"Geithner's Indulgence Of Bankers Is Fast Becoming President Obama's Achilles' Heel"

[Better Believe It]

The Nationalization Option
By Harold Meyerson
Washington Post
March 18, 2009

You might think that having anted up $173 billion of our own money, we taxpayers would have some leverage at AIG, now that we own 80 percent of the shares. You might think that when chief executive Edward Liddy, a holdover appointee of Hank Paulson's, told Treasury Secretary Tim Geithner that he had just mailed $165 million of our money as bonuses to the geniuses at the firm's financial products unit -- who probably did more on a per-banker basis to destroy global capitalism than any other kindred group -- that Geithner, upon hearing this news, would have responded, "Liddy, you're fired."

But Geithner's indulgence of bankers' indulgences is fast becoming the Obama administration's Achilles' heel. The AIG debacle is the latest in a series of bewildering Geithner decisions that threaten to undermine the administration's efforts to restart the economy. So long as it's Be Kind to Bankers Week at Treasury -- and we've had eight straight such weeks since the president was inaugurated -- American banking, and the economy it is supposed to serve, will remain paralyzed. The Geithner plan to restart the banks provides huge taxpayer subsidies to hedge funds, investment banks and private equity companies to buy the banks' toxic assets without really having to assume the risk. That's right -- the same Wall Street wizards who got us into this mess, using the same securitization techniques that built mountains of debt within a shadow financial system that remains unregulated, are the saviors whom Geithner has anointed to extricate us -- with our capital, not theirs -- from the mess that they created.

A more plausible solution would be for the government to assume control of those banks that are insolvent, as it routinely does when banks go under. It could then install new management, wipe out the shareholders, take the devalued assets off the banks' books, restart lending and restore the banks to private control at a modest profit for the taxpayers. There may be reasons that Geithner's plan makes more sense than this one, but if they exist, Geithner has failed to explain them.

It's certainly not because Americans are dead set against bank nationalization: A Newsweek poll this month found that 56 percent of respondents supported it. Hell, Alan Greenspan supports it. But Geithner seems unable to imagine a banking system not run by its current leaders or owned by its current shareholders or engaged in the same arcane securitization practices that led to its collapse. An administration that is busily creating alternatives to our health-care system and our energy policies is being dragged down by a Treasury secretary who cannot conceive of an alternative to our catastrophic system of banking.

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/17/AR2009031702939_pf.html

[Laelth]

1. Indulgence? We were blackmailed.

We had to have AIG's participation in the bailout. Both American political parties knew it, and both parties have taken steps to insure it.

AIG and bank executives said they would not participate in the bailout if their bonuses were capped. They blackmailed us. The Federal Government can't let these banks (nor AIG which insured the credit default swaps) fail, because if it did, foreign banks would lose confidence in the U.S. and would not loan the government the $1.5 trillion it needs to keep the government running. Foreign banks finance the U.S. national debt, and AIG insures those banks against losses. AIG held a gun to our head and said, effectively, give us our bonuses or the whole Federal Government collapses because no bank will be willing to lend the U.S. money.

So, Treasury insisted that the bonuses be allowed, and the restriction against them (that Dodd had insisted upon) was removed. Here, Obama did what he felt was best, and I am hesitant to second-guess him on this.

That's what I think happened.

:dem:

-Laelth

cross-posted--six times now.

[ClarkUSA]

2. Another anti-Obama OP today? Boy, you've been busy today! That's all you seem to do...

... when you're not making pissy anti-Obama posts and supporting those who do. I guess you and Louis-Emmanuel take turns
trying to stir up shit against our President? Some people are still so bitter over how the election turned out, eh? :eyes:

[Better Believe It]

3. So why did you post here?

Since it appears you don't have an opinion on the article that you'd like to share regarding the article.

Anyone can run around on this board launching personal attacks against posters instead of contributing to a democratic discussion and debate on economic and other issues.

Perhaps you can find a trash talk board somewhere that would meet your intellectual abilities.

[ClarkUSA]

4. Since you've joined this forum, all you do is run down Obama via one pissy OP after another.

I've been here long enough to know what your agenda is. You and Louis-Emmanuel are a tag team trying to stir up shit.

[HiFructosePronSyrup]

5. You better believe it.

[ClarkUSA]

6. Heh

Thanks for the chuckle.

[Better Believe It]

8. So why did you post here??

This isn't a trash talk board in case you didn't notice.

[D-Lee]

15. Why ignore that Geithner is operating under the BUSH legislation

So, Geithner is operating within the law, as opposed to the prior administration's track record on adhering to the "rule of law" ...

And this is Obama's fault how?

[Median Democrat]

7. Nationalization Still Involves Billions Of Taxpayer Money

Regardless of the label given, there is no magic cure all that avoids taxpayers being on the hook. Now, nationalization may be the better option. However, it is misleading to suggest that it is necessarily cheaper or that it will magically solve the problem of execessive executive compensation.

[Better Believe It]

9. Have you read what nationalization advocates such as Nouriel Roubini have written?

[Median Democrat]

11. Roubine Has A Cost Free Nationalization Plan? Not really

I have read a lot of Roubini's articles. He has never suggested that nationalization can be done for free.

[Better Believe It]

13. What credible economist has written that nationalization of the big banks is "free"

Sounds like your knocking down a straw horse since progressive economists who advocate nationalization have not said it would be done for "free".

We just won't be pouring a trillion or two dollars down a black hole to pay off bondholders and derivative crooks.

So, do you agree with Roubini's nationalization proposal and if not, why not?

[Truth2Tell]

10. K&R, concise:

That's right -- the same Wall Street wizards who got us into this mess, using the same securitization techniques that built mountains of debt within a shadow financial system that remains unregulated, are the saviors whom Geithner has anointed to extricate us -- with our capital, not theirs -- from the mess that they created.

[Bold Sea Captain]

12. Better believe you never supported Obama in the first place

Why should we pay any attention to your biased whining?

[stillcool]

14. is this the chorus line?

[Larkspur]

16. Progressive writer David Sirota warned us about Geithner before

Timmy was confirmed. Sirota also warned us that Obama was surrounding himself with Rubinites from The Hamilton Project, who are all free traders. There are no voices of dissent in Obama's economic team. Larry Summers makes sure of that. Geithner isn't the only one who needs to be fired. Summers needs to be forced out too.