Panning Geithner's Plan

[OneBlueSky]

A former Wall Streeter on why Treasury's toxic assets program stinks.

http://www.motherjones.com/politics/2009/03/panning-geithners-plan

Though the stock market may have lifted off on news of Treasury Secretary Timothy Geithner's purchase plan for toxic assets, don't be fooled by Wall Street's optimism. The plan is even worse than the one floated by Geithner's predecessor, Henry Paulson, last fall. At least Paulson wanted the government simply to buy the banking industry's junk outright—and spend less doing so.

Under Treasury's complicated Public-Private Partnership Investment Program, which was unveiled on Monday morning, Geithner wants to strike a deal with private investors who wouldn't touch these assets without serious incentives. The program will essentially give investors between $500 billion and $1 trillion dollars—at this point, what difference does half a trill make?—of spending money to go shopping for the bad assets that banks are dying to get off their books. And the kicker? The White House says the private sector is doing us a favor.

(snip)

The private sector helped create and spread a toxic stew of derivatives. Yet Geithner's strategy to “fix” the financial system is to ask its riskiest, most opaque players—the companies that shirked the most in taxes and were led by the execs who made the most money during the build-up years—to buy the system's junky assets in order “to cleanse it.” And this will come after $350 billion of capital injections and trillions of dollars of Federal Reserve loans haven't fixed the problem.

(snip)

The administration is caught up in crafting big plans to solve the problems of big banks. Instead, it should be dissecting the system into transparent, quantifiable, and understandable parts—and then dealing with those elements that can and should be assisted. Geithner ought to jettison the too-big-to-fail nonsense and keep it simple: Break up the banks into their commercial and speculative parts, and separate the assets along similar lines. Let the speculative parts die, and tend to the rest. As it stands, the present solution—propping up the entire system in a complex, highly leveraged manner that depends on the kindness of the culprits that caused this mess—is a colossally expensive exercise in bipartisan stupidity.

- more . . .

http://www.motherjones.com/politics/2009/03/panning-geithners-plan

[Larkspur]

1. Another attacking Saint Timmy Geithner?

Thought he walked on water? :sarcasm:

[Larkspur]

2. This is an apt image of Saint Geithner's plan...

It's like going to a used car dealership and saying to the car salesman, “I've got $100,000 to buy whatever you have to sell me,” and expecting him to provide you with his most valuable inventory.

Those banksters will gladly sell us lemons for the billions Saint Geithner plans on giving them.

[Larkspur]

3. Geithner's plan = satisfying a drug addict?

Of course, bank stocks rallied on this cheery news. The Dow perked up like a heroin addict about to get a fix. Why wouldn't banks welcome the chance to participate in a government-sponsored program to clean their polluted balance sheets, where their old clients, the same ones who wouldn't be caught dead purchasing these toxic assets, could be paid for participating?

This is how Christina Romer, chair of the White House Council of Economic Advisers, described the plan on Sunday night: “What we're talking about now are private firms that are kind of doing us a favor, right? Coming into this market to help us buy these toxic assets off banks' balance sheets." She added, "They are firms that are being the good guys here—coming into a market that hasn't existed to try and help us get toxic assets off banks' balance sheets."

Sounds like Saint Geithner's plan is a government sponsored ponzi scheme to me where the taxpayer plays the role again of "Sucker!"

And regarding the stock market, I'm always fascinated when it goes up on the news that tens of thousands of employees will get laid off. It's like the stock market would prefer slavery re-instituted, except this time it won't be just Africans and African Americans who will be subjugated. It will be all of us because in the mind of the stock market poohbahs, workers are a necessary evil at worse and expendable components at best.