The bank stabilization plan the White House is cooking up may mix two competing strategies, the Wall Street Journal reports, setting up a “bad bank” to buy portions of banks’ toxic assets while offering guarantees against future losses on part of the remainder. The goal is to bolster banks and get credit moving while limiting the cost to taxpayers.
The bank, possibly managed by the FDIC, would likely only buy assets that have already been severely marked down by banks, preventing a devaluing of other bank holdings. Many of the remaining troubled assets would be insured against loss. More capital injections are likely, adding to the $335 billion already spent. The bank plan will be rolled out in the coming weeks, along with the stimulus package now in Congress, a plan to stem foreclosures, and a regulatory overhaul.