Banking Industry

Upset about how the first half of the $700-billion Wall Street bailout fund was spent, lawmakers are working with incoming Treasury Secretary Timothy F. Geithner to impose tougher restrictions on recipients of the remaining money and make sure a large chunk is used to help homeowners avoid foreclosure.

"Justice? You get justice in the next world, in this world you have the law." That opening line of one of my favorite novels, William Gaddis' 1994 legal satire "A Frolic of His Own," comes back to me every time I hear someone call for packing the rich malefactors behind the great financial meltdown of 2008 off to jail. Having watched 40% of our 401(k)s go up in smoke and jobs vanish by the millions, it's natural to want to see the guilty subjected to divine justice.

Borrowers are rushing to refinance their mortgages at record low interest rates but face unexpected delays as swamped lenders struggle to cope with the surge at a time when layoffs have sharply cut staffing. Bank of America Corp., which started shedding 7,500 employees after its July merger with Countrywide Financial Corp., recently yanked 300 workers from its home equity line department to help deal with refinancing requests, said Matt Vernon, the bank's national sales executive.

Meet the newest U.S. mega-bank: First National Toxic Loan. The federal government appears to be turning back to Plan A in its efforts to bail out the financial system and get banks to lend again. Plan A, as articulated by outgoing Treasury Secretary Henry M. Paulson in September, was to have the government buy bad loans from banks, ridding many institutions of much or most of their worst junk assets.

Frustrated by their continued reluctance to lend, the British government unveiled Monday its second plan in three months to stabilize the nation's banks, offering to insure them against big losses on toxic assets in exchange for an agreement to issue loans to creditworthy customers. European banking stocks plummeted on the plan and on word that Royal Bank of Scotland was on track to record the biggest annual loss in British corporate history -- as much as $42 billion.

The financial crisis has raised questions about the solvency of Britain's banks that may lead the Bank of England to buy up assets from them within "weeks, not months," the central bank's governor, Mervyn King, said Tuesday.

One measure of the collapse of shares of banks and other financial companies is the sector's shrinking importance in the benchmark Standard & Poor's 500 index. At the stock market's all-time high of Oct. 9, 2007, financial stocks accounted for 20.1% of the market value of the S&P -- the largest share of any of the index's 10 major industry sectors. From the stock market's perspective, finance then was the most important business in America.

Mortgage finance company Freddie Mac said Friday that it would need an additional $30 billion to $35 billion in government aid as it copes with losses on loans the company backed during the housing bubble. The company disclosed in a Securities and Exchange Commission filing late Friday that it was expecting its government regulator, the Federal Housing Finance Agency, to make the request from the Treasury Department. That comes on top of the $13.

The Obama administration has told special investigators in the Treasury Department to delay a comprehensive examination of how banks and other corporations are using $350 billion in federal bailout money because of possible conflicts with federal paperwork statutes. The delay sparked an angry response from the senior Republican on the Senate Finance Committee, Charles E.

The chief watchdog for the U.S. Treasury's $700-billion bailout will ask bank executives not only to describe how they are using the funds but also to certify their answers under threat of criminal penalties, he said in an interview Wednesday. Neil J. Barofsky, special inspector general for the Troubled Asset Relief Program, said his intent was to shed more light on the workings of the widely criticized program.