Treasury Secretary Timothy F. Geithner outlined his overhaul plan for the expansion and rescue of the United States banking system Tuesday, promising transparency and accountability, and giving an indirect, long-term promise for markets and exchange traded funds(ETFs).
The latest program is shelling out $1.5 trillion from the Treasury, private investors and Federal Reserve in an effort to restore the faith in the baking system and giving hope to voters and lawmakers, report Edmund Andrews and Stephan Labaton for The New York Times.
Geithner’s main promise was transparency for the public in regard to the bailout money and tighter accountability for banking institutions that receive rescue money. His multi-pronged program includes:
- The new program, the “bad bank” program, is to buy up hard-to-sell assets that have bogged down banks and financial institutions for the past year. $250-$500 billion is expected to be spent.
- Direct injections into banks up to the remaining $350 billion of the rescue plan money.
- A huge lending program that is aimed at getting consumers the loans they need; $1 trillion will be supplied to regain liquidity into the area of student loans, car loans and credit card debt.
Dakin Campbell and Matthew Brown for Bloomberg report that upon this news, the Treasuries rallied due to the prognosis that the plan would simply not be enough. The safety of the government is the path investors felt was cautious.
Geithner said the Obama administration will fight a “two-front” battle to jump start the economy by stimulating employment and bolstering financial markets. The United States will sell a record $32 billion of three-year notes today. This may help cut consumer borrowing costs. The yield on a 10-year note was down 0.11%, to 2.88%.
- Vanguard Extended Duration Treasury ETF (EDV): up 12.7% over past three months; down 4.9% over past week
Swiss banking giant UBS lost $6.9 billion, or 8.1 billion francs, for the fourth quarter, as they continued to write down assets and many wealth management clients left. This was a bigger hit than analysts had anticipated, and the bank now has a plan to mend.
UBS said it would split its wealth management business into two units with one focusing on clients in the Americas and another on Switzerland and the rest, reports Julia Werdigier for The New York Times. Net money inflows were gained in January, and the bank is hopeful that full profit will be achieved by next year.
- iShares MSCI Switzerland Index (EWL): down 12.4% over past three months; UBS 5.1% of assets
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