This continues to be a bailout for bankers… The greedy speculators ought to be allowed to fail while the more prudent financial institutions ought to replace them.
Bernanke in his report:
Recognizing the critical importance of the provision of credit to businesses and households from financial institutions, the Congress passed the Emergency Economic Stabilization Act last fall. Under the authority granted by this act, the Treasury purchased preferred shares in a broad range of depository institutions to shore up their capital bases. During this period, the Federal Deposit Insurance Corporation (FDIC) introduced its Temporary Liquidity Guarantee Program, which expanded its guarantees of bank liabilities to include selected senior unsecured obligations and all non-interest-bearing transactions deposits. The Treasury–in concert with the Federal Reserve and the FDIC–provided packages of loans and guarantees to ensure the continued stability of Citigroup and Bank of America, two of the world’s largest banks. Over this period, governments in many foreign countries also announced plans to stabilize their financial institutions, including through large-scale capital injections, expansions of deposit insurance, and guarantees of some forms of bank debt.
In light of ongoing concerns over the health of financial institutions, the Secretary of the Treasury recently announced a plan for further actions. This plan includes four principal elements: First, a new capital assistance program will be established to ensure that banks have adequate buffers of high-quality capital, based on the results of comprehensive stress tests to be conducted by the financial regulators, including the Federal Reserve. Second is a public-private investment fund in which private capital will be leveraged with public funds to purchase legacy assets from financial institutions. Third, the Federal Reserve, using capital provided by the Treasury, plans to expand the size and scope of the TALF to include securities backed by commercial real estate loans and potentially other types of asset-backed securities as well. Fourth, the plan includes a range of measures to help prevent unnecessary foreclosures. Together, over time these initiatives should further stabilize our financial institutions and markets, improving confidence and helping to restore the flow of credit needed to promote economic recovery.
Paul nailed it when he said in his remarks: “credit is not capital”. This is a case of bankers looting America while tossing a few bribes here and there.
And if the banks were left with unsellable houses, the housing market would drop and the poor would then be able to buy or rent a house more easily. The ultimate loser in such a scenario? The bankers.
I sincerely believe … that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale.
How bad will the coming hyperinflation be?