That line from President Obama’s news conference — a part of the third prong of the proposed bailout — is key. As The Washington Post reports:
A third program would offer direct help to the nation’s largest banks. The government plans to conduct a review of major financial firms to determine how much they may need. Any federal aid would come with conditions that would give the firms incentives to pay the money back as soon as possible. The review would determine the ultimate price tag of this program.
As the valuation report issued by the Congressional Oversight Panel showed, the first portion of the TARP funds were given without any understanding of what was being purchased — let alone the health of the bank in question more generally.
This bank-by-bank review could do much more to stabilize the system than the other parts of the plan because no one knows what is what today. By going through the banking system methodically and figuring out where things stand, that is the only way we can get a full picture of the problems out there and, as the President said, restore trust in our banking system.
[UPDATE: The excellent Calculated Risk blog provides "a few suggestions" for the proposed "Comprehensive Stress Test for Major Banks" that would lead to "Increased Balance Sheet Transparency and Disclosure" for the public. It's a great post, with smart regulatory advice.]
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Chris Geidner is the award-winning senior political editor at D.C.'s Metro Weekly and has written for The Atlantic Online, The American Prospect, Advocate.com, Salon and other publications, as well as at his blog, Law Dork. In 2011, he received the Excellence in News Writing Award from the National Lesbian and Gay Journalists Association for his coverage of "Don't Ask, Don't Tell" repeal. Prior to moving to D.C. in 2009, he served as an attorney on the senior staff at the Ohio Attorney General's Office and had earlier worked for a leading Columbus law firm. An extended biography can be found