Tags: treasury

Foreign Banks Will Get Treasury Support Too

Monday, 22 Sep 2008 03:56 PM

It looks like foreign banks, which were initially excluded from Treasury Secretary Henry Paulson's bailout proposal, will be able to sell the toxic American mortgage debt owned by their American units to the Treasury and wind up getting the same treatment as U.S.banks.

"It's a distinction without a difference whether it's a foreign or a U.S. one," Paulson told Fox News.

Though millions of American citizens hold accounts in foreign banks with offices in the U.S., a number of U.S. legislators are worried that including foreign institutions may add to the pain of what could ultimately turn out to be a trillion-dollar bailout for Wall Street.

"I'm skeptical of the bailout, the whole bill is only a couple of pages long," New Jersey Republican Congressman Scott Garrett, a member of the House Financial Services Committee, told The New York Times.

"I have a concern with it (including foreign banks that) probably should be treated differently, but Congress is really not getting any say."

A second foreign bank problem looms on the horizon: A $111 billion backlog of bonds that must be refinanced over the next year threatens to increase the number of foreign bank defaults.

The bulk of the emerging debt due, $59 billion, is from banks and financial groups.

Because the global credit crisis severely hampers banks' ability to raise funds, emerging market banks and companies could struggle to roll over the maturing debt.

"Many corporates and banks in the emerging markets are highly levered without cash to fall back on," says David Spegel, global head of emerging markets strategy at ING.

"These will struggle should they need to raise money in the markets," he says.

Analysts say the outlook is better for banks in cash-rich economies like Brazil and Chile, where still-high commodity prices offer a means of acquiring needed funds.

In comparison, countries like Russia and Kazakhstan both accumulated much of their debt prior to the credit crunch.

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It looks like foreign banks, which were initially excluded from Treasury Secretary Henry Paulson's bailout proposal, will be able to sell the toxic American mortgage debt owned by their American units to the Treasury and wind up getting the same treatment as U.S.banks."It's...
treasury
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2008-56-22
Monday, 22 Sep 2008 03:56 PM
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