U.S. financial system

The U.S. government is working flat out on comprehensive reforms of the financial system. Next week will be circles that a three-pronged program to deal with bad securities are presented. In addition to the U.S. banks also appear next to all the other financial institutions greater control. On Wall Street will detail how the U.S. government to domestic banks toxic securities will decrease with voltage expect.

Approximately five weeks had Finance Minister Timothy Geithner only rough outline for acceptance lazier papers presented. Geithner fell on the weekend because of controversial bonus payments to managers of state-backed insurer AIG increasingly under pressure. President Barack Obama has strengthened him demonstratively back.

According to districts with the help of the U.S. deposit insurance (FDIC) in low-interest loans to private investors will be forgiven, then with the money to buy up bad securities. This could be the banks’ balance sheets of the toxic free papers and the institutions to submit to be preserved. With mortgage-related documents after the collapse of U.S. real estate market massively in value and huge holes in the balance sheets of the money left behind houses.

Second pillar of the project should be that the Treasury investment managers to manage public-private fund hires, in the mortgage papers to invest, the prospect of profit. The third pillar of the program aims to extend the recently announced by the U.S. central bank issued credit program (TALF) show. It is difficult to $ 1000 billion. The Wall Street Journal indicates that the increase from 75 to 100 billion dollars or more. This is “legacy” – that is older with mortgage-related securities – will be bought up.

The detailed plans will be districts that are already presented on Monday, which the Finance Ministry, however, not confirmed. Officially Geithner wants first basic outline of the project on Thursday before a conference committee to explain.

Greater control of all financial institutions
Analysts stress that the Plan was an essential building block for the rest of the U.S. economy. One of Obama’s economic advisers, Christina Romer, was confident that the reforms introduced by the President within a year will lead to success. The mood on Wall Street, however, fluctuated between hope and fear. “There must be a well-elaborated and credible program so that this problem will be solved,” John Praveen invited dealers.

According to a government representative also urges Obama to major financial institutions such as AIG better monitor, if necessary, easier to intervene and under state administration to be able to. Unlike insurance companies and funds are available at U.S. commercial banks a clear jurisdiction. They are controlled by the FDIC. Advised them in difficulties, closed the bank and the authority is usually in the region a buyer for the branches and deposits of the collapsed over rivals.