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| A joint statement from federal banking regulators indicated President Barack Obama still supports a private U.S. banking system.The statement was released today by the U.S. Department of the Treasury, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Reserve Board.
The statement followed speculation that the government was quietly pondering taking over U.S. institutions, including Bank of America Corp. The American Bankers Association issued a news release Friday indicating that the speculation was inhibiting private investments and consumer confidence in banks. Nationalization, however defined, is not the solution to the problems in the financial markets,” ABA President and Chief Executive Officer Edward L. Yingling said in the release. “Investment of private capital will not return until the fear of further dilution of private equity investments in the banking system has significantly abated. Investors will remain on the sidelines if there is continued speculation that the government may step in and undercut their investment.” In today’s statement, the regulators acknowledged that the financial system must be strong and resilient before the economy can recover. But the Obama administration stopped short of potential nationalization. “Because our economy functions better when financial institutions are well managed in the private sector, the strong presumption of the capital assistance program is that banks should remain in private hands,” the regulators said. “We reiterate our determination to preserve the viability of systemically important financial institutions so that they are able to meet their commitments.” The $1 trillion capital assistance program was announced on Feb. 10 and is expected to act as a buffer between credit markets and the nation’s banks. The statement noted that major U.S. banks are well capitalized, and that the government is firmly behind the banking system. The government is prepared to ensure that U.S. institutions are adequately capitalized so they can continue to perform a critical role in the financial system even as economic conditions worsen. The statement was issued amid published reports suggesting that the government could take a bigger stake in Citigroup Inc. at the request of the struggling institution. Negotiations reportedly center around a government investment in Citi’s common stock. |
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