New Rules On Bank Bailouts AnnouncedNew Treasury Secretary Timothy Geithner's first move on Tuesday was to place tighter restrictions on firms receiving bailout funds, making transparency and responsibility key issues.
The new rules will prevent lobbying by companies that receive taxpayer money, including restricting contacts with lobbyists in connection with applications for, or disbursements of federal money, according to a Treasury statement.
These steps were promised by the new President and demanded by the Congress after many of the banks kept the bailout money to build up their capital reserves rather than lending it to businesses or consumers.
The Treasury says this announcement "builds on several reforms to the Emergency Economic Stabilization Act (EESA) previously outlined by President Obama, including monitoring and tracking lending patterns by financial institutions, limiting executive compensation, and preventing shareholders from being unduly rewarded at taxpayer expense. These new rules go beyond the approach taken under the EESA to date and will help ensure a new level of openness and accountability going forward."
The Treasury Department's new plan: "Keep Lobbying and Special Interest Influence out of Emergency Economic Stabilization Act (EESA) Investment Decisions" has rules that include:
Combat lobbyist influence in EESA process: The Treasury will implement safeguards to crack down on lobbyist influence over the program, including restricting contacts with lobbyists in connection with applications for, or disbursements of, EESA Funds.
Keeping politics out of funding decisions: The Treasury will ensure that political influence does not interfere with EESA decision making, using as a model for these protections the limits on political influence over tax matters.
Certification to Congress on objective decision making: In reporting to Congress, the Office of Financial Stability will certify that each investment decision is based only on investment criteria and the facts of the case.
The investment process will be transparent and based on objective criteria:
--Only banks recommended by the primary bank regulator will be eligible for capital investments.
--The Office of Financial Stability will publish a detailed description of the investment review process undertaken by the regulators and OFS.
--The Treasury will make sure adequate resources exist to process applications as quickly as possible with priority to the date of the application as received by the Office of Financial Stability, and will formulate procedures to ensure integrity and regularity in the application process.
Geithner Confirmed As Treasury Secretary
Prior to Tuesday's announcement, Timothy Geithner was confirmed as U.S. Treasury Secretary by the Senate on Monday by a vote of 60-34 after two hours of debate. Geithner had faced Republican opposition after it was found out he underpaid federal taxes for a period of three years. He becomes Treasury Secretary during a financial crisis that is now the country's longest recession since the 1980s.
Geithner was president of the Federal Reserve Bank of New York since 2003 and starts work today to turn around the economy. He faces a record budget deficit and more than $1 trillion in losses in the financial system.
Geithner is expected to be replaced at the Federal Reserve Bank of New York by William Dudley, the New York Federal Reserve Bank's markets director.
Home Prices in 20 U.S. Cities Drop
Declines in the housing market continue with a drop in home prices in 20 U.S. cities slipping more than 18 percent in November compared to a year ago, a report shows.
This is the fastest drop in the S&P/Case Shiller index history, and follows an 18 percent drop in the previous month. The index began falling in January 2007, as foreclosures continued to climb and sales sank.
Record foreclosures drove losses to more than $1 trillion in the global market last year. The index compared to a year earlier shows a decrease in prices in November, with Phoenix having the biggest drop of 33 percent, followed by a 32 percent drop in prices in Las Vegas.
Retailers Get No Respite in 2009
The retail industry is expected to decline further in 2009, according to the most recent economic forecast by the National Retail Federation. Retail industry sales, aside from auto sales, gas stations and restaurants, are predicted to decline 0.5 percent says the industry group.
Discount shopping will be the way most consumers buy in 2009. This is the first time the industry group has said there would be a decline in annual retail sales. It began recording retail sales 14 years ago. The weakness in sales is attributed to customers cutting back to only what they need in these economic hard times, shopping more at discount retailers.
The NRF's quarter-by-quarter outlook sees a 2.5 percent sales drop in the first half of the year. The NRF also predicts sales to drop 1.1 percent in the third quarter with a 3.6 percent increase in the fourth quarter, as the economy begins to pick up by the end of the year.