Thursday, October 16, 2008

Robert Weissman & FDIC Chairperson on problems with current efforts to defuse the economic crisis

October 15, 2008
Public Ownership, But No Public Control
The Partial Nationalization of US Banks

But the Treasury proposal specifies that the government shares in the banks will be non-voting. And there appear to be only the most minimal requirements imposed on participating banks.

So, the government may be obtaining a modest ownership stake in the banks, but no control over their operations.

The banks reportedly will not be able to increase dividends, but will be able to maintain them at current levels. Really? The banks are bleeding hundreds of billions of dollars -- with more to come -- and they are taking money out to pay shareholders? The banks are not obligated to lend with the money they are getting. The banks are not obligated to re-negotiate mortgage terms with borrowers -- even though a staggering one in six homeowners owe more than the value of their homes.

"The government's role will be limited and temporary," President Bush said in announcing today's package. "These measures are not intended to take over the free market, but to preserve it."

But it makes no sense to talk about the free market in such circumstances. And these measures are almost certain to be followed by more in the financial sector -- not to mention the rest of economy -- because the banks still have huge and growing losses for which they have not accounted.

OCTOBER 16, 2008

FDIC Chief Raps Rescue for Helping Banks Over Homeowners


WASHINGTON -- Federal Deposit Insurance Corp. Chairman Sheila Bair on Wednesday criticized the federal government for failing to take more aggressive steps to prevent Americans from losing their homes, highlighting a rift between her and other senior U.S. officials over terms of the $700 billion rescue package.

The government plan will help stabilize financial markets but it doesn't do enough to address home foreclosures, the root of the crisis, she said in an interview with The Wall Street Journal.

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