The Congressional Oversight Panel is warning that federal efforts to help struggling banks aren't doing enough to help smaller institutions. The panel, chaired by Elizabeth Warren, homed in on what it sees as shortcomings in the Public-Private Investment Plan, or PPIP.
Designed to encourage investment in the toxic mortgage-backed securities that fueled the current financial crisis, PPIP has been scaled back from $100 billion to $30 billion. Warren and COP argue in their August analysis that PIPP doesn't reach far enough. Calculated Risk pulled this part of the report:
The problem of troubled assets is especially serious for the balance sheets of small banks. Small banks' troubled assets are generally whole loans, but Treasury's main program for removing troubled assets from banks' balance sheets, the PPIP will at present address only troubled mortgage securities and not whole loans. The problem is compounded by the fact that banks smaller than those subjected to stress tests also hold greater concentrations of commercial real estate loans, which pose a potential threat of high defaults. Moreover, small banks have more difficulty accessing the capital markets than larger banks. Despite these difficulties, the adequacy of small banks' capital buffers has not been evaluated under the stress tests.
The emphasis is Calculated Risk's.