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[0:00] ..." This is Lisa Meyer and the WBZ newsroom were talking with Boston university School of Law professor -- its early."...
[0:06] ..." With the former chief counsel to the Fed board of governors. About the government increasing substantially. Its stake in Citicorp -- plain to me what this deal means to the government. And the degree of risks that opposes."...
[2:11] ..." in places scenario where. The government's in this big time and then. Citicorp flunks the stress test what would happen."...
[2:38] ..." course the question -- also if the government is doing this with Citicorp. Could other banks follow as well."...
[3:45] ..." Credit is restored. And I -- it all goes back to the housing market you know we have to find a mechanism for clearing the inventory of unsold houses. There are. Many many months if not"...
[0:00]" This is Lisa Meyer and the WBZ newsroom were talking with Boston university School of Law professor -- its early."
[0:06]" With the former chief counsel to the Fed board of governors. About the government increasing substantially. Its stake in Citicorp -- plain to me what this deal means to the government. And the degree of risks that opposes."
[0:21]" Well you're right that no new money is changing hands and you know some people view this as just an arcane. Accounting change. Whether. You convert the preferred into common and increase. They an equity measure of that a lot of analysts are following. But on the other hand it's a profound impact as contrasted with the the bookkeeping part of it is that the the US government now has actual control of the former 36%. Of the common shares of the company. And to use the cast of the impact of this will be the extent to which the government gets involved it and the in running in the institution."
[1:07]" I would imagine that that when you own that significant share of the financial institution you should have some say right."
[1:13]" Bush or at 36%. Say the government has by our. The largest shareholder. The announcement didn't indicate that they're going to move to via independent director dominated board. The expectation I would think is that those independent directors -- not just independent. But they are what. Some people refer to as constituency. Directors that is to say. They have a constituency. That they represented that is the taxpayers of the US. So they're not just purely independent they are there to represent hopefully. The ownership interest that the government took over today."
[1:54]" One thing that that sort of caught my ear when I was listening this morning to what is this deal involves. Is that it's coming before. On the results of the stress test city. -- come through now. It seems to me that that could set in places scenario where. The government's in this big time and then. Citicorp flunks the stress test what would happen."
[2:19]" Well they do would be talking about the upping the financial ante for the government if for example they they -- the stress tests as you indicate. And that the government decides to put in more capital and we shareholders are at an additional risk."
[2:38]" Of course the question -- also if the government is doing this with Citicorp. Could other banks follow as well."
[2:44]" Assured the distressed test is being applied to the nineteen largest banks in the US every. Bank with assets over a hundred billion is going to undergo of the stress test and they're all. Under the microscope now."
[2:58]" And conceivably there could be other banks that the government has substantial stake in right."
[3:03]" Oh yes -- of these these so called TARP program. Or capital purchase program. Invested. For us in. In approximately 300 banks of all sizes just nineteen largest."
[3:17]" do you see this and they will -- and anytime soon."
[3:21]" Well in the end we're all -- But yes I think I think. They're upset emotions. The steps that have to be taken. He this is creeping nationalization. A big step forward in that regard was taken with this action today in. More of that will come. Yeah I think we'll get to the point where. Credit is restored. And I -- it all goes back to the housing market you know we have to find a mechanism for clearing the inventory of unsold houses. There are. Many many months if not years of inventory in some markets that have to be absorbed and and you know that's part that's a big part of the puzzle to."
[4:08]" And until you can get credit flowing freely you can't get. A significant dent in -- surplus."
[4:14]" Exactly exactly and as wonderful as loan modifications are for certain customers who were. Abuse in the origination process. The we shouldn't put all our -- in the loan modification. Basket -- it's -- money and buyers coming into the system. That will signal the end."
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