Legal Commentary

Finally Going to Get Tough On The Banks?

By Big Tent Democrat

For those, like Brad DeLong, who argue that the Geithner Plan is merely the first phase of the Obama Administration's plan on the financial crisis, this story should be encouraging:

As the Obama administration completes its examinations of the nation’s largest banks, industry executives are bracing for fights with the government over repayment of bailout money and forced sales of bad mortgages.

[More...]

Some of the healthier banks want to pay back their bailout loans to avoid executive pay and other restrictions that come with the money. But the banks are balking at the hefty premium they agreed to pay when they took the money. . . “This is a source of considerable consternation,” said Camden R. Fine, who attended the White House meeting as president of the Independent Community Bankers, a trade group of 5,000 mostly smaller institutions, many of which are complaining about the repayment requirements. Meanwhile, the Obama administration wants weaker banks to move more quickly to relieve their balance sheets of the toxic assets, the home loans and mortgage bonds that nobody wants to buy right now. But the banks are resisting because they would have to book big losses.

The pressure and criticism that the Geithner Plan has faced no doubt contributed to this statement from the President:

“You will be seeing additional actions by the administration,” Mr. Obama said after the meeting Friday, when the officials discussed the bank stress tests and the new $500 billion to $1 trillion plan that will use public subsidies to encourage private investors to buy mortgage assets.

What that "additional action" will be is critical:

The tension between the industry and the administration is rising as the government’s bailout fund is dwindling, putting the administration in a bind. It is all but certain to need to seek more money from Congress, which wants to see results from existing programs first.

The debate seems to be moving in a positive direction.

Speaking for me only

Full post as published by TalkLeft on April 11, 2009 (boomark / email).