An industry aid package, including the creation of a "bad bank" concept, will be announced next week, said the source, who is familiar with a weekend's worth of discussions between government officials and representatives of the financial services industry.Obama's got a lot of work ahead of him, but I'm hoping "bad bank" has been delayed because somebody in his economic braintrust realized it's not going to work.The Obama administration and those people have been discussing a number of measures and issues on a concentrated basis since Friday, when speculation first arose that any policy initiative on a bad bank would be delayed.
Though details of the intended Obama administration announcement on Wall Street compensation are unknown at this time, it will be executed through the TARP plan, meaning it will address limits on pay for those firms receiving government assistance, as both Congressional Democrats and senior White House advisors have urged in recent weeks.
Toward the end of the week, President Obama chastised Wall Street firms for handing our large executive bonuses, while petitioning for government assistance and in some cases struggling to survive, calling the situation “shameful” and "outrageous." Congress is now also seriously considering legislation capping executive compensation.
In his weekly radio address Saturday, the President said new initiatives would make sure chief executives "are not draining funds" from their firms that might otherwise be spent on fueling an economic recovery, through loans and other instruments.
If anything, the moral hazard alone created by knowing "bad bank" is on the way should have virtually every bank salivating over truly crazy opportunities to not lend money to consumers and businesses, but to invest it in risky and crazy propositions. After all, if the bet goes sour, they can just dump it on Obama's doorstep.
You'd be crazy not to.
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