Yellen speaks to ABC7 about bailout

January 16, 2009 12:28:36 PM PST
Banks are showing signs they desperately need another infusion of cash. The Federal Reserve Bank of San Francisco spoke to ABC7 Moneyscope about the next bailout.

Bank of America and the Treasury Department are in negotiations for another cash infusion. The likely figure is $15 to $20 billion. That's on top of $25 billion Bank of America already received.

San Francisco Federal Reserve President Janet Yellen said she had no details of the bank's situation. However, she suggested it's a reflection of the worsening economy.

"With rising delinquencies and losses, credit losses on loans, banks will continue to have troubles, and it's conceivable that more money will have to be injected in the banking system," said Yellen, Ph.D.

Congress has been unable to find out how banks have used billions of dollars in bailout funds from the first $350 billion in so-called 'tarp money.'

House Speaker Nancy Pelosi says that won't happen with this second round of tarp.

"I don't think you'll see us support anything unless we have passage of what Barney Frank is putting forth with accountability, with transparency, openness about these requirements and conditions about how what conditions should be placed on those receiving the money," said Speaker Pelosi.

Citigroup, the parent of Citibank, may also be seeking another round of bailout money.

Dr. Yellen told members of the Financial Women's Association of San Francisco that the banking sector's situation is likely to improve with economic recovery.

And, in her opinion, another stimulus program will be important.

"I think that if the stimulus package is passed and the economy begins to recover and we cap the unemployment rate, it will be very good for the banking system," said Ph.D.