WSJ: U.S. Considers Structure For Financial Firm's BaAssets
The federal government is considering creating a mechanism to take bad assets off the balance sheets of financial companies, according to a person familiar with the matter.
Treasury officials have studied such a structure for weeks but have been reluctant to ask Congress for such authority unless they were certain it could get approved. The intensified market turmoil might have changed the political calculus, even with less than two months left until the November elections.
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke have scheduled a meeting at 7 p.m. on Capitol Hill Thursday to brief top lawmakers on recent developments. Messrs. Paulson and Bernanke made a similar trip to Capitol Hill on Tuesday evening to discuss the takeover of insurer American International Group Inc.
The briefing is expected to discuss 'potential solutions' to the financial crisis, including creating a mechanism that could buy up distressed assets from troubled financial institutions, according to people familiar with the matter.
Any eventual plan isn't expected to mirror the Resolution Trust Corp., which was created during the savings and loan crisis to hold and sell off the assets of failed banks. Rather, a new entity might purchase assets at a steep discount from solvent financial institutions and then eventually sell them back into the market.
One way this could be done is through some sort of auction facility so that the government was involved in directly negotiating the value of specific assets with different companies.
Thursday marked another day of frenetic Washington scrambling to deal with the growing capital market uncertainty.
President George W. Bush met for 45-minutes with top economic advisors, including Messrs. Paulson and Bernanke, as well as Securities and Exchange Commission Chairman Christopher Cox.
Deborah Solomon / Damian Paletta
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