Richmond Federal Reserve President Jeffrey Lacker on Friday called arguments to remove toxic assets from bank balance sheets "compelling."
"As long as you have some material risk that remains on the bank's books, any new equity investor is going to be subsidizing existing debt holders, and that's going to impose an impediment to raising new equity and recapitalizing the banking system from the private sector," he said, taking questions from reporters after a speech to the Richmond chapter of the Risk Management Association.
Lacker, a 2009 voting member of the Federal Open Market Committee, said he supports an idea floated earlier in the day by U.S. Treasury Secretary Henry Paulson to create some type of aggregator bank. "That general idea is a very good one," he said. "It has a lot of promise for the way forward."
In comments to reporters after his speech, as reported by Dow Jones News