Get your fresh Treasury-FDIC plan here

re: "They've extended a lot more money in loans than they've taken in as deposits, and they bridge the gap with wholesale lending."

probably clearer to say "they bridge the gap with wholesale borrowing" or "borrowing from wholesale lenders" or somesuch

Fixed it. Thanks!

I've not heard anything about the role of the current federal bank regulators (FDIC, Fed, OCC, OTS) under this new plan, which likely means that there is no change at the moment. Is there any new effort to move forward with the restructuring that Paulson proposed earlier this year (elimination of OTS, etc)? It is clear that the large, politically powerful institutions have eluded strong and effective supervision while the small institutions are subject to rigorous regulation.

@Lolajax: Paulson has stated repeatedly that serious regulatory reform is gonna be the job of the next administration.

"experimental economist"? Beyond very trivial experiments, that sounds unlikely.

That is, it will buy senior preferred shares that will pay a divided of 5% a share for the next five years and 9% a share after that, and also get warrants to buy common stock worth 15% of the value of the preferred shares. Treasury won't get any voting shares, but it will have veto power over any dividend increases or share buybacks.

Didn't Warren Buffett just put $10 billion into goldman sachs in exchange for preferred shares providing a 10% annual dividend?

This makes me sick -- the Fed should have made it clear to these institutions and their stockholders that if they wanted SOME of their investments saved, they'd have to take the same deal that American taxpayers are getting. But if "the market" says that GS preferred shares should yield a 10% dividend, then that is what taxpayers should be getting.

Meanwhile, the FDIC says it will insure all "non-interest bearing deposit transaction accounts, regardless of dollar amount." This applies mainly to business payroll and transaction accounts; the idea is to keep business customers from fleeing banks.

As the link provided notes, this guarantee lasts only until the end of 2009. Given the stake that the American taxpayer now has in enriching Paulson's Wall Street cronies, deposits in their institutions will continue to have defacto "full insurance" for all accounts (not just deposit transaction accounts). In other words, while this insurance might prevent "fleeing", its not going to prevent migration that will further line the pockets of Paulson's friends at the expense of other (especially local/regional) banks.

As someone who has invested what little money I have conservatively (insured CDs only) and with an eye toward local investment (I do my banking with a credit union), I want to know why people like me -- people who invested responsibly -- are paying keep the pockets lined of the same people who brought about this crisis -- the only taxpayer dollars that I'm willing to contribute is toward incarcerating these crooks, and that includes Paulson (who made between 500 and 700 million dollars by acting as one of the architects of this crisis as chair of Goldman Sachs.)

Paulson has stated repeatedly that serious regulatory reform is gonna be the job of the next administration.

in other words, he's handing over our money to a bunch of his friends with no effective oversight of what they will do with it. Its a shell game, because what Paulson is doing is using tax dollars to shore up these banks in a way that reduce the urgency for the stringent regulation of financial institutions that are the only real long term solutions.

http://www.nytimes.com/2008/10/15/business/economy/15bailout.html?hp

A Credit Stimulus Package
As I understand TARP, it is essentially a credit stimulus package. The first part was forcing 9 large banks to jointly participate because:

"Bringing together all nine executives and directing them to participate was a way to avoid stigmatizing any one bank that chose to accept the government investment."

I'm not so sure that this wasn't done to move the plan forward quickly and avoid negotiating with each bank, but I get the point, sort of.

Then, because each bank could use the money for something other than loans, the plan forces them to loan the money.

“The needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it,” Mr. Paulson said, who offered some details of the plan along with the Federal Reserve chairman, Ben S. Bernanke, and the chairman of the Federal Deposit Insurance Corporation, Sheila C. Bair.

The problem here would seem to the quickness, intelligence, and risk of these loans.

"In a letter to Mr. Paulson on Monday, Mr. Schumer, chairman of the Joint Economic Committee, urged the Treasury to demand that banks receiving capital eliminate their dividends, restrict executive pay and stick to “safe and sustainable, rather than exotic, financial activities.”

I'm still not reassured.