US moves to get $700B bank rescue effort started

October 13, 2008 5:37:12 AM PDT
The Bush administration said Monday it is moving quickly to implement a $700 billion rescue program, including consulting with private law firms on how to buy ownership shares in a broad number of banks to help thaw frozen lending and get the economy moving again. The administration announced the selection of a team of interim managers, picked an outside firm to help run the program and tapped Federal Reserve Chairman Ben Bernanke to head the oversight board guarding against conflicts of interest.

Neel Kashkari, the assistant Treasury secretary who is interim head of the program, said officials were developing the guidelines that will govern the purchase of bad assets and was consulting with six specialist law firms on how the government will take partial ownership of banks.

"We are moving quickly - but methodically - and I am confident we are building the foundation for a strong, decisive and effective program," Kaskhari said in a speech Monday to the Institute of International Bankers.

Kashkari, however, provided few details about how the program will actually buy bad assets and ownership shares in banks. He focused mainly on the nuts and bolts of getting the program running.

He said five veteran government officials had been chosen as interim heads of key components of the program including Tom Bloom, currently, the chief financial officer at the Office of the Comptroller of the Currency, to serve as the chief financial officer for the rescue program.

Kashkari said seven policy teams at Treasury had been created to focus on the different aspects of the program including the effort to buy bad assets such as mortgage-backed securities and another team to work on buying residential mortgages which he said were currently clogging the books of regional banks. Another team will focus on the program to buy equity stakes in private banks as a way to boost their capital.

To help structure the program to buy bank stock, Kashkari said Treasury had consulted with six specialty law firms to obtain advice and had chosen Simpson Thatcher & Bartlett LLP to move forward with greater details.


Load Comments