Foreign Banks May Get Bailout
In a change from the original proposal sent to Capitol Hill, foreign-based banks with big U.S. operations could qualify for the Treasury Department’s mortgage bailout, according to the fine print of an administration statement Saturday night.
The theory, according to a participant in the negotiations, is that if the goal is to solve a liquidity crisis, it makes no sense to exclude banks that do a lot of lending in the United States.
The legislative outline that went to Capitol Hill at 1:30 a.m. Saturday had said that an eligible financial institution had to have has “its headquarters in the United States.” That would exclude foreign-based institutions with big U.S. operations, such as Barclays, Credit Suisse, Deutsche Bank, HSBC, Royal Bank of Scotland and UBS. The theory, according to a participant in the negotiations, is that if the goal is to solve a liquidity crisis, it makes no sense to exclude banks that do a lot of lending in the United States.
But a Treasury “Fact Sheet” released at 7:15 last night sought to give the administration more flexibility, with an expanded definition that could include all of those banks: “Participating financial institutions must have significant operations in the U.S., unless the Secretary makes a determination, in consultation with the Chairman of the Federal Reserve, that broader eligibility is necessary to effectively stabilize financial markets.”
The major change in the suggested eligibility requirements is the biggest change that Treasury publicly made after a day of briefings and conversations with Capitol Hill, and is likely the first of many.
Aspects of the $700 billion, two-year proposal that are still under negotiation include what, if anything, will be added to the administration’s simple but sweeping proposal. And the parliamentary route, such as what committees or hearings might be involved, has not been finalized.
House Financial Services Committee Chairman Barney Frank (D-Mass.) has a hearing scheduled for Wednesday that is likely to focus on the proposal.
Under what congressional officials called a likely scenario, the measure could go to the House floor on Thursday, with passage expected the same day.
The Senate could take the package up as soon as Friday and send it to President Bush for his signature, although the Senate schedule is less predictable and had not been determined.
Officials expect passage by huge margins in both chambers, since Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke have told congressional leaders the country’s financial stability depends on it.
House Democrats plan to insist on adding protections for homeowners facing foreclosure, and want to add measure to help homeowners facing bankruptcy, and an executive compensation restriction designed to prevent golden parachutes for the heads of troubled institutions.
Sen. Barack Obama (D-Ill.), who was supportive of the bailout concept in a statement released Friday, thinks that “whatever gets done in Congress has to protect Main Street,” senior adviser Stephanie Cutter said on MSNBC on Saturday.
Leave a Reply