Tags: bailout | congress | vote

Critics: New Bailout Lacks Oversight

By    |   Wednesday, 08 Apr 2009 11:18 AM

Treasury Secretary Timothy Geithner's Public-Private Investment Program for helping private investors buy toxic assets will increase economic risk, not lessen it, observers say.

The plan calls for the FDIC to insure 85 percent of the funds Treasury lends.

It effectively gives the insurance fund a blank check, making it a huge enabler of leverage and increasing risk for which taxpayers will ultimately pay.

Think TARP Two without a Congressional vote.

The FDIC considers the new obligations—which total more than $1 trillion as “contingent liabilities,” meaning what the fund expects it could lose.

“We project no losses,” FDIC head Sheila Bair told The New York Times.

“Nobody is paying any attention to how they’re pulling this off,” says a prominent securities lawyer who has done work for the government and asked not to be identified by name.

“They may not be breaking the letter of the law, but they’re sure disregarding its spirit.”

The fund’s own charter limits the its ability to borrow, guarantee or assume obligations to more than $30 billion, but a special provision allows it to take extraordinary steps when an “emergency determination by secretary of the Treasury” is made to mitigate “systemic risk.”

The Treasury Department is delaying the filing deadline for PPIC participation and loosening some of its guidelines for participation, Bloomberg reports.

The adjustments suggest that Treasury is open to including securities in the program other than the commercial and residential mortgage-backed products the plan was devised to buy.

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Treasury Secretary Timothy Geithner's Public-Private Investment Program for helping private investors buy toxic assets will increase economic risk, not lessen it, observers say.The plan calls for the FDIC to insure 85 percent of the funds Treasury lends.It effectively gives...
bailout,congress,vote
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2009-18-08
Wednesday, 08 Apr 2009 11:18 AM
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