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U.S. drafting rules to spur private equity funded bank buyouts | The Commercial Finance Blog

U.S. drafting rules to spur private equity funded bank buyouts

by LJ Miehe on June 14, 2009

Editor’s Note: This is a positive move for the financial markets as a whole.  The more we get these failed banks out of the system or into new ownership, the more trust will return to our financial system.  The last thing we need in America is “Zombie Banks” or a “Lost Decade” like they had in Japan in the 1990’s.  We need to punish the bad actors in this latest crisis and that equals to either bankruptcy or a takeover.  This is the correct prescription for our market-based economy.

News (Reuters):

U.S. regulators are drawing up rules that would make it easier for private equity firms to acquire troubled banks, aiming to free up more funds to recapitalize lenders, the Financial Times reported, citing people close to the situation.

The plan, which has yet to be finalized, may require private equity companies to inject substantial capital into lenders and to agree not to sell them for at least two years, the newspaper reported.

Obama administration officials continue to stress concerns about ensuring sufficient capital in the financial system, even as several financial institutions have begun lining up to return funds borrowed under the government’s $700 billion troubled asset relief program to cope with the financial crisis.

The paper cited analyst estimates that private equity firms could provide up to $50 billion to recapitalize banks.

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