The proposed $700 billion financial industry bailout could actually aggravate financial problems by driving up interest rates, says a global investment research group in Jupiter.
“There should be no illusion that the $700 billion estimate proposed by the Administration will be enough to end the crisis,” Martin D. Weiss, president of Weiss Research, said today in a press release. “Nor should there be any false hopes that the market for U.S. government securities can absorb the additional burden of a $700 billion bailout without putting major upward pressure on U.S. interest rates.”
Weiss Research released a study, based on Federal Reserve and Federal Deposit Insurance Corp. data, that found that:
– 1,479 U.S. banks and 158 U.S. thrifts are at risk of failure; these banks and thrifts have total assets of $3.3 trillion – 41 times the assets of the FDIC’s list of troubled banks.
– 61 banks and 25 thrifts with more than $5 billion or more in assets are heavily exposed to nonperforming mortgages.
– The proposed bailouts – while expected to cost more than $1 trillion – are too small to rescue most institutions at risk, and don’t address other problems with U.S. interest-bearing debts outstanding of $51 trillion or derivatives held by U.S. banks of $180 trillion.
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