September 18, 2008

OH, YEAH, REMEMBER HOW THE S&L CRISIS WAS GOING TO CAUSE A GREAT DEPRESSION...:

Return of the Resolution Trust Corp.?: Some powerful advocates are calling for a new agency to oversee debt restructuring (Jane Sasseen, 9/18/08, Business Week)

In the late 1980s, Washington created the Resolution Trust Corp. to restructure the mortgages held by 750 insolvent savings and loans. By selling off assets over time rather than in a fire sale, the RTC lessened the cost of the crisis to taxpayers. [...]

A new RTC would be a buyer of last resort. It might buy the mortgages and related debt from banks at a heavy discount or in exchange for equity. Or it could let troubled institutions go bust, then liquidate those assets in an orderly fashion. "Rather than seeing forced sales for 10 cents on the dollar, the government could take its time and get, say, 40 cents on the dollar," says Lawrence J. White, an economics professor at New York University.


MORE:
Citing Grave Financial Threats, Officials Ready Massive Rescue: Lawmakers Work With Fed, Treasury To Try to Restore The Flow of Money (Binyamin Appelbaum and Lori Montgomery, 9/19/08, Washington Post)

The Bush administration is urgently preparing a massive intervention to revive the U.S. financial system, including a plan to sweep away the unpaid loans that are choking banks and blocking the flow of money to borrowers.

Congressional leaders gave bipartisan support to the administration's efforts after a meeting last night with Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke.

Paulson and Bernanke presented a "chilling" picture of the state of the financial system, according to a participant in the meeting who spoke on condition of anonymity. Lawmakers were told that the consequences would be grave if they failed to pass legislation by the end of next week. Sen. Harry Reid (D-Nev.) and Rep. Nancy Pelosi (D-Calif.) committed to meeting that deadline.

The plan involves using hundreds of billions of dollars in government funding to buy bad loans, leaving banks with more money and fewer problems, according to two sources familiar with what was said at the meeting.

After the meeting, Paulson told reporters the proposal was "an expeditious solution that is aimed right at the heart of this problem."

Posted by Orrin Judd at September 18, 2008 8:19 PM
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