Plan to Buy Bad Loans Founders

[steven johnson]

Source: Wall Street Journal

MAY 28, 2009

By DAMIAN PALETTA and DEBORAH SOLOMON
WASHINGTON -- A government program designed to rid banks of bad loans, part of a broader effort once viewed as central to tackling the financial crisis, is stalling and may soon be put on hold, according to people familiar with the matter.


The Legacy Loans Program, being crafted by the Federal Deposit Insurance Corp., is part of the $1 trillion Public Private Investment Program the Obama administration announced in March as a way to encourage banks to sell securities and loans weighing on their balance sheets to willing investors.

But prospective buyers and sellers have expressed reluctance to the FDIC about participating for fear the program's rules will change in a political atmosphere hostile to Wall Street. In addition, some banks that might have sold troubled loans into the program earlier in the year have become less eager as they regained a sense of stability.

PPIP was to be split between the FDIC program, which would buy whole loans, and one run by the Treasury Department focusing on securities. Treasury is expected to push ahead with its plan -- the larger and more substantial of the two -- and could begin purchases sometime this summer. But the size of that program could be smaller than initially envisioned, government officials say.
The scaling back of the FDIC program is potentially good and bad news for investors, indicating that the health of the financial system -- while improving -- remains fragile.

Government officials are still concerned about distressed assets, including residential and commercial real-estate loans, which continue to rot banks' capital. FDIC officials said Wednesday some losses had not yet peaked and government officials believe banks still hadn't fully recognized the value of some distressed assets on their balance sheet.


Read more: http://online.wsj.com/article/.SB124346787723260427.html?

[knowbody0]

1. soon we will all qualify for section 8 housing

I would love to see the mcMansions leased out

[DJ13]

2. Im calling bullshit.

"But prospective buyers and sellers have expressed reticence to the FDIC about participating for fear the program's rules will change in a political atmosphere hostile to Wall Street."



More like the banks were upset that FDIC chief Sheila Bair told the bankers earlier today that they couldnt buy their own toxic assets, and they're pitching a childish fit.

Seriously, if the administration would stop coddling these bastards and tell them the possibility of nationalization still exists they would cease playing games to maximize their bottom lines at taxpayers expense and this crisis would be over a lot sooner.

[PSPS]

3. You've got that right

The way U-bama and his cronies gamed this scheme, the banks would be able to buy their own worthless crap, conveniently now allowed to be "marked-to-fantasy," at 15% of this made-up value, safe in the knowledge that U-bama would just shovel the other 85% to them from our taxes.

[depakid]

5. "in a political atmosphere hostile to Wall Street."

Haven't seen much of that from the Senate or the administration.

[Vidar]

4. Good. If anyone deserves bankruptcy, it's the predatory banks.

[pam4water]

6. Dang the article is gone now. Is this the big plan that was roll out with a lot of fan fair last mot

were the government would back the sales of those assets with a guarantee and had some relation to the remaining TRAP money.

I love these guys who screwed everything up but want no consequences.

[DLnyc]

7. Some bad ships are better off foundering than trying to sail.

At least the conscripts can row to shore.