Banking Bailout Party: New Details Emerge

The New York Times has details about the new bailout plan Treasury Secretary Tim Geithner is scheduled to talk about later today. Here’s a rundown of what’s on the menu:

  • No “severe limits on executive pay for companies receiving government aid.”

  • Bank executives will stay, shareholders will not be wiped out.
  • There will be “a joint Treasury and Federal Reserve program, at an initial cost of $250 billion to $500 billion, to encourage investors to acquire soured mortgage-related assets from banks.” The FDIC might provide guarantees to investors.
  • A program run by the Federal Reserve to try to unfreeze the market for commercial, student, auto and credit card loans will be expanded from $200 billion to up to $1 trillion.
  • A review of the capital levels of all banks, including projections of future losses, to determine how much additional capital each bank should receive.
  • Next week, the New York Times says a separate $50 billion program to help homeowners facing foreclosure refinance into fixed rate loans will be announced.

The article says that the Treasury Secretary is at odds with top officials in the Obama Administration, who wanted tougher restrictions on executive pay among other concessions from banks.

There will be, however, restrictions on banks using bailout funds to acquire other banks, as well and restrictions on lobbying. The $500,000 pay cap is still in place, but applies only to very senior executives. Some argued that it should be extended to all employees of banks receiving funds.

Bloomberg also notes that TARP will be renamed:

Geithner will also give the $700 billion Troubled Asset Relief Program a new name: the Financial Stability Plan.

Whatever makes you feel better, we suppose.

Geithner Said to Have Prevailed on the Bailout [NYT]
(Photo:The Joy Of The Mundane)