by Calculated Risk on 10/20/2009 10:18:00 PM
Tuesday, October 20, 2009
Summary and Too Small To Fail?
A couple of interesting articles and a daily summary ...
The ABA and other bank lobby groups for small banks are seeking to have Treasury develop a program to provide TARP funds to small stressed banks -- those with less than $5 billion in assets -- on the cusp of a default that haven't received TARP funds.And I thought everyone agreed that the FDIC closing small failing banks - albeit slowly - was an example of how bank problems should be resolved. Now we have "Too small to fail"?
As the crisis unfolded and problems arose in different parts of the financial system, the Fed responded by trying to increase liquidity in several markets through special lending programs. These programs may have had some stabilizing effects on markets and may have lowered some spreads. Yet, without defining in advance a systematic and consistent approach to such lending, these programs also raised uncertainty — in this case, about who would or would not have access to the various facilities. This was illustrated when the Term Asset-Backed Securities Loan Facility (or TALF) was announced. Many market participants lobbied for expanding the categories of securities eligible for the program. Did these multiple lending programs keep lenders on the sidelines waiting to see which asset classes the Fed would support and which it would not? Did this delay the healing of the financial markets?
Note: I recently changed the page layout. It now has the last 5 posts, and then short excerpts and links to previous posts.