Friday, February 12, 2016

'Bad bank' skeptics question latest financial cure-all

'Bad bank' skeptics question latest financial cure-all

'Bad bank' skeptics question latest financial cure-all


Yesterday, the stock market bounced in hopes Obama and FDIC will set up a "bad bank" to buy bad bonds and loans, making it easier for lenders to do their thing and get the economy going again.

Today, the skeptics:

A) Meredith (Mrs. Pro Wrestler JBL) Whitney, the Oppenheimer & Co. analyst who predicted Citigroup's dismemberment and a continued drop in housing prices, tells clients, "Simply removing 'toxic' assets from bank balance sheets will not directly cause banks to increase lending." And, she asks, how much would the government pay for the bad stuff? Too little, and banks won't be able to tolerate the write-offs; too much, and taxpayers will scream. Better for banks to sell their good assets to private investors. If the banks have any.

B)  Charles Schumer, D-NY, the senator whose big mouth was blamed by the FDIC for last summer's fatal and expensive run at IndyMac Bank, tells Reuters a "bad bank" could cost $4 trillion -- or something like that -- and he thinks that's too expensive

Plus a thoughtful comment from Scott Siefers and Kevin Fitzsimmons at Sandler O'Neill + Partners: "Investors are starved for any piece of potentially good news.... The problem is there are still more questions than answers..." Should the government buy common stock? Should it insure loans? "At the core is the dilemma of how the government can help save the industry without basically owning it."


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About this blog

PhillyDeals posts interviews, drafts and updates that Joseph N. DiStefano writes alongside his Sunday and Monday columns and ongoing articles about Philadelphia-area business.

DiStefano studied economics, history and a little engineering at Penn. He taught writing and research at St. Joe’s. He has written for the Inquirer since 1989, except when he left a few times to work at Bloomberg and elsewhere. He wrote the book Comcasted, and raised six kids with his wife, who is a saint.

Reach Joseph N. at, 215.854.5194, @PhillyJoeD. Read his blog posts at and his Inquirer columns at Bloomberg posts his items at NH BLG_PHILLYDEAL.

Reach Joseph N. at or 215 854 5194.

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