Obama Has No Quick Fix for Banks
By EDMUND L. ANDREWS
NYT
WASHINGTON —Even before they have settled into their new jobs, President Obama’s economic team faces an acute crisis in the nation’s banking system that has no easy answers and that they are not yet prepared to address.
The president’s advisers watched most banking shares fall sharply on Tuesday, reinforcing what Obama officials have known for weeks: that their most urgent financial problem is an immense new wave of losses at banks and other lending institutions that threatens to further cripple their ability to resume normal lending.
But when Timothy F. Geithner, the president’s nominee to be the Treasury secretary, appears before the Senate Finance Committee on Wednesday for his confirmation hearing, he is not expected to have a detailed plan ready.
While Mr. Obama’s top advisers view the black hole in bank balance sheets as one of their most pressing problems, they cautioned that they would not be pressured into announcing a plan before they had carefully thought through all the options. Instead, they are scrutinizing an array of solutions, each of which has pitfalls and poses its own risks and dangers.
Obama officials are almost certain to intertwine help to the banks with Mr. Obama’s goal of providing up to $100 billion for reducing home foreclosures. The two goals are not necessarily in conflict. Subsidizing loan modifications so that people can keep their homes could relieve banks of the steep losses associated with foreclosures and also prevent further erosions in bank asset values by putting a floor under home prices. “Mortgages are still the underlying problem, and I really think we need to address that problem head-on,” said Christopher Mayer, vice dean at the Columbia University School of Business. “The foreclosure stuff is just trying not to have even bigger losses in mortgages than we have so far.”
(More here.)
NYT
WASHINGTON —Even before they have settled into their new jobs, President Obama’s economic team faces an acute crisis in the nation’s banking system that has no easy answers and that they are not yet prepared to address.
The president’s advisers watched most banking shares fall sharply on Tuesday, reinforcing what Obama officials have known for weeks: that their most urgent financial problem is an immense new wave of losses at banks and other lending institutions that threatens to further cripple their ability to resume normal lending.
But when Timothy F. Geithner, the president’s nominee to be the Treasury secretary, appears before the Senate Finance Committee on Wednesday for his confirmation hearing, he is not expected to have a detailed plan ready.
While Mr. Obama’s top advisers view the black hole in bank balance sheets as one of their most pressing problems, they cautioned that they would not be pressured into announcing a plan before they had carefully thought through all the options. Instead, they are scrutinizing an array of solutions, each of which has pitfalls and poses its own risks and dangers.
Obama officials are almost certain to intertwine help to the banks with Mr. Obama’s goal of providing up to $100 billion for reducing home foreclosures. The two goals are not necessarily in conflict. Subsidizing loan modifications so that people can keep their homes could relieve banks of the steep losses associated with foreclosures and also prevent further erosions in bank asset values by putting a floor under home prices. “Mortgages are still the underlying problem, and I really think we need to address that problem head-on,” said Christopher Mayer, vice dean at the Columbia University School of Business. “The foreclosure stuff is just trying not to have even bigger losses in mortgages than we have so far.”
(More here.)
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