Word: fdic
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...government will back a $306 billion pool of troubled loans and securities largely related to the foundering residential and commercial real estate markets. After Citi absorbs the first $29 billion in losses on these securities, the government - first the Treasury Department and then the Federal Deposit Insurance Corporation (FDIC) - will step in and bear 90% of any further losses. In return, the government gets up to $7 billion in preferred Citi stock and the right to buy more shares at $10.61 - not a bargain these days, with Citi trading in the single digits, but perhaps worth more down the road...
...Geithner also is known for speaking his mind, sometimes forcefully, behind the scenes. In one now famous fight with FDIC chief Sheila Bair the weekend of Oct. 12, 2008, he argued in blunt terms for the need to bolster banks with FDIC guarantees even as Bair was resisting details of a plan. His current job is due in part to his reputation for standing up to powerful people, says Sexton. "[Former Deputy Treasury Secretary] Larry Summers told us that Tim was one of the very few people who, when Larry got on a roll, would sometimes take him up short...
First came the financial sector. Bankruptcy has never really worked for banks, because mere rumors that a bank is headed for failure can drive it under. That's why Congress long ago created a separate regulatory system and reorganization process for banks, with the Fed and the fdic at the center. Over the past quarter-century, though, a "shadow banking system" of investment firms, hedge funds and derivatives dealers grew up that was subject to the same risks as banks but not the same rules. In September, Lehman Brothers, a major cog in this system, filed for Chapter...
More important than the battles between parties or among Democrats, though, are the disputes within the Republican Party. The nastiest fight has been over the program to restructure mortgages nationwide. On Oct. 30, staff from the Treasury Department met with staff from the FDIC to discuss a $50 billion plan to get banks to rewrite troubled loans to make them affordable for distressed homeowners. The FDIC side saw the Treasury's interest as a sign that the plan would be approved...
...Democrats contend that the White House is clamping down on Paulson's previous willingness to do big, expensive interventions. The Treasury Department declined to comment, but the senior official dismissed the talk of White House-Treasury battles as "stupid." Paulson may get grilled on the fight over the FDIC mortgage plan during his appearance before the House Banking Committee and chairman Frank...