Bad bank loan private investment program for banks might stall

May 27, 2009 by · Leave a Comment
Filed under: Policy News 

This program is not fair for the U.S. taxpayers and I agree that it is not needed.  Our financial companies need to realize the true value of the assets on their books so that the gains or losses can be accounted for.  It is funny how this process is taking so long even the accounting rule changes that have happened in the last few months.  Having the government step back and let the market work is the only thing that will be back true confidence and trust in the markets.

News (Wall Street Journal):

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 reticence 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.

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