Government to pass on buying troubled securities

Jim Kim — Wed, 12 Nov 2008 13:41:07 -0500

Not to gloat, but I have been suggesting for a while that the government might not go forward with its plans to buy up troubled securities--originally the centerpiece of bailout ambitions. The valuation issues were just too tricky. Now comes word that Henry Paulson has announced that the Treasury will, indeed, give up on those early plans, something I regard as a good move. The markets, however, didn't agree, at least initially. The only issue is that the bailout package was essentially sold to Congress and the public on the merits of such purchases. Obviously, the bailout efforts give Treasury some leeway; it made the right decision--this time. Meanwhile, Treasury is aiming to support various consumer credit markets, such as credit cards and auto loans. The issue is, how, if it's not going to buy such assets specifically? Interestingly, all this can be seen as tacit acknowledgment that the government could not prod banks to boost lending.

For more:
- here's an AP article
- here's more on the new direction from the New York Times

Related Articles:
Bailout news from FierceFinance

Are prime consumers the next big worry for banks?

Wed, 14 May 2008 06:59:56 -0400

We've spoken ad nauseum about the risks of subprime debts that have filtered through the financial system in many surprising ways. But a lot of prime borrowers have been silently struggling through this economic slowdown. Now there are signs that home equity credits will come under heavy pressure. Bank of America president of global consumer and small business banking, Liam McGee, said that consumers and small businesses are under pressure, according to the AP. The bank now expects losses in its home equity portfolio to increase soon. Projected losses will be higher than expected. Other banks are likely in the same boat. There's a whole host of consumer credit that also might be problematic--auto loans, for example.

For more:
- here's the AP article

Related Article:
Bank of America in sore need of capital