Nov
11

TARP Won’t Spread Loans for Months, Chief Suggests

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Bank equity still has to be purchased and confidence restored

November 10, 2008

Vincent Ryan – CFO.com

Corporate borrowers counting on the trickle-down effect of the federal government’s injection of capital into banks are in for a long wait. So said bankers and regulators at a securities industry conference in New York today that focused on the Treasury Department’s $700 billion program to purchase senior preferred shares of U.S. banks and buy their troubled mortgage loans and other assets.

“People often ask when we will see banks making new loans,” said Neel Kashkari, who, as the Treasury Department’s interim assistant secretary for financial stability, runs its Troubled Asset Relief Program. Without actually answering his own question, he said in a speech at a conference on the program today at Securities Industry and Financial Markets Association conference on TARP that it would take a few months to finish buying up bank equity. Even considering that, banks must regain confidence in the capital markets before lending again.

To be sure, Treasury is in “deep execution mode” on the share-purchase part of the Troubled Asset Relief Program, which will provide up to $250 billion of equity, said Kashkari. But less than half the money has been invested so far, in nine large institutions.

ARTICLE SHORTENED DUE TO LENGTH….

LINK TO ARTICLE HERE:
http://www.cfo.com/article.cfm/12586090/c_12583719?f=home_todayinfinance

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