In the waning days of December, U.S. Treasury Secretary Henry Paulson ensconced himself in a smoke-filled back room (well, presumably that's where it was; that's where shady deals are so often made) with the heads of several large banks, including Citigroup, Wells Fargo and Washington Mutual. Also present were the heads of the FDIC, the OCC and the OTS. They met to forge a plan to bail out subprime ARM borrowers facing looming resets.
Before dissecting Paulson's plan, let's get some important facts on the table. First, 1.5 million to 2 million ARMs worth about $540 billion will reset in 2008. Of that, about 80 percent is subprime or alt-A paper. And second, the market values of the three banks mentioned above were down 42 percent, 14 percent, and 60 percent on the year, respectively, the day before the meeting. That's a key factor in their participation.
The best-laid plan?
Complete your profile to continue reading and get FREE access to CUTimes.com, part of your ALM digital membership.
Your access to unlimited CUTimes.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking credit union news and analysis, on-site and via our newsletters and custom alerts
- Weekly Shared Accounts podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the commercial real estate and financial advisory markets on our other ALM sites, GlobeSt.com and ThinkAdvisor.com
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
