Bank Crisis Will Take Billions More To Fix
Republican presidential candidate, former Massachusetts Gov. Mitt Romney gestures during a campaign stop at Southwest Office Systems, Tuesday, June 5, 2012, in Fort Worth, Texas. / AP Photo/Evan Vucci
A top economic adviser to President Barack Obama said Wednesday that the financial wounds at the center of the economic downturn will require "lots more billions of dollars" to mend.
"It's going to cost more money to deal with this financial crisis," Paul Volcker, chairman of the president's Economic Recovery Advisory Board, told members of the Senate banking committee. "It's going to be lots more billions of dollars."
Volcker said he could not affix a figure to the cost of helping financial institutions free themselves from suffocating bad assets that have locked up credit.
Earlier, Treasury Secretary Timothy Geithner said the government will have to do "substantially more" to address the crisis.
The blunt predictions came as the administration was preparing to unveil a new framework for how to assist banks and other financial institutions with the unspent money in a $700 billion financial rescue fund. Geithner is scheduled to announce the new approaches in a speech next week.
The Obama administration said Wednesday it would impose limits on executive pay at companies receiving bailout money.
Separately, Mr. Obama warned that the recession will turn into a "catastrophe" if Congress doesn't pass an economic stimulus package quickly.
Lawmakers, faced with public antipathy to the Wall Street bailout, have cautioned the administration not to seek more money.
The administration has not yet tipped its hand. But its options include direct capital infusions into banks, guarantees against losses on bad assets and a "bad bank" to buy distressed assets.
Citigroup Inc.and Bank of America provide an example of how the administration could proceed. Both banks received what the administration has called "exceptional assistance" that included taxpayer money from the Troubled Asset Relief Program as well as guarantees against losses provided by the Federal Reserve Bank and the Federal Deposit Insurance Corp.
By using the Fed and the FDIC, the administration did not have to ask Congress for extra money.
Last month, the Senate reluctantly agreed to let Obama have the $350 billion left in the bailout fund. The House, in a symbolic step, voted against releasing the money. But Obama needed only one chamber to side with him to get access to the funds.
Since then, key Democrats such as Senate banking committee chairman Christopher Dodd of Connecticut and Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee, have warned the administration that Congress is in no mood to give it more.
"Until they are successful in showing the average American that the money is being used reasonably, there's no point in asking for it, because they won't get it," Frank said Tuesday.
Other lawmakers have urged Obama's economic team to deal with bad financial assets by guaranteeing them against losses instead of buying them outright.
This week, Sen. Charles Schumer, D-N.Y., a member of the Senate Banking Committee with close ties to Wall Street, warned that the idea of a "bad bank" that would purchase toxic assets would be too expensive and the government would have a difficult time setting a value on the assets.
© 2009 CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report. "It's going to cost more money to deal with this financial crisis," Paul Volcker, chairman of the president's Economic Recovery Advisory Board, told members of the Senate banking committee. "It's going to be lots more billions of dollars."
Volcker said he could not affix a figure to the cost of helping financial institutions free themselves from suffocating bad assets that have locked up credit.
Earlier, Treasury Secretary Timothy Geithner said the government will have to do "substantially more" to address the crisis.
The blunt predictions came as the administration was preparing to unveil a new framework for how to assist banks and other financial institutions with the unspent money in a $700 billion financial rescue fund. Geithner is scheduled to announce the new approaches in a speech next week.
The Obama administration said Wednesday it would impose limits on executive pay at companies receiving bailout money.
Separately, Mr. Obama warned that the recession will turn into a "catastrophe" if Congress doesn't pass an economic stimulus package quickly.
Lawmakers, faced with public antipathy to the Wall Street bailout, have cautioned the administration not to seek more money.
The administration has not yet tipped its hand. But its options include direct capital infusions into banks, guarantees against losses on bad assets and a "bad bank" to buy distressed assets.
Citigroup Inc.and Bank of America provide an example of how the administration could proceed. Both banks received what the administration has called "exceptional assistance" that included taxpayer money from the Troubled Asset Relief Program as well as guarantees against losses provided by the Federal Reserve Bank and the Federal Deposit Insurance Corp.
By using the Fed and the FDIC, the administration did not have to ask Congress for extra money.
Last month, the Senate reluctantly agreed to let Obama have the $350 billion left in the bailout fund. The House, in a symbolic step, voted against releasing the money. But Obama needed only one chamber to side with him to get access to the funds.
Since then, key Democrats such as Senate banking committee chairman Christopher Dodd of Connecticut and Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee, have warned the administration that Congress is in no mood to give it more.
"Until they are successful in showing the average American that the money is being used reasonably, there's no point in asking for it, because they won't get it," Frank said Tuesday.
Other lawmakers have urged Obama's economic team to deal with bad financial assets by guaranteeing them against losses instead of buying them outright.
This week, Sen. Charles Schumer, D-N.Y., a member of the Senate Banking Committee with close ties to Wall Street, warned that the idea of a "bad bank" that would purchase toxic assets would be too expensive and the government would have a difficult time setting a value on the assets.
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Posted by rudedogrulz
Big difference here...they need their profits for exploration and alternative means of fuel...discovery...equipment...they actually sink a giant portion right back into the business. Does that mean all the execs live in poverty. No...they enjoy above average lifestyles when they aren''t working. Banking is different...it''s all schemes and ways to get what the working man tries, without success, to keep. You don''t have to drive. You don''t have to drive gas guzzlers. You don''t have to keep the thermostat at a comfortable 70 degrees. There are other ways to live without oil...business is tied to banking. And banking has taken extortion to a new level.
The best way to get money in the bank is to provide incentives for depositors to put it their for theirselves.
The Obama tax cut was a good start, but the poorest debtors with jobs, need the greatest incentive in place to repay debt and become long term investors.
The best start is with Investment Education for the earners making less than $75,000 a year. A worker making $10,000 has a lot in common with one making 5-7 times their wages if the percentage of debt to earnings ratio is the same....and since credit was over generous to the lowest wage earners, the ratio is actually comparable. If you want to help the bank, the debtors to those banks need to see the benefit and incentives, not the lenders. A reward that lowers the interest rates and accelerates repayment fast enough for a debtor to be a depositor, will be the best medicine for the economy. Every debtor will have their personal stake in the economic recovery for theirself and the nation....if the incentive is there. Without incentives, debtors will just feel like slaves to the banks who trapped them.
The government cannot bailout the over $60 TRILLION in derivatives. The government is going to have to decide to save itself at some point.
The government needs to concentrate on protecting the individual citizen as much as possible throughout the rest of the Great Depression II. For the people by the people.....
Posted by the_2258 at 11:36 PM : Feb 04, 2009
YOU think this meltdown is because "People didn''t live within their means"? LOL This MELTDOWN is because we had an INCOMPETENT LEADER who wanted EVERY over site taken off Lenders AND a Congress who saw NO need in Regulations. The OVER SITE and the REGULATIONS were there FOR A REASON... Guess what? THE EXACT SAME REASON we''re living with NOW.
Posted by hunterdon6 at 05:16 AM : Feb 05, 2009
Like my Dad used to tell me, "deserve has nothing to do with it"! It''s easy to sit on the sidelines and say let them fail but when you must be responsible for what happens when they do fail, the massive economic failure for the nation and the world? Well that''s a much bigger problems huh?
---
Add this debacle to the cost of Iraq and it''s obvious that generations of Americans will be paying trillions for having had a president who wasn''t worth two cents.
Nothing was done with that money to fix the problem, it''s like we''re still in the same place after giving them that money...
What a joke...