Word: trillion
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...next month or so. But that wasn't soon enough for worried investors or for Fed Chairman Ben Bernanke, who according to inside reports had been advocating for a recapitalization for months. Money flowed out of the stock market, including that of many large hedge funds. Some $2 trillion in market value disappeared in a week. "It was tunnel vision," says Republican Congressman Spencer Bachus, ranking member of the House Committee on Financial Services. At a meeting at the White House on Sept. 25, Bachus says, he and others brought up the need for alternative approaches. "The President said, 'Paulson...
...what finally forced Paulson's hand? Pressure mounted from abroad when Ireland, the U.K., France and Germany moved almost sequentially to insure deposits and recapitalize banks--nearly $3 trillion worth. For the Treasury to fail to match that offer would have risked a capital flight by institutional depositors that could have started emptying U.S. banks...
...FDIC, has become the voice of ordinary passbook holders. Bair was front and center with Treasury Secretary Hank Paulson and Fed boss Ben Bernanke when they announced plans to recapitalize the U.S. banking industry. But the three aren't always in perfect alignment. As guarantor of Americans' $4.5 trillion in deposits spread around in some 8,500 U.S. banks, Bair is trying to balance both the needs of depositors like the storied Mrs. Lobsiger and those of big-name players like Citigroup who help generate much of the economy's torque...
...agency is taking on. The new rescue plan requires the FDIC to guarantee not just the new lending by banks but also unlimited deposits in special accounts used primarily by small businesses for things like payroll. Little wonder Bair is cautious: the new program is expected to cover $1.9 trillion, a stunning 42% increase in total FDIC guarantees. In a worst case, widespread losses under the new program would be covered by a special assessment on participating banks...
...less safe by comparison. So Fannie and Freddie's investors have to be compensated for the increased risk. In particular, traders say, the move in the past week by the Federal Deposit Insurance Corp. to temporary offer unlimited deposit insurance for non-interest bearing accounts and guarantee roughly $1.4 trillion in new unsecured bank debt has caused a rush of selling of the bonds of Fannie and Freddie. That's because the FDIC's move makes bank debt more attractive at a time when traders are looking for safety. Sheila Bair, the head of the FDIC, was initially against backing...