Kashkari Says Treasury Approving 20 Bank Stakes Today

I guess we are going to be spending more of our tax dollars for all the already rich bankers who are needing bailouts today. Well what are we going to do. Maybe we should all start a huge company and make a butt load of bad bets and when we are out of money go to the government and tell them that if they don't bail us out then the entire economy is going to fail without us. Oh Well. I called them and they told they wouldn't give me any of the bailout money and that they never heard of my bank.

By Rebecca Christie and John Brinsley

Nov. 14 (Bloomberg) -- The U.S. Treasury is about to approve capital injections into 20 more banks, said Neel Kashkari, the department's assistant secretary in charge of a $700 billion bank-rescue plan.

``I think we're going to approve another 20 banks today, large and small across the country,'' Kashkari told a congressional panel today.

Kashkari fielded questioning from lawmakers concerned that the Treasury's equity purchase program won't do enough to help homeowners facing foreclosure. He said the Treasury has concluded that the capital injections are the ``best way'' to help the overall economy.

The Treasury has allocated $250 billion for purchasing stakes in U.S. banks and has so far approved $125 billion for nine big banks. More than 50 regional U.S. banks have offered stakes to the Treasury and are awaiting final decisions, according to Bloomberg data.

Banks apply first to their regulator to participate in the program. If the regulator approves, the applications go to the Treasury, which makes the final decisions.

Kashkari said the Treasury didn't see an application from National City Corp. for a capital injection. PNC Financial Services Group Inc. said last month it would buy National City for about $5.2 billion in stock after receiving a $7.7 billion investment from the Treasury.

PNC's Application

Kashkari declined to comment on any stake the Treasury might take in PNC. The Treasury has avoided discussing specific banks unless it completes a capital injection in them, although institutions are allowed to disclose preliminary approval if they choose.

Publicly traded banks had until today to decide whether to participate. Kashkari said terms for private banks are coming ``soon.''

Regarding the securities of mortgage-finance companies Fannie Mae and Freddie Mac, which the government took over on Sept. 7, Kashkari said they aren't quite completely guaranteed by the U.S. government, even though they have ``the Treasury's backing.''

``We provide a very strong implicit support,'' Kashkari said. ``It's darn close, but it's not quite full faith and credit.''

Overall, financial markets are starting to experience ``healing,'' Kashkari said. Even so, ``we're not out of the woods yet,'' he said.

Mortgage Rates

The Treasury views its efforts to help ease lending conditions as a way to reach homeowners directly, Kashkari said. ``Bringing mortgage rates down for borrowers is the best thing we could do,'' he said.

The U.S. Treasury also will try to ease ``distress'' in securities markets that is raising consumer borrowing costs, Kashkari said.

``We are examining strategies to support consumer access to credit outside the banking system, specifically the asset-backed securities market,'' Kashkari said in his prepared testimony for the House Oversight and Government Reform Committee's subcommittee on domestic policy.

The market for securitized auto loans, credit cards and student loans ``is currently in distress and its illiquidity is raising the cost and reducing the availability'' of consumer credit, Kashkari said.

TARP Shift

On Nov. 12, Treasury Secretary Henry Paulson announced that the Fed and his department were working on a backstop facility for asset-backed securities, with funds from the Treasury's Troubled Asset Relief Program. Details of the program haven't been announced.

Kashkari said the Treasury has ``stabilized'' mortgage companies Fannie Mae and Freddie Mac and ``limited systemic risk'' that their failure would have posed. Overall, U.S. markets have improved, he said.

``Our system is stronger and more stable than just a few weeks ago,'' Kashkari said.

The Treasury is committed to transparency and oversight for the rescue efforts, Kashkari said. Lawmakers recently have raised concerns that the rescue effort isn't properly supervised.

When asked whether he'd stay on to manage TARP for the next administration, Kashkari, who has been putting in marathon hours, responded that he'd be ``honored'' to be asked to serve. ``I'd have to ask my wife,'' he said.

Separately, the White House announced today that Neil Barofsky, an assistant U.S. Attorney in New York's southern district and chief of a mortgage fraud unit, will be nominated to be the TARP's inspector general.

To contact the reporters on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net; John Brinsley in Washington at jbrinsley@bloomberg.net