Word: guaranteeeing
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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.
In late November, the government agreed in a deal struck over a weekend, to guarantee 90% of the losses on a pool of $300 billion in loans held by Citigroup. The government insurance was supposed to put the bank back on solid footing. At the time, a number of analysts...
Bank of America's shares have similarly traded down since it landed its own loan guarantee deal from the government. In that bank's deal, the government agreed to pick up nearly $100 billion in losses. That hasn't stopped the bleeding at Bank of America, either. Bank of America...
Nonetheless, the idea of new loan guarantees as the solution to fix the banking crisis appears to be gaining momentum in Washington and abroad. Earlier in the week, Treasury Secretary Timothy Geithner seemed to have struck a deal between the FDIC and the Federal Reserve to roll out a new...
But on Friday, reports surfaced that Geithner was thinking about shelving the bad bank approach for now, and just moving forward with the loan guarantee program. If it does, Washington officials would not be alone. Last week, Britain rolled out its own loan guarantee program as part of that country...