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Treasury adopts proactive 'Plan C'

July 8, 2009 at 2:21 PM   |   Comments

WASHINGTON, July 8 (UPI) -- The U.S. Treasury is moving ahead with an approach to the financial crisis that focuses on what may cause trouble around the corner, an official said.

"We are continually examining different scenarios going forward; that's just prudent planning," Treasury spokesman Andrew Williams said.

Informally, the program is known as "Plan C," The Washington Post reported Wednesday.

The Treasury Department has begun assessing companies and markets where a failure could ripple through the financial system. So it has taken on a role of monitoring systemic risk that President Barack Obama proposed recently for the Federal Reserve Bank.

The Treasury is studying commercial and home real estate markets and difficulties among smaller banks.

At particular risk is the commercial real estate market.

As much as $3 trillion in commercial real estate debt may need to be refinanced in the next few years, experts said.

The trouble is, loans are scarce.

"There's going to be a lot of these stories where people relied heavily on this high-leverage cheap availability of debt," said Kevin Smith of Blackwell Advisors, a consulting firm.

In addition, refinancing will be difficult when "the question is whether a loan can be made at all," said Kim Diamond, a managing director at Standard & Poor's.

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