Wednesday, Jan 28, 2009
U.S. May opt for the Bad Bank approach.
Bloomberg: FDIC May Run ‘Bad Bank’ in Obama Plan to Remove Toxic Assets
The Federal Deposit Insurance Corp. may manage the so-called bad bank that the Obama administration is likely to set up as it tries to break the back of the credit crisis, two people familiar with the matter said.
FDIC Chairman Sheila Bair is pushing to run the operation, which would buy the toxic assets clogging banks’ balance sheets, one of the people said. Bair is arguing that her agency has expertise and could help finance the effort by issuing bonds guaranteed by the FDIC, a second person said. President Barack Obama’s team may announce the outlines of its financial-rescue plan as early as next week, an administration official said.
Posted by 51ck-6-51x @ 12:54 PM (311 views) Add Comment
5 Comments
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1. P. Riddy said...
So. To avoid bankruptcy, insolvent speculators sell assets at full price to tax payers, who can't use them because they are worthless. But, if all countries have bad banks, we have an international version of subprime. Is this a new unstable ponzi scheme?
2. bystander said...
Banks/ bankers/ traders etc. really don't have to take any responsibility at all for failure and fraudulent behaviour do they? There was the phrase 'moral hazard' bandied around at the beginning of this, especially by Mervyn King, but he appears to have been muzzled by his paymasters (I do not mean GB and AD). This will inevitably happen again, as the banks know nothing will be allowed to let them fail, no wonder their shares are rocketing. Who'd have thought banking was so safe.
3. rm96696 said...
Why do they need to create a new bad bank? There are plenty of bad banks around?
4. techieman said...
Bystander
Re the "recovery" so far - i thought about buying some RBS @ 11p yesterday (seemed to me like there would be some speculation that they wouldnt be fully nationalised at some stage) but then i had second thoughts! - posted Tuesday January 20th.
So the reason IMO that the banks shares are rocketing is that they may not after all be nationalised.... [not necc my view but thats the market view - so some buying plus short covering i would say].
5. bystander said...
Techieman, I also fancied a couple of shares of Barclays when they sat below 50p, as I thought them oversold based on rumours, but hindsight is a wonderful thing.