Tag Archives: IMF

Geithner Hints at High Bar In Letting Banks Repay Aid – washingtonpost.com

Geithner Hints at High Bar In Letting Banks Repay Aid – washingtonpost.com.

So, I guess, if the banks don’t start lending to revive the economy they won’t be allowed to repay their loans. Let’s see how this turns out.

By David Cho

Washington Post Staff Writer
Wednesday, April 22, 2009


Treasury Secretary Timothy F. Geithner said yesterday that the “ultimate test” for determining which banks can repay government bailout money is whether the entire financial system is capable of offering enough credit to revive the economy.

Geithner’s remarks indicate that regulators will require banks to meet high standards to get out from under the government’s thumb. Industry and federal officials are bracing for a showdown over this issue beginning Friday when the chief financial officers of 19 of the nation’s major banks will be summoned to the Federal Reserve and told the results of the government’s “stress tests.”

This federal initiative is examining whether the firms have enough capital to continue lending if the economy significantly worsens. Senior administration officials say the tests may show that some banks need to raise more money or take additional government aid.

But the banks say federal bailout money, which requires firms to restrict executive pay and submit to other limits, now carries a stigma. Several of the firms, such as J.P. Morgan Chase and Goldman Sachs, have been lobbying the government to be released from the bailout and have taken steps to repay the money.

Geithner said his primary responsibility is to consider the well-being of the entire financial system, rather than the health of individual companies. The federal government can reject requests from banks that want to repay the money.

“The critical thing we care about is whether the system, as a whole, is in a position where it has the capacity to support the credit that recovery requires,” he said, making his first appearance before a congressional oversight panel on the government’s financial-rescue program. “That’s the ultimate test.”

Geithner added that he sees signs of “thawing” in the credit markets and that most banks have more capital than they need. Some market analysts said those comments sparked yesterday’s rally in stocks, which had been trading in negative territory before the hearing began. The Dow Jones industrial average ended the day 1.6 percent higher, while the Standard and Poor’s 500-stock index, a broader measure, jumped 2.1 percent.

“Currently, the vast majority of banks have more capital than they need to be considered well capitalized by their regulators,” Geithner said in his testimony.

Still, even among the positive signs, there are “significant declines” in commercial lending and some consumer loans, such as credit cards, and the cost of borrowing money remains high, he said.

Highlighting these continuing risks to the financial system, the International Monetary Fund yesterday predicted that U.S. financial institutions could lose $2.7 trillion by the time the global credit crisis ends.

Geithner added that the stress tests are looking at not just the overall level of capital, but the type of capital on banks’ balance sheets. Of particular concern is whether banks have enough “tangible common equity,” a kind of capital that can be raised by selling more stock. These funds are the best cushion for cash-strapped banks in crisis.

In a letter to the oversight panel’s chairwoman, Elizabeth Warren, Geithner said that $109.6 billion remains in bailout funds. The Treasury Department has conservatively estimated that firms will repay another $25 billion in the short term. J.P. Morgan and Goldman Sachs combined have received $35 billion in bailout funds.

Some federal officials have said that the government needs such repayments in order to have enough financial firepower to see the nation through the crisis.

“We would welcome it,” Geithner said of the repayments. “It helps show progress, it helps underscore the basic points that the institutions of our financial system are in very different circumstances.”

But he warned that “the basic objective that’s guiding what we do is to make sure the system is working as a whole.”

A Lifeline for Nations Both Rich and Poor – washingtonpost.com

1.1 trillion is a drop in the bucket compared to the 3.5 trillion dollar budget just passed by the US congress when you think that 1.1 trillion is to be distributed worldwide. What are the countries that accept this money going to have to give up in order to use this money?


By Anthony Faiola and Mary Jordan

Washington Post Staff Writers

Friday, April 3, 2009

LONDON, April 2 — The $1.1 trillion pledged by world leaders to combat the worst economic crisis since World War II effectively amounts to a rescue package for both poor and rich countries, potentially including the United States.

The bulk of that money will be channeled through the Washington-based International Monetary Fund, which emerges from the summit with a vastly redefined and enhanced mission. The IMF has long focused almost exclusively on helping developing nations in crisis. As part of Thursday’s agreement, it will take the extraordinary step of effectively extending a $250 billion line of credit to boost liquidity in nations hobbled by the credit crunch, with the bulk of the funds going to the industrialized nations of Europe, United States and Japan.

The fact that the United States, for instance, could draw as much as $42.5 billion of those funds to help jump-start domestic lending underscores the breadth of the global plan, which has both short- and long-term fixes for a crisis that has hit nations small and large, wealthy and not.

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via A Lifeline for Nations Both Rich and Poor – washingtonpost.com.

Toxic Bank Assets Plan Delayed Again

By: Ron Haruni   Friday, March 20, 2009 1:04 AM

Government sources tell Time Magazine – the Administration’s long-awaited plan to save America’s banks is being delayed ‘again’. Apparently, the cause of this latest delay consists in the Treasury Department’s difficulties, or should we say – inabilities at this point, to create a proposal on financial reform that will help banks clean up toxic assets from their balance sheets through a partnership between private investors and the feds.

Administration officials are urging patience and insist they are moving faster than anyone has tried to do before. However, the reality is – the Department’s version of the plan, initially introduced by Secretary Geithner in mid February, has faced challenges from the start and more importantly – so far it has gone nowhere, at a time when urgency is imperative and needed to bolster the financial system.

Geithner, notes the Time has been burdened by thin staffing as he tries to get nominees to the Senate who can pass muster. But let’s face it. That’s not really an objective excuse for someone in charge of such an important department at such a critical time with the U.S. economy confronting its toughest financial crisis in the last seven decades. Geithner’s responsibility is not to delay ; his obligation is to give a detailed plan in clear terms of how we are to proceed. Something he keeps failing to produce. The slip(s) is embarrassing for Treasury officials who have been assuring the media and the markets that the plan was coming. We simply can not continue to respond to market pressures for recapitalization without a specific, well-defined and coherent restructuring or rehabilitation program.

But then again, Geithner’s disappointments didn’t just start with his tax problems. They continued with his incomplete Feb. 10 proposal intended to relieve banks of their toxic assets and was heavily criticized for not providing a detailed plan in clear terms or explaining for that matter, how the program would work. As recently as March 14, Geithner again told Bloomberg TV he would release details of his plan soon, adding the Treasury already is well on its way to starting “a dramatic lending program to help securities markets get flowing again.” Further complicating the matters, besides the latest delay and the uproar over AIG an their bonus structure, is now the International Monetary Fund’s [IMF] latest report – released Thursday (3/19).

The IMF said in the report, prepared for a meeting earlier this month of finance ministers from the Group of 20 nations: “Geithner’s plan to fix the financial system lacks “essential details”…Critical details concerning the valuation of distressed assets remain unclear…The plan also does not address how severely undercapitalized or insolvent banks will be resolved or clarify the

via Toxic Bank Assets Plan Delayed Again.

The Money Masters – How International Bankers Gained Control of America

This is long but informative.

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