Word: banking
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...Regulators are split on what to do next. The Federal Deposit Insurance Corporation is backing a plan to create what it calls an aggregator bank, which would buy up the loans of BofA, Citigroup and the rest of our now troubled system, theoretically putting an end to the escalating losses eating away at the banks' capital. But if the government buys those assets at current market rates, banks would be forced to take immediate losses on the sales, doing more harm than if the government just left the troubled loans where they are. Sources say the Federal Reserve would prefer...
...people are starting to talk about nationalization. Speaker of the House Nancy Pelosi recently said nationalization, or something close to it, is a better solution than just buying bad assets, because if the government takeovers succeed, then taxpayers get to keep the profits when they eventually resell the banks. But if the government doesn't turn a nationalized bank around, it could be very costly to taxpayers...
...matter what happens, things have definitely changed for Lewis and other former titans of the banking business. A few months ago, BofA's CEO was hailed for running a bank so prosperous that it was able to swallow mortgage lender Countrywide Financial and investment bank Merrill Lynch in the depths of the worst banking crisis in recent history. The trade magazine American Banker named Lewis Banker of the Year in December. Now he's fighting to keep his job. And even if he succeeds, he's got a new partner. The government already has a large stake in his bank...
What do you when a bank rescue plan fails? You try it again...
Washington policy makers seemed to be moving closer to expanding loan guarantee programs, which have already been offered to Citigroup and Bank of America, to other banks. But in both those cases, the loan guarantee strategy seems to have produced few positive results...