Will Geithner's "trillion dollar" plan work?

[CoffeeCat]

Poll question: Will Geithner's "trillion dollar" plan work?

Tim Geithner is standing behind a plan to throw up to one trillion dollars
at our nations banks and other financial institutions--to purchase toxic assets.

The theory is that if we put a value on these assets, buy them and get them
out of the system--banking and other financial entities can begin to heal.

In theory, this will help to unfreeze credit, increase confidence in the banks
and get the economic engine running better.

What say you?

[cali]

1. might I suggest that you add "I don';t know" to the choices?

[CoffeeCat]

16. You know what...I did have an...

..."I have no idea' option, and I don't know why it disappeared.

I can't edit any more.

I agree with you. :)

[sharp_stick]

2. Agree with Cali

I think an I don't know is in order here. There seem to be one hell of a lot of "economic experts" on this board lately but there are one or two of us that don't claim that kind of fortune teller ability.

[edhopper]

3. I look to the people

who have been right about this stuff for the last 8 years.
Steiglitz, Krugman, Roubini, Baker, Galbreith, Atrios, Ritholtz...
They ALL think this is a bad plan, and explain why. So I would agree with those who have been right, rather than the Summers, Rubin, Geithner group, which has been WRONG!

[David Dunham]

5. Stop looking to Chicken Little Krugman who has never run a business of any kind

[edhopper]

13. And how do you account

for him being RIGHT for the last 8 years, while those good folks who ran businesses on Wall Street have been so WRONG. So wrong in fact that they came close to destroying our economy.
And I did not just mention Krugman, but a half dozen (and there are more) Economist who have also been RIGHT the last 8 years and say the plan is not good.
In case you missed it, last year the sky did fall.

[fasttense]

4. What do you mean by help?

I don't have a problem getting loans. I know very few people who do. Mostly the problem is paying back the loan and finding a good paying job.

So if you mean help by making the banks and Wall Street firms CEOs rich again? Well, it will make Them rich. It just wont help anyone else. It wont create jobs or return main street to a thriving community again.

Seems to me Herbert Hoover tried something like this in the Reconstruction Finance Corporation. It helped the rich stay rich but did very little for the starving masses and the middle class.

[CoffeeCat]

17. That's an incredibly important point...

What's the point of "unfreezing credit" FIRST when people have no jobs, no money and are afraid to
spend the money that they do have?

Middle-class folks don't exactly "need" to better their lives right now by going out and borrowing
money. That's not their chief complaint. Getting a job, keeping their job and being able to
stay in their homes and afford the necessities--that is what is needed.

I don't hear too many people in my suburban neighborhood saying that there would be much less
suffering in their lives if they could only get a loan from a bank. They want to become employed
or to remain in their job.

[madrchsod]

6. it`s going to cause a depression worse than 1930`s

[Tierra_y_Libertad]

7. Printing money to give to bankers? A recipe for for more deflation and a worthless dollar.

Will it work? Like a dream come true for he bankers. The rest of the world...let them eat cake.

http://www.atimes.com/atimes/Global_Economy/KC24Dj01.html

Washington fiscal and monetary policies are completely out of control. Apparently, the overarching objective has evolved to be one of rejuvenating the securities and asset markets. I believe the principal objective should be to avoid bankrupting the country. It is also my view that our policymakers and pundits are operating from flawed analytical frameworks and are, thus, completely oblivious to the risks associated with the current course of policymaking.

Today's consensus view holds that inflation is the primary risk emanating from aggressive fiscal and monetary stimulation. It is believed that this risk is minimal in our newfound deflationary backdrop. Moreover, if inflation does at some point begin to rear its ugly head the Fed will simply extract "money" from the system and guide the economy back to "the promised land of price stability". Wording this flawed view somewhat differently, inflation is not an issue - and our astute central bankers are well-placed to deal with inflation if it ever unexpectedly does become a problem.

Our federal government has set a course to issue trillions of Treasury securities and guarantee multi-trillions more of private-sector debt. The Federal Reserve has set its own course to balloon its liabilities as it acquires trillions of securities. After witnessing the disastrous financial and economic distortions wrought from trillions of Wall Street credit inflation (securities issuance), it is difficult for me to accept the shallowness of today's analysis. In reality, the paramount risk today has very little to do with prospective rates of consumer price inflation. Instead, the critical issue is whether the Treasury and Federal Reserve have set a mutual course that will destroy their creditworthiness - just as Wall Street finance destroyed theirs.

[TwilightGardener]

8. Don't know--I'm willing to wait and see rather than start screaming, "It's all a SCAM" in

paranoid hysterics.

[western mass]

9. Putting Geitner in charge of the economic recovery...

is like putting Tony Soprano in charge of cleaning up organized crime in NYC.

And any economist or talking head who failed to predict what's happened needs to STFU. They've already proven that they know sh**.

[MarjorieG]

10. We don't know, could save money, but nationalism always costly, moreso with these behemoths. Krugman

isn't G_D. People are spouting him because he feels revolutionary, bold, counter establishment, when no one, including Krugman, knows what will work work, or not, or what the value of these black holes are.

I deeply resent Krugman for his political tin ear to what he causes, and for thinking he's always correct when there are as many loopholes and leaps of faith to his conclusions.

Will his followers be upset that the economy improves, even though we don't follow his words? Will they color the judgment of whether it improves, because we didn't follow Krugman in lockstep?

[edhopper]

14. Not just Krugman

Steilglitz, Roubini, Baker, Johnson....

There is a consensus among those who have been right that this is not a good plan.

[MarjorieG]

18. I'm not as concerned about what we could have done, given power and consensus, but what now.

[Sebastian Doyle]

19. As far as I know, Krugman doesn't think he's G_d

But I don't know if I could say the same of the Wall Street Criminals. They seem to think they are.

[960]

11. by the time he's on his 30th or 40th "trillion dollar plan"

it might just work. Unfortunately I'll probably have starved to death, so I'll never know.

[Statistical]

12. I wish you had another option.

Yes it WILL work BUT it is likely a very expensive way to solve the problem.

Banks will not lend period until they get rid of the toxic assets. Reason why is survival is always rule #1.

Bank xyz with $100 million in toxic assets has no idea how low it can go so that bank will hoard cache to ensure it doesn't default on its deposit requirements and be taken over by FDIC.

Period. Nothing will change that. No bank will loan money knowing that loans reduce its capital position and with no security on value of the toxic assets risk going into deposit default.

They have seen 100+ banks already fail FOR THAT EXACT REASON.

So if you want banks to lend you need to get this crap off the books.

The idea is sound however I think the plan is VERY VERY VERY expensive.

Govt could find a market for this by simply making it tax free.
It doesn't cost the govt anything other than potential tax receipts.

Private money will buy this is the pot is sweet enough. Offer some specualtors the potential to make 70% tax free and they will buy it and take it off the banks books.

So plan wins of concept and fails on execution.

[edhopper]

15. Which is why

nationalizing these banks is the better option.