Geithner's Bank Plan Led Goldman to Call Meeting BOFA, BANK, JETS, CORPORATE, APARTMENT, LEWIS Posted By: Charlie Gasparino | On-Air Editor CNBC.com | 12 Feb 2009 | 04:17 PM ET
How worried was Wall Street about a lack of clarity in Treasury Secretary Tim Geithner’s plan to save the banking system by buying toxic debt? So worried that Goldman Sachs called a meeting to figure out how to fix the problem.
—This meeting known as the “Goldman Sachs roundtable” took place just hours after Geithner’s speech (and the dismal market reaction) on Tuesday at the headquarters of Goldman Sachs in lower Manhattan.
—Around 20 of the firm’s biggest hedge fund and private equity clients from around the country showed up—a testament to just how concerned financial industry insiders are about what few details Geithner presented.
—They included representatives of KKR, Fortress Investment Group , Bain Capital, Perry Capital, Capital Research, Putnam and Citadel.
Goldman sachs says the meeting was planned well in advance. But people who attended tell CNBC that they received the invitation after the speech and decided to attend because of the speech. Goldman Sachs initially denied that the meeting, hosted by co-presidents John Winkelried and Gary Cohn, took place.
Here are some of the upshots from that meeting:
1. While it is better to wait for a good plan as opposed to quick-and-dirty bad one, time is important. What the group concluded was that the longer the plan takes to produce, the more difficult the situation becomes. That's because reviving the securitization market is key toward reviving the economy and it’s a vicious cycle: The longer it takes to revive securitization, the worse the economy becomes and the securitized products held by the banks lose more value.
2. Ken Griffen, the founder of Citadel, stressed the need not merely to fix the prices of the securitized bonds, but also that any plan must stabilize the root cause of the problem—the mortgages themselves. And he came up with several ideas to spur homeownership that could revive the housing market.
3. Also some worry over speculation that Obama economic adviser Paul Volker doesn’t have a more formal role in the process of coming up with a bailout plan.
WallStreet against Obama and mainstreet ~ US Regulators Stand Ready With More Bank Capital
TREASURY, GOVERNMENT, FINANCIAL SERVICES, CITIBANK, BANK OF AMERICA, BANKING, BANKS Reuters | 23 Feb 2009 | 08:44 AM ET
U.S. banking regulators Monday pledged to provide more capital to banks as needed and keep large institutions viable through a new capital assessment program to be launched Wednesday.
"The U.S. government stands firmly behind the banking system during this period of financial strain to ensure it will be able to perform its key function of providing credit to households and businesses," the regulators said in a statement issued by the U.S. Treasury that named no individual banks.
"The government will ensure that banks have the capital and liquidity they need to provide the credit necessary to restore economic growth," the regulators said. "Moreover, we reiterate our determination to preserve the viability of systemically important financial institutions so that they are able to meet their commitments."
The program to be launched Wednesday -- the Capital Assistance Program -- was announced Feb. 10 by U.S. Treasury Secretary Timothy Geithner as part of a larger bank rescue plan that will include the creation of a public-private partnership to mop up toxic assets on bank books.
Under the Capital Assistance Program, regulators will conduct "stress tests" to evaluate the potential capital needs of major U.S. banks should the economy perform more poorly than expected.
"Should that assessment indicate that an additional capital buffer is warranted, institutions will have an opportunity to turn first to private sources of capital," the regulators said.
"Otherwise, the temporary capital buffer will be made available from the government.
The announcement followed a report on Sunday night that Citigroup was in talks on the U.S. government taking a bigger stake in the bank. The Wall Street Journal said taxpayers could end up owning as much as 40 percent of the ailing lender's common stock. The announcement did not mention Citigroup or any other institution.
Any government capital under the new program will come in the form of mandatory convertible preferred shares, which would be converted into common equity shares only as needed over time to keep banks well capitalized, the regulators said. These can be retired before conversion if conditions improve.
Banks that previously received preferred stock capital injections under the Troubled Asset Relief Program can exchange these shares for the mandatory convertible preferred stock, "to enhance the quality of their capital."
The regulators stressed, however, that major institutions currently have more than enough capital to be considered well capitalized.
The Capital Assistance Program aims to ensure that they have sufficient capital to support economic recovery, even if conditions worsen.
"Because our economy functions better when financial institutions are well managed in the private sector, the strong presumption of the Capital Assistance Program is that banks should remain in private hands," the regulators said.
In addition to the Treasury, these regulators include the Federal Reserve Board, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Office of Thrift Supervision. # Read the Full Text of the Treasury's Statement Copyright 2009 Reuters. Click for restrictions.
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