Sheila Bair is delivering a sensible general message: we need dramatic action to clean up banks’ balance sheets and, presumably, to recapitalize them.  This initiative apparently has support from influential senators, such as Kent Conrad and Charles Schumer.  Many Republicans also seem inclined to come on board. 

I like an aggregator-type approach; this is quite consistent with the RTC-inspired structure that we have been advocating (see the WSJ.com article linked through that post for details; such ideas are consistent with and an update of our proposals from September, November, and December).  But some of the details currently being floated seem less than ideal.  Given that the design work on this program is still ongoing and the new Administration will, without doubt, seek broad support on Capitol Hill, I would suggest that the following points be considered or even stressed in the upcoming deliberations. Continue reading “Designer Talk: Bank Recapitalization (and Bair’s Aggregator)” →