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Europe agrees to secure banks
Question of the Day
Some analysts were disappointed that the weekend G-7 meetings, including a Saturday afternoon White House summit with President Bush, produced a lot of rhetoric but few concrete proposals.
“The markets wanted maybe more assurance that there would be a unified global backstopping of the banks, and it doesn’t sound like that’s in there,” said Kim Rupert, managing director of global fixed income for San Francisco-based Action Economics LLC.
French Foreign Minister Christine Lagarde said of the G-7 joint statement, “Some of us hoped [the communique] had had more teeth to it, but at least it was endorsed.”
U.S. officials reportedly are reluctant to match the European guarantee on interbank lending because of the size of the American market and because a much greater share of such U.S. lending is between financial firms that are not commercial banks.
Democrats in Congress pressed Mr. Paulson on Sunday to embrace a plan under which the Treasury would use taxpayer dollars to directly subsidize U.S. banks, giving the government a share in troubled lenders. Mr. Paulson’s original blueprint called for simply purchasing the banks’ bad loans in an effort to spur lending again.
“I am hopeful that tomorrow, the Treasury will announce that they’re doing it,” said Sen. Charles E. Schumer, New York Democrat and chairman of the Joint Economic Committee. “And they have to do it quickly. … Markets are waiting.”
Richard W. Fisher, president of the Federal Reserve Bank in Dallas, said the U.S. central bank stood ready to consider any policy options to ease the banking crisis and restore confidence among lenders. Mr. Fisher said the Federal Reserve’s governors were even ready to drop their traditional secretive ways in order to reassure the markets.
“This morning, I am casting convention aside,” Mr. Fisher said in a panel discussion at the Institute of International Finance in Washington. “I speak for all of us when I say that the Federal Reserve will continue to explore every avenue and consider every option to see the credit markets through the crisis.”
The markets may get a clearer signal of the U.S. government’s intentions on Monday morning when Neel Kashkari, the Treasury official in charge of the bailout effort, gives his first major public address to a gathering of international bankers in Washington.
IMF chief Dominique Strauss-Kahn, in a joint news conference with Mr. Zoellick, said officials are essentially crossing their fingers and hoping the weekend’s activities and statements will calm the markets.
He said he expected investors to be cheered by the news from Europe, but, he added, “you can never be sure what will happen.”
This article is based in part on wire service reports.
About the Author
Raised in Northern Virginia, David R. Sands received an undergraduate degree from the University of Virginia and a master’s degree from the Fletcher School of Law and Diplomacy at Tufts University. He worked as a reporter for several Washington-area business publications before joining The Washington Times.
At The Times, Mr. Sands has covered numerous beats, including international trade, banking, politics ...
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