All eyes should be on Rome today (Friday, Feb. 13) and tomorrow. The G7 meeting is taking place there, and the American representative, our Secretary of the Treasury, Timothy Geithner, will have his first chance to meet the finance ministers of Canada, France Germany, Italy, Japan, and the United Kingdom.(click here for an earlier review of Mr. Geithner)
The meeting is important because Mr. Geithner will be forced, to some degree, to put some meat on his proposal to salvage the American banking system. His proposal of a few days ago, as to how to spend the balance of the TARP funds, has not been greeted with any enthusiasm in America.
American banks are in horrid shape, especially our largest ones. Today, the market capitalization of our top banks is below $500 billion. Yet the International Monetary Fund estimates that the write-downs of their loan portfolios will rise to $2.2 trillion once a full accounting is required. When this happens, Mr. Geithner will be forced to step up to the task of rescuing them. But it is hard to imagine a scenario where the American taxpayer will pony up $2 trillion and not want a piece of the action. Yet “nationalization” of our banking system is not something he, or many others, want.
For the balance of this article and details of what is faced at the G7 meeting, click here.
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