Monday, the state was presented with the downcast rural face of the banking crisis — the fallout in Greeley of the bad loans and shrinking reserves that mark the nation’s economic reality.
How many more Greeleys should we expect to see in the next few months? According to the influential Baseline Scenario bloggers, it depends on who wins in the great and mostly unreported battle that’s waging between the Finance Industry and the American People.
Baseline blogger James Kwak provides this insight based on a reading of today’s New York Times:
For a snapshot of what’s wrong with our banking policy, look at the front page of the business section of today’s New York Times. On the left side: “U.S. in Standoff with Banks over Chrysler.” On the right side: “Banks Show Clout on Legislation to Help Consumers.”
On the left side, a consortium of banks holding Chrysler debt is refusing to agree to the current restructuring plan, which involves bondholders holding $6.9 billion in secured debt getting about 15 cents on the dollar – roughly where the bonds are currently trading, according to the Times… The banks are playing the ongoing game of chicken with the government, betting that the government will cave and give them a better deal rather than take a risk on a bankruptcy.
On the right side, the banks are using their lobbying clout to block the administration’s proposals to help consumers and households, including the mortgage cram-down provision (which would allow bankruptcy courts to modify mortgages on first homes) and added consumer protections for credit card customers.They currently have all 41 Republican votes in the Senate tied up, which means nothing can pass.
Here’s more on the battle to scuttle the cram-down plan to help consumers.
Meantime, top-dog Baseline blogger Simon Johnson in a piece at NYTimes.com presses the case again for greater action now on the propped-up banks. Show them who’s boss, dammit! he says. Shout the truth and take action accordingly: Declare the big guys bankrupt and restructure them, ASAP. As usual, he makes a powerful case.