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To: Bobby Yellin who wrote (14064)	7/2/1998 5:41:00 PM
From: goldsnow	Read Replies (2) \| Respond to of 116764

>>>hopefully Japan will add something else before the 12th of July Bobby, July 12 of what year ? :)

To: Bobby Yellin who wrote (14064)	7/2/1998 6:08:00 PM
From: goldsnow	Respond to of 116764

Japan Puts Up 30 Trillion Yen To Shut Insolvent Banks, Bail Out Borrowers Japan to Close Insolvent Banks Using 30 Tln Yen Fund (Update8) (Adding comments from U.S. Treasury Secretary Rubin, former Comptroller of the Currency Conover, dollar-yen quote in paragraph four.) Tokyo, July 2 (Bloomberg) -- Japan's government said it will close insolvent banks while protecting borrowers from a sudden cut-off of credit as part of its latest plan to restore the country's debt-strapped banking system to financial health. The scheme is the most sweeping yet, and if implemented could go a long way toward disposing of the 77 trillion yen ($546 billion) in problem loans that have crippled corporate lending and helped drive the economy into recession. ''It is critical to promptly restore orderly functioning of the financial system as the lifeblood of the economy,'' Finance Minister Hikaru Matsunaga said. Investors, who've been burned before buying Japanese financial assets on the basis of government promises that were never fulfilled, were wary. The dollar jumped more than 2 yen to 141 after the plan was unveiled, and gained another yen in recent trading on doubts the government has the political will to take the tough steps required. ''It's a major step forward,'' said James McGinnis, a banking analyst at Dresdner Kleinwort Benson (Asia) Ltd. ''But are they actually going to implement the plan? That's what the world really wants to see.'' Under the so-called ''total plan'', the government will close insolvent banks, turning their creditworthy clients over to government-run ''bridge'' banks that will continue to provide them with capital. The sale of real estate used as collateral for loans gone sour will be speeded. Managers deemed responsible for bank failures could be prosecuted, while shareholders will probably see their equity wiped out. ''The plan seems to have taken into account the three key constituencies,'' said Todd Conover, a San Francisco-based investment manager who was U.S. Comptroller of the Currency from 1981-85. ''There are provisions for credit-hungry corporate customers; depositors will be made whole, and it's very important that shareholders be wiped out,'' he said. ''It's a fine plan on paper, but if they are timid, it won't work.'' The plan, which contained no significant surprises, spawned optimism in recent days that Japan's economy could be nearing a turning point after seven years of slump. Stocks rallied for a seventh day with the benchmark Nikkei 225 average climbing 0.66 percent to 16,471.58, a 12 percent gain since mid-June. The plan was unveiled after trading halted. Watch Dog The job of deciding which banks can't be salvaged and must be shuttered will be handled by the Financial Supervision Agency, Japan's new bank watchdog. It will conduct inspections using some outside auditors. Finance Ministry officials said that insolvent banks would be placed under government control. Depositors' assets will be protected using as much as 17 trillion yen of the 30 trillion yen the government set aside in January to cover the cost of cleaning up the banking system. The remainder will be used to boost bank capital depleted by writing off bad loans. A senior Finance Ministry official said the ultimate cost of the bailout could exceed 30 trillion yen. ''The framework's now in place to protect borrowers, so now let's seize the institutions,'' Dresdner's McGinnis said. A similar sense of urgency was expressed by U.S. Treasury Secretary Robert Rubin, who praised the plan but said that ''what is important is for the Japanese authorities to move quickly. Quick and decisive actions are needed to restore confidence.'' The government is also trying to bolster investor confidence that the banks are coming clean on the full extent of their troubles. The FSA will force banks to release more information on the extent of their problem loans and strengthen outside auditing. The agency will inspect all 19 major banks, several of which analysts reckon will ultimately have to be closed, by ''early autumn''. It will start with the Long-Term Credit Bank of Japan Ltd., which said on Monday that it may merge with Sumitomo Trust & Banking CO. The FSA will appoint managers to run failed banks. The directors responsible for the failure will be forced to resign and be subject to prosecution. Bridge Bank The plan was designed to ensure that borrowers won't be starved of credit, further damaging an economy that's already in recession. To that end, a new holding company called the Heisei Financial Revitalization Corp. will oversee so-called ''bridge'' banks. Government money will be channeled through the Deposit Insurance Corp., a state-backed institution set up to guarantee bank deposits. A DIC committee will decide whether to provide troubled banks with fresh capital. The corporation will also draw on the fund to provide loans to the bank customers clients, to cover losses on new loans and to capitalize a bridge bank holding company. The Resolution and Collection Bank, created to take over the assets of collapsed thrifts and buy failed banks' bad loans, will provide capital to banks by buying preferred shares and subordinated debt. The government has already spent 2 billion yen on such assistance. The government will look for buyers for failed banks for two years, with three one-year extensions possible after that. Under the plan, the government also will set up an organization to resolve disputes involving bad loans between lenders and borrowers, speed up the sale by auction of real estate used as collateral for defaulted loans, and permit the creation of private loan-collection companies. The plan will extend until March 2001 the period during which banks may sell defaulted loans to the Cooperative Credit Purchasing Co. and redevelop real estate collateral through the Housing and Urban Development Corp. The government plans to submit legislation to implement the new plan to an extraordinary session of parliament in late July, Finance Ministry officials said. Approval is all but certain since the ruling Liberal Democratic Party controls the powerful lower house and is just nine votes shy of a majority in the 252-seat upper house. bloomberg.com