Thursday, October 9, 2008

White House Considers Taking Stakes in US Banks

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Well that was quick - we just touched on the UK plan yesterday, and said the US should (will) follow. Better to do it soon than in 6 months. It appears this is what "caused" the sell off in the last 30 minutes yesterday (along with a longer timetable to buy bad debts) as it took the market by surprise.
  • The Bush administration is considering taking ownership stakes in certain U.S. banks as an option for dealing with a severe global credit crisis. An administration official, who spoke on condition of anonymity because no decision has been made, said the $700 billion rescue package passed by Congress last week allows the Treasury Department to inject fresh capital into financial institutions and get ownership shares in return. (interesting, must of snuck that in - I don't remember that mentioned during the debate - I guess when it goes from 3 pages to 110 pages to 400+ pages you can start throwing stuff in no one notices)
  • This official said all the new powers granted in the legislation were being considered as the administration seeks to deal with a serious credit crisis that has caused the biggest upheavals on Wall Street in seven decades and continues to roil global markets.
  • Taxpayers would benefit because the government would receive an equity stake in the bank in return for providing the capital. A decision to inject capital directly into financial institutions in return for ownership stakes would be similar to a plan announced Wednesday by Britain.
  • Asked whether he would try something like the British plan, Paulson said: "We have a broad range of authorities and tools. ... We've emphasized the purchase of liquid assets, but we have a broad range of authorities. And I'm confident we have the authorities we need to work with going forward."

3 comments:

Pedda said...

This is why educated people do not like bureaucracy. People also have short memory. They all get fired up one way or the other and they both lose steam when the decision is made one way or the other. There was huge uproar prior to the bailout, now that the bailout has passed the senate, no one is asking for checks on how the money will be spent. They talk about regulation, but the regulation and checks should begin at the level where the fed spends the tax payers money.

Rowe said...

Mark, really appreciate your thoughts on markets and otherwise.

I have tried to resist and resist, but have finally succombed to my anally retentive tendencies, and will presume to offer a small suggestion.

The phrase "...must of snuck that in..." I believe should be more appropriately stated as "...must HAVE snuck that in..." In short, "should of," "could of," etc., I believe should be "should have," "could have," etc., respectively.

Sorry to be a dickwad if that's what I am being here, but I think, in the long run, it couldn't really be a bad thing.

Again, enjoy your blog, and appreciate your sharing your thoughts/views.

TraderMark said...

Pedda,

"Hurry! Hurry!! Money needed imminently! No questions! Just give us money!!! The whole system collapses if we don't have approval by Friday. Ok by Sunday! Ok we meant Monday! I meant Thursday!" And then when given the money two weeks later - they won't even roll out the plan til late in the month? lol

They said that had this contigency built for MONTHS - so why was the whole infrastructure not ready to go? Another group of lies.

Rowe, sorry for the English - my use of tenses is plain awful :)

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