Big bang financial clean-up started

If Bush were still around, he'll probably called it "Mother of Financial Clean-Up". The Obama administration meanwhile preferred to call it "Big Bang Financial Clean-Up". To me, it look like a massive cleanup of dead whales washed ashore and oil spills caused by Exxon Valdez wreck.

The Obama administration is gearing up for a “big bang” announcement within the next two weeks that will combine a bank clean-up with measures to reduce home foreclosures and probably steps to kick-start credit markets.

The plan will involve an overhaul of the troubled asset relief programme – the $700bn bail-out fund – including strict curbs on compensation at banks receiving public aid. The Tarp overhaul is intended to restore public confidence in what is a deeply unpopular programme and ensure that taxpayer money is not used to fund excessive pay, bonuses and dividends to shareholders.

FT.com - US set for ‘big bang’ financial clean-up

The announcement, which officials said was likely late this coming week or the week after, will follow Friday’s news that the US economy contracted at an annualised rate of 3.8 per cent in last year’s final quarter – less than analysts were expecting, but still the worst quarter since 1982. The fall was cushioned by ballooning inventories, which suggest the economy could shrink faster than expected in the first quarter.

The “big bang” approach reflects the belief of Tim Geithner, Treasury secretary, and Lawrence Summers, National Economic Council director, that the Bush administration was wrong to dribble out policy initiatives. Mr Geithner intends to present a “comprehensive” plan that policymakers hope will command market confidence.

Details of the financial overhaul are being finalised and have yet to be approved by President Barack Obama, but it may include both the purchase of toxic assets by a “bad bank” and insurance-style guarantees for problem assets remaining on bank balance sheets.

Anti-foreclosure efforts are likely to focus on subsidising programmes that reduce unsustainable monthly mortgage payments, though there may also be support for schemes that subsidise the partial writedown of loans that exceed the value of the home. Treasury may also unveil new efforts to revitalise dysfunctional securitisation markets.


MarketWatch - Utah's MagnetBank closed without an acquirer

FDIC shuts down three banks in one day amid ongoing credit crisis

SAN FRANCISCO (MarketWatch) -- Federal regulators closed three banks in a single day Friday, as the ongoing credit crisis showed no signs of abating.

Utah's MagnetBank became the fourth bank failure of the year, and the Federal Deposit Insurance Corp. was forced to directly refund depositors after being unable to find another institution willing to take over its operations.

That marked the first time the FDIC has been unable to find an acquirer for a failed bank in nearly five years, according to FDIC spokesman David Barr. "This bank did not have an attractive franchise value, and not many retail deposits or core deposits," Barr said. The FDIC had conducted an extensive marketing process for the bank's assets, he said.

Salt Lake City-based MagnetBank had total assets of $292.9 million as of Dec. 2, and $282.8 million in total deposits. "It is estimated that the bank did not have any uninsured funds," the FDIC said in a statement.

The FDIC later said it has also closed Maryland-based Suburban Federal Savings Bank, and Florida's Ocala National Bank.

Suburban Federal had total assets of roughly $360 million as of Sep. 30, and total deposits of $302 million, the FDIC said in a statement. Tappahannock, Va.-based Bank of Essex agreed to assume all of the failed bank's deposits, the FDIC said.

Ocala National had $223.5 million in total assets as of Dec. 31, and $205.2 million in total deposits, the FDIC said. Winter Haven, Fla.-based CenterState Bank has agreed to assume all of the failed bank's deposits.

The closures mark the fourth, fifth and sixth bank failures of 2009, bringing the total to 31 since the start of the credit crisis.