Will taxpayers be overburdened in order to save the Fed's bankrupt banking system?
"WITH THE BANKING CRISIS SHOWING NO SIGNS of abating, President Barack Obama's economic team is working furiously to craft in a matter of weeks a solution that President Bush's team couldn't arrive at in over a year.
The president's team appears to be favoring a plan put forth by Sheila Bair, right, chairwoman of the FDIC.
The leading plan right now is to create a huge 'aggregator' bank to buy bad loans and money-losing securities from troubled lenders to keep them from failing, a gambit that likely would cost taxpayers at least another trillion dollars, and probably more. Approval of this could be the single most expensive decision the new president will make in his entire term.
It's increasingly clear that bold, far-reaching action of some kind is needed swiftly. Though the government has pumped hundreds of billions of dollars into individual banks since last fall, the industry continues to reel. One of the latest shockers: State Street Corp., long seen as insulated from the crisis, last week reported $9.9 billion in unrealized losses. Its shares plunged 59% last Tuesday.
The aggregator, or 'bad bank,' idea has been championed by Sheila Bair, the outspoken chairwoman of the Federal Deposit Insurance Corp. Appointed by Bush, she is expected to remain in the post under Obama, and an insider tells us there's a better than 50-50 chance her plan for an aggregator will move forward. Obama reportedly hopes to unveil a final rescue plan within a few weeks."