Schumer Favors Guarantees Over 'Bad Banks' Plan

Sen. Chuck Schumer (D-N.Y.), appearing on CBNC moments ago, said he opposes the "bad bank" plan being tossed around by President Obama and Treasury Secretary Tim Geithner, which would create a federal government bank that would take all the toxic assets from private banks, allowing them to clean up their balance sheets.

Sort of like the original $700 billion bailout plan. Remember that?

Schumer instead proposes a plan in which the toxic assets would remain on the banks' books but be guaranteed by the federal government, sort of like FDIC depositor insurance.

The government would guarantee the assets at a lower rate than they're valued, giving the government a break while providing a floor of value for the bank.

To receive the guarantee, banks would have to pay insurance, so they don't "get off scot-free," Schumer said.

-- Frank Ahrens
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