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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 03:58 PM
Original message
Geithner's Plan "Extremely Dangerous," Economist Galbraith Says
Geithner's Plan "Extremely Dangerous," Economist Galbraith Says
The Business Insider
(Video at link)

Tim Geithner has finally revealed his plan to fix the banking system and economy. Paul Krugman, James Galbraith, and others have already trashed it.

Why?

In short, because the plan is yet another massive, ineffective gift to banks and Wall Street. Taxpayers, of course, will take the hit
Why does Tim Geithner keep repackaging the same trash-asset-removal plan that he has been trying to get approved since last fall?

In our opinion, because Tim Geithner formed his view of this crisis last fall, while sitting across the table from his constituents at the New York Fed: The CEOs of the big Wall Street firms. He views the crisis the same way Wall Street does--as a temporary liquidity problem--and his plans to fix it are designed with the best interests of Wall Street in mind.

If Geithner's plan to fix the banks would also fix the economy, this would be tolerable. But no smart economist we know of thinks that it will.

We think Geithner is suffering from five fundamental misconceptions about what is wrong with the economy. Here they are:

The trouble with the economy is that the banks aren't lending. The reality: The economy is in trouble because American consumers and businesses took on way too much debt and are now collapsing under the weight of it. As consumers retrench, companies that sell to them are retrenching, thus exacerbating the problem. The banks, meanwhile, are lending. They just aren't lending as much as they used to. Also the shadow banking system (securitization markets), which actually provided more funding to the economy than the banks, has collapsed.

The banks aren't lending because their balance sheets are loaded with "bad assets" that the market has temporarily mispriced. The reality: The banks aren't lending (much) because they have decided to stop making loans to people and companies who can't pay them back. And because the banks are scared that future writedowns on their old loans will lead to future losses that will wipe out their equity.

Bad assets are "bad" because the market doesn't understand how much they are really worth. The reality: The bad assets are bad because they are worth less than the banks say they are. House prices have dropped by nearly 30% nationwide. That has created something in the neighborhood of $5+ trillion of losses in residential real estate alone (off a peak market value of housing about $20+ trillion). The banks don't want to take their share of those losses because doing so will wipe them out. So they, and Geithner, are doing everything they can to pawn the losses off on the taxpayer.

More...
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PM Martin Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:06 PM
Response to Original message
1. k/r
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AzDar Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:11 PM
Response to Original message
2. Well. There it is.
:scared:
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chimpymustgo Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:14 PM
Response to Reply #2
8. Sachs, Krugman, Galbraith hate it. Wall Street loves it. Which side you on?
Money Party!!!
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Coffee and Cake Donating Member (140 posts) Send PM | Profile | Ignore Fri Mar-27-09 04:28 AM
Response to Reply #8
88. And Stiglitz reject it, but Obama fans love it.
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Name removed Donating Member (0 posts) Send PM | Profile | Ignore Thu Mar-26-09 03:42 PM
Response to Reply #2
75. Deleted message
Message removed by moderator. Click here to review the message board rules.
 
Larkspur Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:12 PM
Response to Original message
3. Waiting for the Obama fanatics to attack Galbraith
Looks like Krugman is one of many voices of dissent against Geithner's bailout plan.
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SemiCharmedQuark Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:13 PM
Response to Reply #3
7. The article isn't by Galbraith, it's by Henry Blodget.
It only has one line by Galbraith.
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terisan Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:26 PM
Response to Reply #7
16. Galbraith on Video saying Gaithner Plan Bad-Yahoo Finance has it. nt
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SemiCharmedQuark Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:27 PM
Response to Reply #16
17. *That's* what I'm looking for. Thanks!
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leftchick Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Mar-24-09 12:24 PM
Response to Reply #16
71. it is just incredible
have any of those asshats in congress asked him why he has not consulted with these top economists? Krugman, Galbraith, Steiglitz and Roubini yet today??
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galloglas Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Mar-26-09 07:25 PM
Response to Reply #16
77. But Galbraith is DEAD!
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:30 PM
Response to Reply #7
19. Did you watch the video at the link?
The article is based almost entirely on Galbraith's comments in the interview.
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galloglas Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Mar-26-09 07:25 PM
Response to Reply #7
76. And Galbraith has been DEAD since 2006 !!
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camera obscura Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 07:21 PM
Response to Reply #3
55. He must be a PUMA!
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yurbud Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Mar-24-09 10:05 AM
Response to Reply #3
70. attacks aren't from Obama fanatics, they're from paid fanatics
there are positions I can understand people legitimately believing and disagreeing with me, and then there are those that it is hard to imagine ANYONE holding unless they stand to gain from it directly or are paid to do so.

