Thread: Administration unveils plan to help banks

And the insantiy continues..................

The Obama administration unveiled plans Monday to combat the nation’s worst banking crisis in 70 years.

updated 31 minutes ago
WASHINGTON - The Obama administration, striving to ease lending in the struggling economy, moved Monday with private investors to sop up bad bank assets.

The administration said the program could grow to $1 trillion in purchases eventually, if it proves successful in attacking the bad-books problem that has been at the heart of the banking crisis.

In a lengthy fact sheet, the administration said it plans to use $75 billion to $100 billion from the government’s existing $700 billion bailout program for this purpose, and it predicted participation from a broad array of investors ranging from pension funds and insurance companies to hedge funds.


To achieve the goal of freeing up more lending, the program would entice private investors with low-cost loans provided by the Federal Deposit Insurance Corporation and the Federal Reserve. The government would also shoulder the vast bulk of the risk.

In one example used in the fact sheet, the purchase of a batch of bad mortgage loans would see the private investor put up 6 percent of the cost with the rest provided by the government, with the FDIC covering 84 percent of the cost with a loan and the remaining 6 percent coming from funds from the $700 billion bailout program.

Wall Street applauded the new program. That offered a sharp contrast to the reaction that Treasury Secretary Timothy Geithner got on Feb. 10 when he unveiled the new administration’s first bailout initiative. Investor disappointment sent the Dow Jones industrial average crashing by 380 points that day.

Geithner’s unveiling of the new program took place Monday morning at the Treasury Department with an off-camera briefing. President Barack Obama was scheduled to discuss the program later in the day.

In opinion piece in Monday’s Wall Street Journal, Geithner said the new program was designed to “resolve the crisis as quickly and effectively as possible at the least cost to the taxpayer. ... Simply hoping for banks to work these assets off over time risks prolonging the crisis.â€

The administration’s revamped program for toxic assets is the latest in a string of banking initiatives which have also included efforts to deal with mortgage foreclosures, boost lending to small businesses and unfreeze the market for many types of consumer loans.

Its quit possible that America has seen the folly in living on borrowed money and is adopting a cash society mentality attitude. This will cause bailouts of banks to be of no use other than to make the rich richer and put future generations in hock as well as bankrupt this country!

Let the banks fail. Start using credit unions.