifeboats.

[dawn53]

The Financial Stability plan will also require all firms receiving federal funds participate in foreclosure mitigation plans to stem the housing crisis

It will be interesting to see how many banks refuse funds rather than be told what to do.

What I'd like to know is the definition of "foreclosure mitigation" (are they just messing with the terms, or are they lowering the loan amount.)

[Wyatt's Torch]

Market isn't too fond of the plan:

[Red in Blue PA]

“Treasury and the Fed are creating a new consumer business lending initiative to leverage up to $1 trillion dollars “

Correct me if I am wrong, but wasn’t leverage one of the things which got us into this mess to start with?

[Danae]

I am giving some serious consideration to doing the same thing, only, is there ANY bank that can be trusted right now?

I don’t know. That’s is just insane, but I don’t know!

[goodnesswins]

We are going to a Credit Union with a volunteer Board....but, it’s been in business a long time...

[Danae]

Leverage in the form of CRA and the 1992 Bill that created federal Quotas for banks FORCING them to write bad loans and Organizations protected and funded by Democrats in Congress like ACORN , the BIG STICK of the Dem Party, there to SUE banks that DIDN’T write bad loans to those who could not afford them.
Congress + ACORN + DNC = FINANCIAL COLLAPSE and BAILOUTS.

Its just as simple as that.

[Oldexpat]

They start out trying to ask for our confidence with two guys of questionable character..Dodd and Geithner.
Dodd got a special deal from one of the worst sub-prime lenders who pawned off loans to Fannie and Freddie..
And Geithner is a tax cheat.
Dumb and dumber.