I don't know too many right wingers or even so-called centrists who think writing blank check after blank check to Wall Street is going to help--apart from reviving the predator class that caused the problem.
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SemiCharmedQuark Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:13 PM
Response to Original message
4. I think you should rewrite your title. This isn't Galbraith, this is Henry Blodget
I would love to read Galbraith's actual words. These aren't them.

Blodget is not on our side. Here's a big article of his AGAINST nationalization and against pay caps on CEOs:

http://www.businessinsider.com/henry-blodget-90-bonus-t...
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chimpymustgo Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:18 PM
Response to Reply #4
11. The headline is correct. Blodgett is relating his conversation with Galbraith.
-snip-



Why?

In short, because the plan is yet another massive, ineffective gift to banks and Wall Street. Taxpayers, of course, will take the hit.

-snip-
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SemiCharmedQuark Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:23 PM
Response to Reply #11
13. Blodgett is borrowing credibility from Galbraith.
DU wouldn't trust Blodgett. We do trust Galbraith.
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galloglas Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Mar-26-09 07:30 PM
Response to Reply #13
80. But Galbraith is dead!!
(October 15, 1908 April 29, 2006)

How GOP of someone to quote someone quoting someone who is DEAD!


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galloglas Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Mar-26-09 07:29 PM
Response to Reply #11
78. Where/when did this interview take place??
You should check this out. Galbraith died in 2006 at the age of 98!!


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Oak2004 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Mar-26-09 07:46 PM
Response to Reply #78
83. The dead one had a son by the same name, also a prominent economist nt
Edited on Thu Mar-26-09 07:47 PM by Oak2004
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galloglas Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Mar-26-09 08:00 PM
Response to Reply #83
85. Yes, but how many are deceived
When you quote a "J. Galbraith" or "J. K. Galbraith" as an economic source, there are inherent dangers. To segue, without elucidation, to what some would call "John Kenneth's idiot son" is disingenuous at best.

John Kenneth Galbraith has been the presumed authority on liberal economics since the 1930s. To float in a "ringer" is not close to credible, particularly when playing on the last name. It is similar to quoting "Buckley", but meaning Christopher instead of William F. Buckley. Or to say that "Reagan said" when you mean Michael Reagan or Ronnie Reagan.

Seriously, how many posters will see through the sleight-of-hand?
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Oak2004 Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Mar-27-09 04:25 AM
Response to Reply #85
87. None here that follow the discussions regularly
James Galbraith's name and writings are mentioned here all the time. When I see "Galbraith" here I assume it's the living, younger Galbraith, unless someone specifically refers to the work of the father.

You're the only poster I've seen who didn't seem to understand who "Galbraith" usually means here.
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:34 PM
Response to Reply #4
22. I didn't write the headline.
If you watch the video at the link I posted, you can hear that it is a direct quote.

I like Blodget on the whole, though I have disagreements with some of his views. I don't think it's valid to say "he's not on our side", therefore we should ignore anything he writes. This article is mostly expanding on the economic outline Galbraith gives in the interview.
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Pale Blue Dot Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:13 PM
Response to Original message
5. He NAILS it.
The reality: The economy is in trouble because American consumers and businesses took on way too much debt and are now collapsing under the weight of it.

Nobody is dealing with this issue. Americans owe nearly 100% of our GDP. The only other time that's happened - 1929. What we DIDN'T have in 1929 was massive corporate, state and local, and federal debt totaling up to an additional 5x (or more, depending on the estimates) GDP.

