Word: paulson
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Dates: during 2000-2009
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...turnaround? It comes down to this: Banks need money. The U.S. government has it. Or can print it. So in addition to the end-around plans to buy mortgage securities and other toxic assets that Paulson and Fed Reserve Chairman Ben Bernanke have been devising, why not go with a more direct approach...
...press conference on Wednesday, Paulson suggested that he was about to expand his tool kit. "It is the policy of the Federal Government to use all resources at its disposal to make our financial system stronger," he said. "We will use all of the tools we've been given to maximum effectiveness, including strengthening the capitalization of financial institutions of every size." Put another way, a senior Administration official says, the $700 billion is "for everyone; it's for everything: buying assets, insuring assets or purchasing equity, the biggest to smallest...
Lending remains absolutely frozen right now, as banks are too frightened to lend to each other - let alone businesses and municipalities, since they're worried about who could go under next. The initial market reaction to Paulson's speech was something on the order of: "Holy [expletive deleted], we must really be in trouble." The market cratered when it heard on Wednesday, losing nearly 190 points on the Dow after trading in the black for most of the day. It tanked again on Thursday...
...hammer was supposed to be the famous $700 billion bailout bill that Congress signed last week, in which Paulson and Co. were given wide berth to do what they needed to ease the financial panic that all but froze credit markets. Much of the discussion, and the planning, has revolved around how the government would buy up the toxic securities such as CDOs (collateralized debt obligations) that are now poisoning bank balance sheets. The thinking has been that once financial institutions can unload this trash on the government, the gears of commerce will move again. But that takes time...
Directly investing in the banks allows Paulson to get the money to where it is needed the fastest, which would then allow well-capitalized banks to loosen the strings of lending. Nationalization? Not quite. Under such a plan, the U.S. would become a shareholder in banks, taking stock in exchange for the capital injection. The government would essentially become a passive investor. It wouldn't take any board seats, and it wouldn't actively seek to influence how the banks were being run. It doesn't have to; Treasury has regulatory control over the banking system anyway. Harvey has proposed...