"Plan to Buy Banks' Bad Loans Founders,"

[nodular]

Wall Street Journal, MAY 28, 2009

http://online.wsj.com/article/SB124346787723260427.html

"A government program designed to rid banks of bad loans, part of a broader effort once viewed as central to tackling the financial crisis, is stalling and may soon be put on hold, according to people familiar with the matter.

"The Legacy Loans Program, being crafted by the Federal Deposit Insurance Corp., is part of the $1 trillion Public Private Investment Program the Obama administration announced in March as a way to encourage banks to sell securities and loans weighing on their balance sheets to willing investors.

"But prospective buyers and sellers have expressed reluctance to the FDIC about participating for fear the program's rules will change in a political atmosphere hostile to Wall Street. In addition, some banks that might have sold troubled loans into the program earlier in the year have become less eager as they regained a sense of stability.


"The scaling back of the FDIC program is potentially good and bad news for investors, indicating that the health of the financial system -- while improving -- remains fragile. Government officials are still concerned about distressed assets, including residential and commercial real-estate loans, which continue to rot banks' capital. FDIC officials said Wednesday some losses had not yet peaked and government officials believe banks still hadn't fully recognized the value of some distressed assets on their balance sheet."


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