Banking Crisis
Wall Street Tries To Resist Creeping Bank Nationalisation - Report
Wall Street firms are to lobby the US administration to relax its plans for stringent reviews of banks’ financial health and capital injections that could leave the government as a large shareholder in many of those institutions, the Financial Times said.
People close to the situation say financial groups were frustrated by the administration’s decision not to hold detailed talks with the industry before last week’s release of its $2 trillion financial rescue plan.
One of the issues thrown up by potentially greater state control of banks is nervousness by clients in these banks’ wealth management businesses about the confidentiality and privacy of their affairs.
Administration officials said the announcement was always intended to be a framework rather than a final plan and stressed that input would be sought from industry “stakeholders” as details were fleshed out. “We’re going to get opinions from across the industry ... to help shape the final plan,” said one official quoted by the FT.
Banks’ worries were reinforced last week when Tim Geithner, Treasury secretary, cancelled a meeting with Wall Street chiefs. An administration official denied that Wall Street was snubbed, pointing out that regional banks and other interested groups were also invited to the meeting, which was postponed because of “scheduling problems”.
The industry’s frustration contrasts with the cautious welcome given to Mr Geithner’s plans by private equity and hedge fund groups. The government package contained two items at the top of those investors’ wish-list: financial assistance to purchase toxic assets from banks; and a guarantee to cover some of the losses on those assets.
Bankers say the government’s decision to leave out some of the plan’s most important details gives them an opportunity to try to modify some of its more controversial provisions.
Several banks want the government to clarify that its plans for a “stress test” of companies’ ability to survive a sharp deterioration in the economy and financial markets would not result in a “pass or fail” grade.
They argue that any sense that banks have inadequate resources to stave off a worsening climate would destroy investors’ and savers’ confidence.