Negotiations on Bailout Package Are Stuck
Congressional leaders are stalemated on several issues.
Jason Vance
Published: Sep 26, 2008
Congress continued negotiations Thursday night on a bailout package for the financial crisis with the Treasury Secretary and chairman of the Federal Reserve Board. A meeting was held at the White House earlier in the day with Congressional leaders as well as the presidential candidates from both parties, but it seems that the wheels are spinning but negotiations aren't going anywhere.
"The whole issue here is removing the bad debt from the banks' books," says Farm Futures market analyst Arlan Suderman. "Because as long as that bad debt is there, banks won't loan to each other, banks don't have capital to loan to businesses, and banks don't have money to loan to consumers, so credit has simply dried up. People are having trouble getting car loans, house loans - people who are good credit risks."
According to Suderman what the government is trying to do is come up with a plan to remove that bad debt from the books to free up capital so the banking system can start functioning. He says that would restore confidence in financial institutions and allow the economy to start flowing.
"A lot of the debate right now is exactly how to free up the banking system without having the taxpayers essentially having to take over every bad loan in the entire country," Suderman says. "They are trying a lot of creative ways to try to do that. The bottom line is that it not only has to be something the taxpayers will accept, but it has to be something that will stabilize the financial markets and restore confidence in our banking structure and system. If it doesn't do that, we'll still be in the same problem and continue to be in a deflationary cycle in both Wall Street and Chicago."
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