Valuing toxic assets on bank balance sheets is among "real key issues" as the Obama administration devises a plan to mend the financial system and steady credit markets, Comptroller of the Currency John Dugan said, Bloomberg reported.
The biggest challenge is how to "pick and choose which assets to take from open institutions and how much you pay for them," Dugan, the supervisor of U.S. national banks, said in an interview in his Washington office today.
The administration plans to spend what remains of the $700 billion from the Troubled Asset Relief Program, which may include a government bank to assume toxic assets. Economists including Joseph Stiglitz, a Nobel laureate and professor at Columbia University, and investors such as billionaire George Soros say the plan may widen the U.S. deficit and is insufficient to revive lending.
Dugan, who regulates more than 1,500 banks including units at Citigroup Inc. and Bank of America Corp., in negotiating the plan with Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben S. Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair.
Dugan, 53, declined to elaborate on the policy discussions, and said the officials are sorting through "the best mix of tools" available for aiding banks that reported more than $500 billion in writedowns and credit losses last year.
Geithner has said a "range of options" are being considered for a further rescue and Obama's advisers are struggling with how to value the mortgage-related securities and other distressed holdings financial firms would like to unload. "It's an incredibly difficult thing to do and to get right," he said on Jan. 22 during his Senate confirmation hearing.