The Financial Rescue Package Update

Sarah Binder discusses the $700 billion financial rescue package on The Federal Drive with Tom Temin and Jane Norris

Jane Norris, host: Treasury obviously in the process of trying to put together a panel of experts and assets. You know buying these assets, these so called toxic mortgage assets that are clogging up the financial industry. So how does that all come together?

Sarah Binder: Well I think that is the stock question of the day and the month and the rest of the fall. What the bill passed by Congress last week does is it gives the Treasury Department very very broad authority to buy as you referred to as $700 billion dollars worth of troubled assets. Now, what has happened there will be called mortgaged back securities which are essentially are the securities where we put together mortgages, some where homeowners can’t pay and some where homeowners can pay. But the assets are dragging down the books for financial institutions and these financial institutions, Marshall Banks aren’t willing to lend very much anymore. So what the Department has to do is find a price to buy these toxic assets off the books and that’s what the discovery will have to field in the next month. How are they going to set the price of these assets that nobody wants to buy?

Tom Temin, host: Now this is pretty technical stuff, determining the value of them and how to hold them on the books, how to account for them. And so the Treasury is likely to outsource this, deputize some of the companies that are already in the business to do the work. And the other point that happened today is that Neel Kashkari, who’s been with Goldman Sachs, was vice president there, now Assistant Secretary of the Treasury. Do you think that within Treasury, in people like Mr. Kashkari, there is the expertise to know what to look at as they oversee the people that they deputize to do this work?

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