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Obama Urged to Move Swiftly to Rescue Banks

January 18, 2009

President-elect Obama’s advisors have provided few details about how they will attack the banking crisis.

The financial meltdown is the most serious to confront a new president since Franklin D. Roosevelt entered the White House in 1933.

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By Stephen Labaton
The New York Times

A growing chorus of officials and Wall Street executives have urged President-elect Barack Obama to move immediately to shore up the banking industry as its crisis deepens.

With Citigroup, Bank of America and many other large financial institutions continuing to hemorrhage billions of dollars, the central issue Mr. Obama faces is how to relieve banks of rapidly deteriorating assets.

In a speech last week at the London School of Economics, Ben S. Bernanke, the chairman of the Federal Reserve, raised three proposals that Obama transition officials are said to have been considering to cleanse the largest banks of their biggest problems. One would involve the purchase by the government of troubled assets. A second would provide guarantees and agreements to absorb some of the losses in exchange for warrants or other compensation. A third would involve the creation of “bad banks” that would buy the declining assets for cash or stock in the new entity.

Mr. Obama has vowed in generalities to move swiftly. In an interview last week on “This Week” on ABC, he said he had asked his team “to come together, come up with a set of principles around how we are going to maintain transparency, what are we going to do in terms of housing, how are we going to target small businesses that are under an enormous business crunch.”

Likewise, advisers to Mr. Obama have provided few details about how they will attack the banking crisis.

The financial meltdown is the most serious to confront a new president since Franklin D. Roosevelt entered the White House in 1933.

On March 5 of that year, a day after he became president, Roosevelt responded to the devastating string of bank failures by declaring a bank holiday that closed all banks and halted all financial transactions, allowing the start of the arduous process of restoring public confidence in the system.

None of Mr. Obama’s advisers are suggesting a bank holiday. But like Roosevelt’s move, the details of the Obama administration’s rescue efforts are expected to begin to emerge quickly after the new president takes office.

On Wednesday, the day after the inauguration, Timothy F. Geithner, the nominee for Treasury secretary, is certain to be asked about the administration’s plans at his confirmation hearing before the Senate Finance Committee.

Read the rest:
http://www.nytimes.com/2009/01/18/
us/politics/18assets.html