A resolution, I trust
ALL that stuff about markets treading water? Forget about it. Indexes rose over 4% to end the day, making everyone feel good except the poor saps at Lehman who may end up being the only ones left without a bailout of their very own. Cheer up, guys! It could be worse! You could be living in a tent city.
The reason for the surge, it seems, is the suggestion that Hank Paulson and Ben Bernanke are pursuing what’s being called a more comprehensive solution to the crisis. It’s unclear what that solution might be, however. Many individuals have called for a new Resolution Trust Corporation or Home Owners’ Loan Corporation, the function of which would be to purchase troubled securities and mortgages from sinking firms in order to get all the junk out of the system at a stroke.
New York Democratic senator Chuck Schumer, who said he had spoken to Mssrs Paulson and Bernanke regarding the possibility of a broader solution, offered a different approach:
Schumer urged forming an agency to inject funds into financial companies in exchange for equity stakes and pledges to rewrite mortgages and make them more affordable. His remarks indicate momentum is building for some wider plan after the Fed and Treasury’s takeovers of Fannie Mae, Freddie Mac and American International Group Inc. this month.
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Agreement Reached On Bailout Bill » … RTC.” “Resolution Trust Corp. was established during the savings-and-loan crisis of …
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Things are starting to get interesting as the backroom maneuverings over the bailout bill … Merrill Lynch mortgage new home sales Obama oil option ARMs phoenix real estate Regulation RTC s&p …
Schumer advocated a Great Depression-era Reconstruction Finance Corp. model, different from the Resolution Trust Corp.- type plan others have floated. Another RTC, which was a 1990s agency that sold devalued assets in the Savings and Loan Crisis, would “simply transfer excessive risk to the U.S. government without addressing the plight of homeowners,” he said.
Housing Needs an RTC (Not a Bailout)
Friday, July 18, 2008 The fastest way to get policymak-ers to run for the door has been to mention the "B" word: bailout. Of course, nobody likes bailouts.
The difference being, it seems, whether the government takes ownership of the troubled securities themselves or of stakes in the companies holding them. It will be interesting to hear the logic behind that proposal. One thing is clear, as Felix Salmon points out:
What I do know is that all of the rumors and noise surrounding this story are going to keep a lot of reporters up very late tonight, despite the fact that most of them haven’t had a decent kip since Saturday.
That’s something I was thinking about earlier today. Can you imagine the amount of steam that’s going to be let off in Manhattan this weekend? The sheer scope of the likely debauchery is unimaginable. Almost makes me want to buy a train ticket. Perhaps our New York correspondents can provide coverage.
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