Next step in economic crisis: a giant resale agency?
Some lawmakers and economists are calling for the US to absorb damaged assets of firms.
Washington's response to the credit crisis so far has seemed to rely on daily improvisation. Perhaps it now needs something more organized: a new US government resale agency that would absorb and then dispose of the assets of damaged firms.Skip to next paragraph
Subscribe Today to the Monitor
That is the opinion of key lawmakers and some private economists as a week of unprecedented US intervention in the marketplace draws to a close.
For regulators, establishment of such a temporary entity might be a trip back to the future. In the 1980s the largely taxpayer-financed Resolution Trust Company (RTC) seized and liquidated savings and loans.
But the S&L crisis was a brush fire compared with today's financial four-alarmer. An RTC redux would have to deal with many tough political and policy issues, and could represent yet more government intrusion in private markets.
Scrambling to try and ease the worst credit crunch since the 1930s, the Federal Reserve on Sept. 18 pumped billions of dollars into the world financial system.
The New York Fed injected $55 billion into US markets, while the central Fed increased lines of cash for foreign central banks by some $200 billion.
The moves were intended to counter a spike in the overnight lending rate between banks, an increase which threatened to worsen already tight credit conditions.
World "central banks continue to work closely together and will take appropriate steps to address the ongoing pressures," the Fed said in a statement.
Seeking to reassure nervous citizens, President Bush announced that he had canceled a trip to stay in Washington and consult with his economic team.
The government has taken "extraordinary measures" in recent weeks to try to stem the crisis, said Bush. Yet the markets continue to deal with "serious challenges," he said.
The thinking behind the buzz goes something like this: the US government is already carrying out such a function in an ad hoc manner. With its bailouts of Bear Stearns, Fannie Mae and Freddie Mac, and AIG, Washington now has become a dealer in damaged companies.