FDIC’s loan purchase stalled

Part of the Treasury’s PPIP is the purchase of so-called legacy loans of bans by the FDIC. But as we come closer to the implementation of the plan, it has been reported that it might be stalled and put on hold as buyers and sellers increase their worries about the prospective looney rule the Congress might pass later on once profits start coming in.

Then there’s this from the WSJ:

…some banks that might have sold troubled loans into the program earlier in the year have become less eager as they regained a sense of stability.

And it doesn’t help when you have this:

But, at the same time, administration officials say they believe the program to purchase toxic securities mightn’t be as integral to a recovery as it once seemed. Markets seem to have stabilized and banks appear more able to digest losses associated with the troubled securities.

This is where political will comes in. Stability, after dubious “earnings” from last quarter and even the recently reported purchase accounting followed by some banks, needs to be redefined – one that comes from having sustainable earnings, and not with the aid of one-time charges and gains. Plus even with such earnings ‘stability’, the object of concern still lingers; the legacy loans still remain in the balance sheets of the banks.  While ‘stability’ could remove the need to get rid of them, it is rather only temporary and when not solved, becomes simply a source of a crisis, stemming from the current system’s inability to resolve the problems we have at the moment.

Source: WSJ


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