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Geithner unveils bank rescue plan
Treasury Secretary Timothy Geithner announces details of the Financial Stability Plan at the U.S. Treasury Building -- February 10, 2009
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Bill Radke: Treasury Secretary Timothy Geithner this morning unveiled a revamped financial rescue plan to untangle the banking system and support new lending. The bank rescue started life as TARP, the Troubled Asset Relief Program under President Bush. The Bush administration spent the first half of that $700 billion package.
This morning, Geithner revealed his plan for the second half of the package. It's been renamed the "Financial Stability Plan," or FSP.
Geithner addressed a growing public perception that the government is bailing out big banks at the expense of innocent taxpayers:
Tim Geithner: When our government provides support to banks, it is not for the benefit of banks. It is for the businesses and families who depend on banks, and it's for the benefit of the country.
Geithner said a public-private investment fund will be established, seeded with government money. The idea is to leverage private money so that so-called toxic assets can be cleansed from the books of the faltering banking system. The hope is that that will help banks resume lending.
Analyst Christopher Whalen of Institutional Risk Analytics says the Treasury's plan lets bank bondholders off too easy by protecting them instead of letting them take losses:
Christopher Whalen: So in two months, three months at most, we'll come back to this. And once again, Secretary Geithner and President Obama will be standing there with a plan. And that's OK, that's what democracies do. But we have to focus on reality, and reality is you have to restructure some of these big banks. And that may mean that the bondholders have to take a loss.
The Treasury will also be devoting $50 billion in federal rescue funds to try to stem home foreclosures and soften the impact of the housing crisis.
About the author
Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead. Follow Jeremy on Twitter @jeremyhobson
I agree with the Mr. Richard. One of the problems is legislators get kickbacks too. How do you think these banks got into this position ? Why do we think they are the answer and, how could they have spent $400 billion dollars and not account for it. Like Mr. Richard said, what private company does business like that ? Bank CEO's keep there mouths shut and polticians pass the buck between democrats and republicans but, after the last election I recall Mr. Bush and Mr. Kerry playing golf on Bush's ranch. This is not about poltics this is about taxpayer money. Screw a bank, why not give it to small businesses to create jobs, grants for small businesses to pursue alternative enegry solutions instead of these huge corporations. There's nothing realitivly wrong with huge corporations but don't just give opportunities to big companies who can do more with less and are already in competition. President is talking about improving the communications infastructure including wireless. Why not invest grants into WiFi Max technologies as well as 3G networks which are being carried by AT&T, Verizon and SBC. That way there is a even handed competition. If you must give to banks why not regional and small national banks. It's time to start a new wave of companies and wipe the slate clean. As long as the slate stays the way it is we'll be in the same perdicument. Oh, and God forbid I use, what most plticians consider curse words... raise taxes on everybody and entity from corporate tax to indiviual so our children won't have to pay back China. Even for those who don't have children, it's someone elses child that will make manage there tomorrow eventually.
I am not in the least bit surprised to hear legislators on both sides of the Atlantic lambasting financial firms' executives for misuse of taxpayers' money.
Not only do such attacks glorify politicians in the eyes of their constituents, but provide those very legislators with a opaque shield hiding their own incompetence.
No one, using their own funds, would begin to consider the levels of support that Government has provided the financial industry without knowing how, why, when, and for what the money would be spent and demenading full accountablilty BEFORE money was spent.
Using taxpayers hard-earned Pounds, Dollars, or Euros, Government never considered the even small probability that money given to financial firms might be spent in ways that are not in the best interests of anyone but the taxpayers.
As long as legislators attack financial firms' CEOs and keep them on those CEOs on the defensive, their own actions won't be questioned.
It would be wonderful to hear just one high-ranking executive retort, "Well, what did you expect? You gave us this money and put no conditions whatsoever on how we were to spend it! You provided no oversight, no acountability. What did you expect?"
It'll never happen, but it's a wonderful fantasy.
