World News Brief, Tuesday April 21

US to re-write bank loan rules as lending continues to drop; North and South Korea in tense meeting today; Thais look to amend constitution; Israel pulls ambassador; and more

Top of the Agenda: TARP Conditions, UK Bailout

The United States plans to create new rules governing how banks can repay bailout loans, the Financial Times reports, and in some cases banks won't be allowed to repay the loans immediately. The paper quotes a senior U.S. official who says the government will set up a test to determine whether it is in the "national economic interest" to allow specific banks to repay their loans. The change would follow pressures from Goldman Sachs and JP Morgan Chase to be allowed to repay loans they had taken from the Troubled Assets Relief Program, or TARP.

Some analysts worry repayments could be counterproductive in terms of getting credit markets flowing again. The Wall Street Journal reports this morning that bank lending has continued to drop, despite the government's efforts to pump money into the system.

Washington also signaled today (NYT) that it may move to convert some of the loans it has given to large banks into equity shares of those banks, in an effort to provide more relief without having to go back to Congress for more funding.

In other financial news, British Finance Minister Alistair Darling admitted for the first time today that the British government won't fully recoup (FT) the costs of its banking interventions. Darling said the British bailouts could wind up costing the government 60 billion pounds, or roughly $87 billion.

Policy Recommendations:

- A new paper (PDF) from CFR's Squam Lake Working Group on financial regulation recommends support for a regulatory hybrid security aimed at expediting the recapitalization of troubled financial firms.

- In a Council Special Report (PDF), CFR's Benn Steil proposes a broader framework for U.S. financial regulatory reform.

 

PACIFIC RIM: Kaesong Talks

The Korea Times reports officials from Pyongyang will likely threaten to shut down a joint industrial complex at Kaesong during meetings today between North and South Korean officials.

Yonhap reports South Korean President Lee Myung-bak convened impromptu meetings of South Korean security officials ahead of the meetings with North Korea.

THAILAND: Thailand's Prime Minister said the country's leading political parties have two weeks (Bangkok Post) to propose amendments to the country's constitution with an eye toward helping defuse the political tensions that spurred recent demonstrations in Bangkok.

 

ELSEWHERE:

Israel pulls ambassador to Switzerland over UN row.

Obama welcomes Venezuela's plan to dispatch envoy to Washington.

This is an excerpt of the CFR.org Daily News Brief. The full version is available on CFR.org.