TARP 2.0 to avoid ‘bad bank’ idea

Reportedly at the insistence of Speaker of the House Nancy Pelosi and Democratic Sen. Chuck Schumer, he of protecting his NYC hedge fund buddies’ backs, Treasury Secretary Tim Geithner’s bank aid plan scheduled to be unveiled Monday will only have a scaled-back “bad bank” provision. So, it’s probably going to keep skirting the issue of just how bad off some fiscal institutions are.

And, if a bad bank is off the table, certainly, anything close to bank nationalization is out of bounds.

The good part is that, under one program targeted for more Troubled Assets Relief Program funds, the Term Asset-Backed Loan Facility, assets from banks in the toilet will reportedly only be bought at a discount, not at their banks’ face value.

That said, how serious of a haircut these banks are forced to take will be another issue.

And, other potentially good news is the FDIC will reportedly have its credit line tripled. To me, that says that the government is not only ready to backstop more banks, but ready to move in, even with full takeovers, in more cases as needed. Perhaps not “nationalization,” but something.