More Help Is On The Way

The Wall Street Journal reported that the U.S. government, recognizing that the banking crisis is far larger than originally thought, is laying the groundwork for a second phase of its rescue attempt, with plans to purge bad assets that are paralyzing the financial system. Officials at the Treasury, Federal Reserve and Federal Deposit Insurance Corp., in consultation with the incoming Obama administration, are discussing a plan to create a government bank that would buy up the bad investments and loans that are behind the huge losses that U.S. banks continue to report, say government officials. Also under consideration is an additional and giant government guarantee of banks’ assets against further losses.  The latest government proposals are aimed at attracting private capital back to the banking system, efforts that have until now largely failed. “All of these ideas are designed ultimately to facilitate more lending in the economy,” said FDIC Chairman Sheila Bair. “It’s essential to get some private capital back into these banks.”