In an attempt to strike a deal with the opposition camp, the Liberal Democratic Party offered Monday to scrap two financial stabilization laws that allow the injection of public funds into troubled banks.
In its latest compromise proposal to the Democratic Party of Japan, Shinto Heiwa (New Peace Party) and the Liberal Party, the LDP said it will abolish the two existing laws upon the enactment of new legislation.
Opposition officials called the proposal, officially presented to executive members of a Lower House special committee on financial system stabilization, vague and insufficient. They agreed, however, to hold further talks with the LDP later in the day and to continue efforts toward a concession by the end of the day.
That prospect, however, remained unclear, with the handling of the ailing Long-Term Credit Bank of Japan emerging as a major point of contention. While calling for the implementation of new legislation that would impose strict rules in allowing “public assistance” to ailing financial institutions, the LDP’s proposal includes no specific reference to the government’s controversial plan to inject public funds into the LTCB.
A senior DPJ official said that the new and strict rules should apply to the LTCB and set a standard for the future handling of failing banks.
The LDP, however, maintains its earlier stance that the planed injection of public funds into the LTCB should be carried out in accordance with the existing two laws.
In Monday’s proposals, the LDP also accepted the three opposition parties’ idea to set up a Japanese version of the U.S. Resolution Trust Corp. to single-handedly collect bad loans.
The LDP had been calling for keeping the two existing organizations — the Resolution and Collection Bank and Housing Loans Administration Corp. — intact. But it has now agreed to integrate the two organizations to create the Japanese RTC.
As to the creation of the tentatively named Financial System Resuscitation Committee, an independent body to facilitate controlled liquidation of failed banks, the LDP’s proposal calls for “taking into consideration” the government’s policy for reorganizing central government agencies.
Opposition officials, however, said it remains unclear whether the complete separation of the financial and fiscal authorities can be achieved.
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