Foreclosures Have Made Everybody Skeptical about the Health of the Banks
June 10th, 2009
Foreclosures for sale have made everybody skeptical about the health of the banks. But Treasury Secretary Timothy Geithner, just prior to the release of the important details that gauge the health of 19 big banks of the nations, said that most of them have enough capital. It suggested that there was no more need to pump money from tax payer’s funds to keep their blood line flowing.
Geithner did not elaborate in details about the bank rescue efforts since these have not been finalized as yet. Tough questions were posed by the Congressional Oversight Panel. This board had been created to keep track of the TARP fund distribution. It was created in 2008, amounting to $700 billion to bail out Wall Street giants.
Geithner admitted “significant declines in lending for consumer loans and for commercial and industrial loans” despite the efforts to bail out banks. Till now there has been no tangible impact on the economy.
While the treasury chief was testifying there were many demonstrators waving signs that read “Give us our $$$$$ back.” And “Where’s our money?” Elizabeth Warren of the panel did not block these out and allowed them to be televised during the long two hour session. Certain methods are being used to measure the tests. A report in this regard awaits early release.
It seems that the banking sector in general will get passing grades. The panel was primarily concerned about stress tests by which the regulators try to measure whether the big banks have sufficient capital to live up to the deepening economic crisis.
Geithner speaking to the panel said, “Currently, the vast majority of banks have more capital than they need to be considered well capitalized by their regulators.” He added that even if the economic situation took a turn for the worse the banks had the strength to stand up to it. The panel consisted of present and past legislators as well as many important public figures.
Those banks that have insufficient funds have to raise the capital within six months from the private sector. Otherwise the government would be compelled to step in by taking over a stake in the ownership. It is apprehended that it will not be long before this happens because the investors can deduce from the comments of the heads of the banks that are the tottering.
The Treasury is in a fix. If they disclose the results of individual banks it would threaten the safety and soundness of that bank but if the Treasury remains silent then it will be charged for hiding the truth!
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June 30th, 2009 at 10:10 am
[...] market when property values are rapidly falling there is logic in allowing for short sales or even foreclosures for sale. Both short sales agreement and foreclosures mean going away from the house without [...]