Any time now…
Geither is going to…
Announce the guts of his plan…
Geithner Says He’ll Soon Offer Details on Toxic-Asset Cleanup
By Rebecca Christie and Lizzie O’Leary
March 15 (Bloomberg) -- U.S. Treasury Secretary Timothy Geithner said he will soon provide details of his plan to help banks clean up the non-performing assets that are clogging the financial system.
“We’re going to move quickly to lay out a new financing program to deal with these legacy assets,” Geithner said in an interview with Bloomberg television yesterday during a meeting of Group of 20 finance ministers in Horsham, England. “We have and expect to see a lot of support for this program” among potential buyers of the assets, he said.
Geithner disappointed investors and was criticized by U.S. lawmakers including Senator Kent Conrad of North Dakota, chairman of the budget committee, for outlining plans to address toxic assets without an explanation of how they will work. The Standard & Poor’s 500 Stock Index slumped 4.9 percent on Feb. 10, the day Geithner announced the plan.
Geithner’s program has three main elements: Injecting fresh government capital into some of the country’s biggest financial institutions; establishing a public-private partnership to handle as much as $1 trillion of banks’ bad assets; and starting a credit facility with the Federal Reserve of as much as $1 trillion to promote lending to consumers and businesses.
The Treasury hopes to unfreeze credit markets by providing new incentives to banks and investors to resume trading in mortgage securities and other troubled assets. U.S. regulators are conducting a new series of examinations to make sure banks have enough capital to accept losses when selling these assets, while also planning to provide government financing to the investors who might buy them.
More information about the public-private investment plan will be made available in the next week, a Treasury official told reporters yesterday, speaking on condition of anonymity. The Treasury will roll out enough information for investors to gauge their interest in the new program, along with an operational timeframe, the official said.
In the interview, Geithner said the Treasury already is well on its way to starting “a dramatic lending program to help securities markets get flowing again.” He said regulators will ensure banks have a “backstop of capital” to make sure they can “do what’s necessary” to restore lending.
The Treasury also is looking to a new program, launched in partnership with the Federal Reserve, to encourage banks to make new loans. The Term Asset-Backed Securities Loan Facility is intended to revive the market for securities backed by consumer loans, yet it may start with just a handful of deals, according to participants in the preparations.
Last week, the Fed delayed by two days until March 19 the deadline for submissions of proposed packages of debt that investors can buy with Fed financing. Brokers and investors have had difficulty agreeing over contract terms for the TALF, the people said.
The Treasury isn’t worried if the TALF gets off to a slow start, the Treasury official told reporters. The program is meant to be a longer-term effort to spur new lending, so a slow initial take-up shouldn’t be surprising, he said.
Geithner met yesterday with Chinese Finance Minister Xie Xuren, days after Chinese Premier Wen Jiabao said he was “worried” about China’s investment in U.S. Treasury securities and wanted assurances that the holdings are safe. In Horsham, Geithner said the U.S. and the Chinese focused on their common goal of helping restore health to financial markets and the global economy.
“The tone was very good,” Geithner said in the interview, when asked about his meeting with Xie. “China is playing a very strong, very stabilizing, very important role in responding to this global crisis and we’re going to work closely with them.”
Geithner left the G-20 with a broad pledge from his counterparts to wield monetary and fiscal policy “as long as needed” to heal financial markets and the global economy. The ministers also were supportive of Geithner’s proposal to increase funding for the International Monetary Fund, without specifically endorsing his target to provide up to $500 billion.
On the subject of executive salaries and bonuses at institutions receiving bailout funds, Geithner said he wanted to see “guidelines for the future” to better align corporate pay and risk. The Obama administration has not yet released specifics of how it will apply its new executive compensation limits along with new restrictions passed this year by Congress.
Separately, the U.S. Treasury ordered American International Group Inc., the insurer saved from collapse by taxpayer bailouts, to overhaul plans to give out multimillion- dollar bonuses and repay the government for some 2008 payments, according to a person briefed on the matter.
Geithner telephoned Chief Executive Officer Edward Liddy on March 11 to demand changes to AIG’s bonus payments, an administration official said separately. AIG was rescued by the government in September after its bets in the derivatives market threatened to bankrupt the insurer.
“To gauge interest…”
Hmmm… floating crap to see if it sticks. Guess what, it won’t. We have turned into a Wimpy debt riddled society always looking for the easy out.
Did you read that article? How many references to getting “credit” flowing? Credit = debt… more debt on top of already unserviceable debt is not a plan, it’s a disaster.
Does anybody else feel like a teenaged boy sitting in the back seat of a Chevy Camaro with the school’s most beautiful cheerleader who “promised” but can’t follow through when the time comes? I think there’s a term for that, and I think Geithner’s giving investors a serious case of “Blue balls.” The disappointment is, well, painful – not that I’d know first hand!
And all of the sudden Giethner is changing his tune with China? Sounds like that threat the other day worked.
Thank Goodness, though, that we’re finally doing something about AIG’s bonuses! We’re saved!
“I’ll gladly pay you Tuesday for a Hamburger today…”