Rescue bill’s revision seen as opportunity to recapitalize banks, refinance mortgages
Posted by: in HousingFiled under: International markets, Politics, Housing, Recession, Financial Crisis
With the U.S. Senate expected to debate and vote on a revised bailout/rescue bill in the next day or so (famous last words), two revisions the world’s greatest deliberative body should incorporate are bank recapitalization options and funding to refinance mortgages, economists say.
BloggingStocks’ Peter Cohan has written extensively on the need to recapitalize banks, and economist Richard Felson concurs. However, Felson argued that the revised rescue bill should give banks and other institutions the option of either offering their distressed/bad debts to the U.S. Treasury in its reverse auction or accepting a mutually agreeable investment by the U.S. Treasury into the institution.
Creating options for stressed banks
“This will give banks more options, and in my view more incentives to participate in the rescue plan. If the plan just contains asset purchase provisions some banks might balk at the prospect of selling some assets at a fire-sale price of 10 cents or 15 cents on the dollar, and that might prevent some distressed assets from being removed from the system, delaying the financial system’s recovery,” Felson stated. “Offering to buy a stake in the bank offers another recapitalization option.”
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