Citigroup was just the beginning. The US Treasury has announced that it will use more Citi-style rescue packages to help financial institutions in deep trouble.
The nation's top number crunchers reckon they'll treat each potential bailout on a case by case basis, looking at such issues as how much the collapse would hurt creditors and counterparties, the degree to which that stress is caused by a distressed or illiquid portfolio of assets, the number and size of financial institutions that are in the same boat or that would be affected by the collapse, whether that institution is sufficiently important to the nation's financial and economic system (i.e. too big to fail) and the extent to which it has access to alternative sources of capital and liquidity.
It's labelled the Targeted Investment Program and the bureaucrats claim, in their press release, that it will be used sparingly. "This program will be applied with extreme discretion in order to improve market confidence in the systemically significant institution and in financial markets broadly. It is not anticipated that the program will be made widely available.but going on the track record so far, don't expect any accountability or too much discretion."
Don't believe it. Based on the track record, we can't expect too much accountability on how the money will be allocated, or for that matter, too much discretion.
Just last month, the Government Accountability Office slammed the way the bailouts had been handled, and raised questions about transparency. I looked at that issue here.
It's going to get a lot worse.
no comment untill now