Insurers, car makers and US subsidiaries of foreign banks all want a piece of the largest government rescue in US history.
Firms start competing for US bailout money
WASHINGTON // The bailout is now the hottest lobbying game in Washington. Insurers, car makers and US subsidiaries of foreign banks all want a piece of the largest government rescue in the country's history. The feeling is that many with their hands out will be successful, especially with financial markets diving and predictions the economy is tumbling into deep recession. These groups argue that the credit squeeze is so severe and the risks to the economy so dire that their industries need financial support as well.
The Treasury is considering requests from a variety of industries, but has not decided whether to expand the programme, despite the intensifying lobbying pressure. The Financial Services Roundtable, the lobbyist group for the financial services industry, wrote to Treasury officials on Friday requesting that the initiative to buy US$250 billion (Dh918.5bn) in bank stock be expanded to cover insurers, motor-vehicle companies, securities dealers and US subsidiaries of foreign companies, including banks.
The Treasury's plan is intended to bolster the tattered balance sheets of banks and get them to resume making loans. As the Treasury now interprets it, these additional groups would not participate in the bank stock scheme. They could receive help from a separate part of the $700bn rescue that will buy bad assets from financial institutions. Steve Bartlett, the president of the Roundtable, urged the Treasury to broaden the definition of those eligible for help.
"The institutions that are excluded play a vital role in the US economy by providing liquidity to the market," he told Neel Kashkari, the Treasury department official running the programme. Referring to the US subsidiaries of foreign companies, Mr Bartlett said: "This is a global crisis and to not recognise the US firms controlled by foreign banks or companies would create further impediment to the market's recovery."
A financial industry official said the Treasury secretary, Henry Paulson, had met over the past week various groups, including hedge fund managers, that were petitioning for assistance. The official said the discussions with insurance industry executives were being held in advance of what were expected to be disappointing earnings reports by some companies in the coming week. The official said the insurance industry wanted government purchases of their stock on a mandatory basis, duplicating the agreement Mr Paulson struck two weeks ago with nine major banks. He pressured the big banks to go along with the scheme as a way of removing the stigma that might be attached to the payments if only a few major banks had received them.
Some insurers technically would be eligible for stock purchases now if they owned subsidiaries that were savings and loan institutions regulated by the Office of Thrift Supervision. Last month, American International Group, the country's largest insurance company, received an $85 billion loan from the Federal Reserve. Since then, it has received further support. Complicating the government's decision-making is that the Bush administration will not be in charge after Jan 20. Mr Paulson, who has said he has no intention of staying in the job, has pledged to consult both presidential candidates on his bailout actions.
The debate over expanding the bailout comes as the Treasury is rushing to get money to the primary recipients: banks that sharply curtailed lending after suffering billions of dollars of losses on mortgage-related assets as home foreclosures soared in the housing slump. * Associated Press