Ramsey and others on thread,
The following is an article about the LTCB "agreement." Perhaps
others with more insight than I can better fathom the critcal details.
in this thing. But having read it, the phrase "the devil is in the
details" still comes to mind.
Regards,
Tundra
Japan's Ruling LDP, Opposition Parties Agree on Bank
Bill Compromise
Japan's LDP, Opposition Agree on Bank Bill Compromise (Update1) (Adds
comments from an opposition leader in 7th paragraph; moves some
background from 4th to 8th paragraph.)
Tokyo, Sept. 26 (Bloomberg) -- Japan's ruling Liberal Democratic Party and
leading opposition parties struck an accord on banking legislation aimed at
reviving the country's ailing financial industry.
The LDP and opposition legislators settled on a plan for the financially
troubled Long-Term Credit Bank of Japan Ltd., clearing a major obstacle to
passing the bank bill before the parliament session ends Oct. 7.
Under the agreement, the government will purchase LTCB's common shares,
temporarily nationalizing the bank, and look for a healthy bank to buy the
majority of LTCB's shares to make it a subsidiary.
Passage of the legislation is seen as a key step toward ending Japan's worst
recession since the end of World War II. Japanese banks, saddled with an
estimated 77 trillion yen ($575 billion) in bad or risky loans, are reluctant to
lend, making it difficult for businesses to expand.
Japan's political leaders initially agreed on a plan a week ago only to see the
talks break down in squabbling over how public money should be used to
re-capitalize the banking system.
The talks on the banking legislation had stalled because LDP favored keeping
LTCB afloat with the aid of public funds, while opposition parties wanted to
put it under government control for eventual liquidation.
Naoto Kan -- head of the Democratic Party of Japan, the largest opposition
party -- said the compromised plan breaks new ground because LDP agreed
to adopt almost all of the opposition's proposals, Asahi News Service
reported.
Under the compromise plan, the government will take over the control of
failed banks by purchasing their shares. A new government-backed
institution, modeled on the U.S. Resolution Trust Corp., will buy bad loans
from failed banks through March 2001.
Still, the LDP and the opposition disagree on when to transfer the Ministry of
Finance's authority over bank failures to a separate government body and on
the creation of a new fund to boost banks' capital. The government
established in February a 13 trillion yen fund to recapitalize banks that write
off their bad debt. The LDP last week agreed to abolish the fund and the two
sides will keep discussing the issues at senior-level meetings.
The LDP had said the fund must be maintained to support viable banks and
prevent them from collapsing, while opposition leaders said troubled banks
must be shut.
The opposition had also sought to strip the ministry of its power to handle
banking failures. In an earlier proposal, the opposition called on the ministry
to concede that power by June 1999, but the LDP has refused.
The agreement comes a week after the LDP and opposition parties reached
a tentative compromise, which Prime Minister Keizo Obuchi explained to
U.S. President Bill Clinton in New York earlier this week.
After that meeting, Obuchi said he would ''take all appropriate steps'' to
revive the economy and to repair the banking industry.
The agreement started to unravel earlier this week because of different
interpretations of the plan by LDP and opposition legislators. Concern about
the political deadlock prompted Japan's benchmark stock index Friday to
record its steepest decline in two weeks.
The Nikkei 225 index fell 481.94 points, or 3.39 percent, to 13,723.84, its
steepest tumble since Sept. 11.
The political dispute had centered on whether to use taxpayer money to bail
out LTCB, one of the nation's largest and sickest banks. The LDP wants to
pump public funds into LTCB so it can be merged with Sumitomo Trust &
Banking Co. The trust bank has said it is willing to absorb LTCB only after
LTCB has written off problem loans.
The agreement must now be passed by both houses of Japan's parliament,
which is scheduled to adjourn Oct. 7. |
