Bankers’ bailout ‘could be as bad as it gets’

The Federal Reserve has taken a tough line on its plans to provide banks with a huge bailout package that will cost the nation as much as $600 billion over the next two years.

The bank’s leaders say they will have to borrow heavily to avoid the crisis, while lawmakers and analysts say the plan could be as big as it is costly.

Here’s what you need to know about the Fed’s plan.

(Jenny Starrs/The Washington Post)Read more:Federal Reserve chief Janet Yellen says ‘the path ahead is uncertain’ for banksThe Fed’s announcement Friday marks a significant shift for the central bank from its previous cautious tone about the possibility of a government rescue.

Yellen told lawmakers in a floor speech on Thursday that she thinks the “path ahead is unclear,” even though she said that her team is confident that it will be possible to bring the banks to financial stability.

“We will take whatever steps are necessary to prevent a potential collapse in the economy,” Yellen said.

“This is the second time in three years that the Fed has come to the floor of Congress with this kind of announcement,” said David Rosenberg, a fellow at the Peterson Institute for International Economics.

“It’s not surprising to hear it’s the second in that time frame.”

The Fed plans to begin taking applications for a $550 billion package of emergency loans this week, according to a statement.

The plan includes $100 billion in cash for banks, $40 billion in insurance, and $30 billion in emergency loans for homeowners and other households.

Banks and other financial institutions that fail would have to find alternative funding sources or go out of business, and the plan would provide billions in direct subsidies to the private sector, the Fed said.

But some experts question the extent to which this bailout package will be sufficient to keep the banks from imploding.

In a speech on Tuesday, Yellen called for Congress to provide more funding to the banks, saying they were a “critical” part of the economy.

The Fed’s proposal also calls for $1.5 trillion in mortgage-backed securities to be backed by government bonds, according, and for more government-backed mortgage-bond collateral.

The announcement Friday is significant, because the Fed had said it would begin taking the applications for the $550-billion bailout program this week.

But the Fed statement Friday does not give a clear indication of when the banks will get their money.

It was unclear if the Fed would also seek more emergency loans from the government.

“The Federal Reserve is confident it can ensure that the federal government will provide the financial support needed to prevent the most severe disruptions to the financial system,” the Fed stated in its announcement Friday.

“But we need Congress to act, and it will take action if Congress does not act, including by authorizing a new round of federal support to ensure a timely and orderly transition to a new financial system.”

A second round of $350 billion in bailouts will start on Tuesday and end on March 28, 2018.

This round will be similar to the first round.

“As of this date, the Federal Reserve anticipates that it may have exhausted the available resources and may have no additional funds available to support the institutions and financial firms whose failure would cause the greatest disruption to the global economy,” the statement reads.

“Therefore, in order to ensure that a sufficient amount of support is provided to the institutions, financial firms and their employees, we intend to provide additional liquidity to these institutions as well as other financial firms.”

This article has been updated to clarify that the Federal Government has a $600-billion emergency loan program to help banks.