Alexa
  • Directory of Taiwan

New bank plan light on specifics; observers wary

 Traders work in a booth on the floor of the New York Stock Exchange as Treasury Secretary Timothy Geithner is seen on a television screens in backgro...
 Treasury Secretary Tim Geithner arrives on Capitol Hill in Washington, Tuesday, Feb. 10, 2009, to testify before the Senate Banking Committee. (AP Ph...
 Treasury Secretary Timothy Geithner  stands tight lipped during a news conference detailing the administrations plans for the economic recovery, Tues...

APTOPIX Bailout Plan Wall Street

Traders work in a booth on the floor of the New York Stock Exchange as Treasury Secretary Timothy Geithner is seen on a television screens in backgro...

Obama Economy

Treasury Secretary Tim Geithner arrives on Capitol Hill in Washington, Tuesday, Feb. 10, 2009, to testify before the Senate Banking Committee. (AP Ph...

APTOPIX Obama Economy

Treasury Secretary Timothy Geithner stands tight lipped during a news conference detailing the administrations plans for the economic recovery, Tues...

To critics, the Obama administration's new bank rescue plan raised more questions than it answered. But for many industry groups, the proposal was cause for celebration.
The split response came after the Treasury Department outlined how regulators will try to prop up the limping financial industry. The idea is to create a public-private partnership to buy troubled assets, expand a plan to boost consumer and business lending and impose stricter accountability on the banking industry.
Industry groups heaped praise on the proposal, which Treasury Secretary Timothy Geithner unveiled in a speech Tuesday.
"We are encouraged by the creative and wide-reaching suite of programs outlined today," Tim Ryan, chief executive of the Securities Industry and Financial Markets Association, said in a statement that endorsed each point of Geithner's plan.
"It's big, it's bold, it's tailored, it's targeted," crowed Scott Talbott, a lobbyist with the Financial Services Roundtable.
But lawmakers and other experts worried that a lack of specificity about most aspects of the program would defeat its goal of bolstering capital markets, encouraging lending and getting investors to buy up the bad assets gumming up banks' balance sheets.
Details are lacking on how private companies would be induced to participate, what would happen to banks that perform poorly on a mandatory new "stress test" by regulators and how a new oversight body would be composed. So it's impossible to evaluate whether the program will benefit the banks, the economy or both.
"This is a nice look from 50,000 feet, but we need more meat on the bone," said Robert Schwartz, a lawyer with Smith, Gambrell & Russell whose clients include community banks. "In terms of me calling up my financial institution clients and explaining what this all means, I'm unable to do that."
Treasury may have been reluctant to unveil specifics because it's not politically feasible to ask Congress for more money beyond the original $700 billion banking bailout, suggested Vincent Reinhart, a former monetary economist with the Federal Reserve and scholar at the American Enterprise Institute.
"What they did was effectively to rely on off-balance-sheet entities," Reinhart said. "The idea is, 'Sure, it's an obligation of government, but it's a deferred one.'"
Like Talbott and Schwartz, Reinhart said he could not tell from Tuesday's announcements what would happen to banks whose performance on the new "stress tests" fell short.
He compared the announcement to former Treasury Secretary Henry Paulson's lurching implementation of the first round of bailout spending. Paulson's approach was roundly criticized for its frequent revisions and reversals.
"The Bush administration's failure was adding uncertainty to an environment where there was already a lot of uncertainty," Reinhart said. The plans announced Tuesday, he said, "didn't provide closure; it created an additional source of uncertainty."
The lack of detail could put off any resolution of the financial crisis, said Simon Johnson, an economics professor at MIT and former chief economist at the International Monetary Fund.
"It's a banking fiasco, and we know how to deal with banking fiascoes," Johnson said, referring to the Federal Deposit Insurance Corp.'s experience in taking over failing banks and selling off their assets.
But Geithner's plan doesn't take the necessary steps, Johnson said. Geithner "didn't tell us exactly" what he's going to do, Johnson said, adding, "When they tell you their basic principles, you're really in trouble."
Johnson noted that the Treasury Department said it will take public comments on its plan. But he said, "the comments will be much more carefully articulated by the lobbyists" than by the general public.
Billionaire investor Wilbur Ross, a private equity investor through his firm WL Ross & Co., said he remains interested in participating in the Treasury plan, though he's awaiting the release of more details. He said he expects stakeholders will be invited to weigh in on the program's structure.
"As in any complex financial transaction, the key thing is the details, not just the broad outline," Ross said. "I think it was a good start in the sense that finally the government is acknowledging that something really massive is needed."
___
AP Business Writer Christopher S. Rugaber contributed to this report.


Updated : 2021-10-19 01:30 GMT+08:00