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from The Great Debate:

Ending the debt limit crisis: Dear Ben Bernanke

Warren Buffett calls the debt ceiling a “nuclear weapon, too horrible to use.” Obama administration official Jason Furman says the consequence of a default on U.S. government debt is “too terrible to think about.” When asked about a default, Wells Fargo strategist James Kochan simply commented, “Holy cripes.”

With this crisis, America is risking financial Armageddon. The default of Lehman Brothers on its $613 billion of debt ignited a chain reaction in the financial system, nearly destroying the U.S. economy. A default by the U.S. government on $17 trillion of debt -- debt that has been considered the safest in the world -- could be far worse.

But at heart, this is not a debt problem. It is an accounting problem. The Treasury Department issues U.S. debt, and lots of it. So you would think that America is deeply indebted to its bondholders. Yet increasingly, it is the U.S. monetary authority, the Federal Reserve, and not private investors, who buys this debt.

So a simple solution to the impasse is as follows: Federal Reserve Chairman Ben Bernanke should simply cancel the Treasury debt that it owns. The government can just forgive the government’s debt.

from Unstructured Finance:

Goldman, AIG and the government renew their friendship

Scanning Goldman Sachs’s newly published interactive annual report on Monday, Unstructured Finance had to do a double-take upon seeing American International Group highlighted as a client success story.

Yes, that’s right. AIG.

Goldman’s site features a 3-minute, 47-second video with two investment bankers, Devanshu Dhyani and Andrea Vittorelli, talking about their work on various AIG deals to help repay the U.S. government.

from Unstructured Finance:

One more try at the Great Refi

By Matthew Goldstein

Don't be surprised if President Obama includes a line or two in his State of Union address this evening about the need for a plan to allow millions of struggling homeowners whose mortgages are packaged into so-called private label mortgage-backed securities to get a chance to either refinance their loans or restructure them.

The Washington Post is reporting today that mortgage refinancing may be one of the laundry list of items Obama will talk about tonight. And for several months now, investors in private mortgage-securities--deals issued by Wall Street banks and financial firms and not guaranteed by Fannie or Freddie--have been quietly bracing for the Obama administration to move forward with a new refinancing effort.

from Tales from the Trail:

Geithner tells Congress: calling China names doesn’t get you anywhere

U.S. lawmakers are mad and want Treasury Secretary Timothy Geithner to step in and call China a name -- "currency manipulator" -- which may not sound like much on city streets but can be quite an insult in world financial circles.

"At a time when the U.S. economy is trying to pick itself up off the ground, China's currency manipulation is like a boot to the throat of our recovery. This administration refuses to try and take that boot off our neck." That's not a Republican raging against President Barack Obama's Treasury Secretary, it's Senator Charles Schumer, a Democrat from New York (where Wall Street happens to be located). USA/

from Financial Regulatory Forum:

US Treasury will close Capital Assistance Program

WASHINGTON, Nov 9 (Reuters) - The U.S. Treasury Department said on Monday it will immediately close its Capital Assistance Program, set up last spring for bank stress tests, because the only firm needing taxpayer funds will use an auto industry support program instead.

GMAC Financial Services has indicated it will need less funds than were expected at the time of the stress tests results in May, Treasury said.

from Financial Regulatory Forum:

U.S. banks give nod to prepaying fees, seek tweaks

By Karey Wutkowski
WASHINGTON, Nov 3 (Reuters) - U.S. banks are lauding regulators for avoiding another emergency fee to replenish the deposit insurance fund, but are suggesting tweaks to a plan for them to prepay three years of regular assessments.


The Federal Deposit Insurance Corp is expected to meet shortly to finalize a proposal that banks pay cash upfront to replenish the depleted fund safeguarding bank deposits.

from Commentaries:

Don’t worry about the weak dollar

By John M. Berry

There's no way to shut off the incessant warnings about a weak dollar from foreign officials and some economists, but it's perfectly safe to ignore them.

You can also yawn the next time Treasury Secretary Timothy Geithner repeats the mantra, "It is very important to the United States that we continue to have a strong dollar."

from Financial Regulatory Forum:

US Treasury to say 3 more funds to buy toxic assets

WASHINGTON, Oct 5 (Reuters) - The U.S. Treasury Department will announce on Monday that three more funds have met requirements to get government financing that will let them begin purchases of banks' so-called toxic assets.

Treasury said last Wednesday, which was Sept. 30, that Invesco Ltd and Trust Company of the West, or TCW, were the first of nine public-private investment funds to raise the necessary capital to launch the program for buying toxic assets.

from Financial Regulatory Forum:

Cross-border resolution of troubled banks may be hard – U.S. Fed’s Tarullo

Federal Reserve Board of Governors member Daniel Tarullo looks down during his testimony at the Senate Banking Committee on Capitol Hill in Washington,July 23, 2009. (file photo)      REUTERS/Larry Downing (UNITED STATES POLITICS BUSINESS IMAGES OF THE DAY) WASHINGTON, Sept 30 (Reuters) - A member of the U.S. Federal Reserve Board of Governors said on Wednesday it may be difficult to find international consensus on cross-border unwinding of troubled financial institutions.

Daniel Tarullo said time will likely be needed to work out relationships among global financial standard-setting bodies in light of the increased role of the Financial Stability Board, the new policy coordinating arm of the Group of 20 nations.

from Financial Regulatory Forum:

SCENARIOS-US weighs how to rebuild depleted bank insurance fund

Federal Deposit and Insurance Corporation (FDIC) Chairman Sheila Bair,  June 17, 2009. By Karey Wutkowski
WASHINGTON, Sept 22 (Reuters) - U.S. bank regulators plan to meet next week to propose options for replenishing the insurance fund used to safeguard bank deposits, including tapping a line of credit with the Treasury Department.

The Federal Deposit Insurance Corp plans to put the options out for public comment, soliciting feedback from the banking industry on how to pay for the cost of bank failures, before the FDIC makes any final decision.

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