Good banks, bad banks - Washington Post

Good banks, bad banks - Washington Post


This year’s annual list of the top national news stories did not include the collapse of one or more big U.S. banks. Contrary to many a dire forecast in the first quarter of 2009, Bank of America, Citigroup and the rest pulled through. And they did so even though the government did not adopt any of the experts’ most far-reaching recommendations — such as nationalization and division into “good” and “bad” banks.

By year’s end, in fact, Treasury Secretary Tim Geithner’s plan for a “public-private partnership” to dispose of the banks’ toxic assets, which was widely criticized as a half-measure, has proved mostly unnecessary because private investors stepped up without it. As Geithner recently testified to Congress, the 19 largest U.S. banks have raised more than $110 billion in common equity and other regulatory capital since he announced the results of a government “stress test” — ridiculed as too tepid — in May. That amount almost equals the $116 billion in repayments of bailout funds the Treasury has received from various banks. Current interbank lending rates are at or near levels consistent with financial normality.
So, all is well? Not quite.


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