On Thursday, September 18th (3:01PM ET), CNBC's Charlie Gasparino reported a preliminary sketch of Paulson's RTC-Type Solution (video). I transcribed the video & added links.
AFAIK, CNBC doesn't transcribe their stuff. It took me several hours to type this out, so please forgive the lack of original content. One of the reasons I transcribed this is a lot of stuff gets missed during the heat of the moment. And what happened this week on Wall Street was huge. What I found particularly hilarious in this video is Gaspy's "biting the apple" stuff.
[DJI displayed in small window throughout :: 113.91]
Bill Griffeth: Plenty of Breaking News today, we have some now from Charlie Gasparino out of Treasury. Right Charlie?
Charles Gasparino: Well, it's out of my sources on Wall Street, Bill. Treasury Secretary Hank Paulson is working on a plan to put some or all of the toxic waste off... take some of that off the balance sheets of the banks and brokerages and put it into some sort of RTC-like structure. This is obviously a plan to sort of deal with the sort of issue at hand that these bad assets are still on the balance sheets and still disrupting the market. We have to be a little cautious here, I'm getting this from my Wall Street sources — Steve Liesman, the Economics reporter, has a call into Treasury. They basically neither confirm nor deny this. But basically from what I'm hearing from my Wall Street sources, who deal with people in the Treasury daily now because of the situation at hand, is that Hank Paulson, the Treasury Secretary, is working on some sort of RTC-like plan to get at least some or all of that toxic waste off the balance sheets of the banks and brokerages. Something that.... what's been described to me as in one bite of an apple, kind of deal with this issue — it's obviously a legacy issue for Hank, Hank Paulson is the former Goldman Sachs CEO. But Lies [talking to Steve Liesman], this is what people on Wall Street who deal with the Treasury directly are telling me, and you know Steve Liesman we talked about this earlier. There were a lot of tea leaves today that something like this was coming down the pipe, maybe you can help me out with that.
Steve Liesman: Yeah, a bunch of comments and it begins with the President — guys in the back: if you have the sound from the President I'd like to roll it — and that's part of the discussion here, as to why... you have the sound guys? Let's listen to President Bush who spoke today.
"The American people can be sure we will continue to act to strengthen and stabilize our financial markets and improve investor confidence" [President Bush Discusses Economy - 18-Sep-2008 @ 10:17 A.M. EDT]
So the White House spokesperson later on in the day was peppered with questions from the Press Corps but what that means, "continue to act", and she wouldn't comment on that. But she did say we can't tell you when all of this will end (?), but the President wants to make sure his government is acting so no further damage comes to the economy. [White House Press Briefing - 18-Sep-2008 @ 11:14 A.M. EDT]
Meanwhile, the Wall Street Journal editorial page, generally a staunch opponent of these type of things, supported the idea of a Resolution Trust Corporation type solution, while Republican candidate John McCain also mentioned it. In about five minutes from now, Senator Schumer [video], the Democratic senator from New York, is going to unveil his own type of plan as it comes to a big — as Charlie said — bite of the apple type solution. It makes sense that there should be some discussion about this, the (inaudible) Resolution is unclear.
BG: There is a ... there's a rush to this right now, we had Barney Frank on Power Lunch yesterday, the Chairman of the Financial Services Committee, who had been floating this very idea. And he got some support on that from the Republicans out there, Bob Bennett for one, who's sort of the financial sage if you will of the Senate Banking Committee, said that he would be in favor of something like that. And now if you in fact you have Treasury talking about this, as Charlie's sources suggest, I think the momentum is mounting for something like that. Although as Barney Frank said... you know it's a very different entity that they'll need from RTC because that was... they were just buying up— [Lawmakers Seek Market Intervention - 17-Sep-2008 | Robert F. Bennett]
CG: And it's not just that Bill, you know now that you see Schumer talking, you know this thing is fraught with politics as well Obviously there's an overall need to go—
BG: Right now guys... we're very much at the highs of the session as word is getting out about this. I mean, Wall Street is looking for some more backstopping by the federal government.
CG: And Bill, Bill I want to caution everybody. This is from my sources who deal with the Treasury Department. We have yet to get a confirmation from the Treasury Department. But what these sources are saying is that they they want to do this thing, and they want to do it — they want to do one bite, and they want to do it fast, like announce something imminently. But we don't know that just yet because the Treasury won't tell us.
BG: I will say, the big proponent in the House, Barney Frank, was taking a very "wait and see attitude". They're going to be starting their hearings next Tuesday, and he said they don't want to formulate anything until the next administration. But maybe it's going to happen sooner (inaudible).
SL: Bill, let me add two things. The first thing is, I have to think that the 180 billion dollars that was injected this morning, I would think the Federal Reserve would have expected more effect than it got. The credit markets are still, in many ways, substantially frozen or otherwise impaired. So that would give some momentum to this idea. The other thing that picked up when we talked about Barney Frank, Schumer, the editorial page of the Journal, McCain. It shows that the political winds have shifted in such a way — Charlie's right it's political, but it's political that would seem to me, at this point, in favor of doing something bigger than not. [Video: Liquidity Injection - 18-Sep-20088 @ 09:03 AM ET | Markets rally as world's central banks infuse cash]
CG: And I want to point out one other thing — I'm giving the viewer and us, you know, a taste of who my sources are on this. They all have a vested interest in this happening, just so you know. And the reason why is, as you see the market's going up, dramatically. If this thing happens, can you imagine? Morgan Stanley might not... it might not have to merge with a bank. And if it needs to merge with a bank, if something like this happens, well Wachovia's, you know a hundred, we were talking a hundred twenty, a hundred eighty billion — I can't remember the number right now — of sour mortgage stuff on their books. Well, that doesn't become such an issue any more. The deal can be done pretty easy at that point
SL: Let's be clear, no comment from Treasury or the Federal Reserve at this point. We have calls in to them, we're waiting to hear back from them if there's any discussion about what's being talked about right now.
[DJI 219.43]