Oversight…
Quite rightly, Congress is reluctant to give the Bush Administration a “blank check”, like they did with the Iraq War. While time is of the essence, Congress and the Treasury have to “get it right”. This shouldn't be a bail-out. The banks are big boys and did some stupid things. They shouldn't be rewarded. Actually, maybe they should fail. But I don't think that the politicians (nor the economy) can accept that.
What shouldn’t be done:
Buy the bad loans at par.
Give the Treasury a free hand without congressional oversight.
What should be done:
Negotiate a deep discount for any loans or bonds that are purchased.
Require that the banks take responsibility for fraud and bad underwriting.
Have a requirement for them to take back certain loans.
Also, mergers need to be vetted carefully. We’re getting closer to the fabled “one bank” scenario.
Remember, even if this works, It's not going to turn the economy around immediately.
What shouldn’t be done:
Buy the bad loans at par.
Give the Treasury a free hand without congressional oversight.
What should be done:
Negotiate a deep discount for any loans or bonds that are purchased.
Require that the banks take responsibility for fraud and bad underwriting.
Have a requirement for them to take back certain loans.
Also, mergers need to be vetted carefully. We’re getting closer to the fabled “one bank” scenario.
Remember, even if this works, It's not going to turn the economy around immediately.
As they used to say on TV, "Stay tuned". It's going to be interesting.
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