Word: credits
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...money that they did not need. He made sure that the taxpayers received preferred shares in the firms in exchange for the capital. After Paulson retired the new administration began testing the banks, knowing that, based on the criteria they had set, many of the firms would fail. The credit markets are harsh. The troubled banks would find it nearly impossible to raise capital from private equity sources. They would turn to the government. The government would convert its preferred shares to common shares to buttress the bank balance sheets. Suddenly, the taxpayers would own controlling interests in many...
There is always hope for more bad news and battles between the government and large banks that would bring the issues back to the front pages of the press. The losses from credit cards, commercial real estate, corporate loans, and derivatives may be substantially greater than the government could have ever imagined. Banks could face hundreds of billions of dollars in additional write-offs. The government and bankers did not see the crisis that is just passing coming. They almost certainly won't see the next...
...Photo Credit: Wikimedia Commons/Andre Engel...
Bernanke has proven himself to be a particularly talented public servant. He saw the credit crisis coming and adjusted the central bank's policies at a rate which was abnormally fast based on Fed history. He offered hundreds of millions of dollars of liquidity to banks that probably would have collapsed without it. He manhandled the people who got in his way, most recently Ken Lewis from Bank of America...
...credit bubbles, and there were other asset bubbles, too like Internet stocks...