Long Overdue Capital Injection

October 14, 2008 7:28am by Barry Ritholtz

Here we are, more than one year into the credit crisis, and long after the collapse of Bear Stearns, and a month after Lehman Brothers, AIG, WAMU, Fannie/Freddie, Wachovia, etc. and we are getting a capital injection into the key banks.

As we noted yesterday, Paulson (and to a lesser degree, Bernanke) were way behind the curve in recognizing the Housing, Economy and Credit issues.

Although Paulson was against the capital injection, the Fed chair was not. the As Krugman noted yesterday, "this was also the solution privately favored by Ben Bernanke."

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Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben S. Bernanke and FDIC Chairman Sheila Bair are scheduled for a press conference at 8:30 am . . .

graphic courtesy of NYT

Sources:
Joint statement by Federal Reserve, U.S. Department of the Treasury, and Federal Deposit Insurance Corporation (FDIC)
http://www.federalreserve.gov/newsevents/press/monetary/20081014a.htm

President’s Working Group Market Stability Initiative Announcement
http://www.federalreserve.gov/newsevents/speech/bernanke20081014a.htm

Treasury Said to Invest $125 Billion in U.S. Banks
Robert Schmidt and Peter Cook
Bloomberg, Oct. 14 2008
http://www.bloomberg.com/apps/news?pid=20601170&refer=home&sid=addCa.BISYDU

U.S. Investing $250 Billion in Banks
MARK LANDLER
NYT, October 13, 2008
http://www.nytimes.com/2008/10/14/business/economy/14treasury.html

Gordon Does Good
PAUL KRUGMAN
NYT, October 12, 2008
http://www.nytimes.com/2008/10/13/opinion/13krugman.html

Bank Bailouts to Make Recession `More Manageable,’ Volcker Says
Chen Shiyin
Bloomberg, Oct. 14 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=aCKGXbTNfSVI&

U.S. to Buy Stakes in Nation’s Largest Banks
DEBORAH SOLOMON, DAMIAN PALETTA, JON HILSENRATH and AARON LUCCHETTI
WSJ, OCTOBER 14, 2008
http://online.wsj.com/article/SB122390023840728367.html

Intervention Is Bold, but Has a Basis in History
STEVE LOHR
NYT,October 13, 2008
http://www.nytimes.com/2008/10/14/business/economy/14nationalize.html

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