Nobody is dealing with this issue. Watch: no one who responds in this thread in favor of this awful plan will even address this issue - they'll simply say that people are against Obama, we need to give Giethner a chance, I'm a "doom and gloomer", etc. It's terrifying.
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SemiCharmedQuark Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:16 PM
Response to Reply #5
9. Where do you get the figure that our debt is 100% of our GDP?
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Pale Blue Dot Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:24 PM
Response to Reply #9
14. Many places.
Here, for one:

http://www.democraticunderground.com/discuss/duboard.ph...

Also, the PBS program "This American Life" had a show about the economy during which an economist mentioned this figure. There may be an achive of the show at www.thislife.org .

Plus, if you're interested I urge you to watch the Chris Martenson "Crash Course" series, also originally broadcast on PBS:

http://www.chrismartenson.com/crashcourse
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SemiCharmedQuark Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:28 PM
Response to Reply #14
18. Ahhh, you're talking about household debt %, not national debt%
My mistake :blush:

Thank you very much for the recommendations.
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galileoreloaded Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:55 PM
Response to Reply #18
30. Actually, total debt, public and private is 100% higher than in the years
precipitating the great depression. 250% vs. approx 360%. Actually, probably closer to 375% with all the bailouts at this point.
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LeftHandPath Donating Member (222 posts) Send PM | Profile | Ignore Mon Mar-23-09 05:21 PM
Response to Reply #5
39. You're spot on!
No where do we hear anything about fixing the real problem, excessive debt and leverage.

If they did, they would have to accept deflation as a consequence of our excess. Instead they are trying to reinflate the bubble.

Get that? They dont want to fix what is broken, they want to get the rigged game going again. And now that they have stepped out over the cliff, there is no turning back.

Were headed for a bond market dislocation and a dollar collapse at some point.
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napoleon_in_rags Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Mar-24-09 01:26 AM
Response to Reply #39
61. What if solving the temporary credit liquidity issue is attached to something else?
Debt is a neutral thing in itself, the question is whether or not its an investment that creates a return. Bush's policies of burning money were fueled by debt, yet offered no return. What about Obamas policies of investing in infrastructure etc that WILL create a return? What if this solution to the temporary credit liquidity crisis is coupled with policy that ensure an increase in debt is wisely invested? What's wrong with that?

And more importantly, if its as bad as people say it is, what have we got to lose in trying?
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okieinpain Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Mar-24-09 07:51 AM
Response to Reply #61
66. i agree, the experts keep saying that we have to let it fall so it
can be fixed. but what does experts don't say is what it will look like if you allow it to fall. are people really ready to see 20 to 40 percent of the people out out work in this country. hell we just damn near had a riot with females trying out for the next top model, can you imagine people in line for food for their kids. please lets get real here.

what would america's collapse do to the rest of the world if we stop buying their stuff. can you imagine china and india with their large populations collapsing, million people riots over food and water.
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galloglas Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 06:27 PM
Response to Reply #5
48. Truman-Eisenhower years equal to current years
Since we are only speaking of US Government debt (you aren't putting up direct TARP money, right??) then we should look at US Government Debt.

You will note from the pages below that US debt as a % of GDP was approximately the same during the Eisenhower-Truman years. Lower during the 1980s largely due to inflation.


http://zfacts.com/p/318.html



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endarkenment Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:13 PM
Response to Original message
6. Soon to be seen on DU: Galbraith, idiot 'economist', is dead to us.
The Obama administration is making a mistake. How serious a mistake this is going to be is hard to tell, but it is a mistake. Insiders are making policy to help their insider friends stay in business and in control of their 'too big to fail' enterprises. It is the kleptocracy, stupid, and it is doing us in.

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ihavenobias Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:22 PM
Response to Reply #6
12. With regard to that comment title, it's so sad and oh so true.
:(
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sendero Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 06:29 PM
Response to Reply #6
50. And the number of SHEEPLE here..
.. that can't see that astounds me. If a Republican were pulling this crap there would be HOWLS.
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galileoreloaded Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:16 PM
Response to Original message
10. What is so dangerous about "our good executives" cleaning up with bonuses playing with taxpayer ....
dollars?

From NPR this AM:

"It appears that the administration would like to distinguish between "good executives" and "bad executives." The bad guys are the ones who are becoming a burden on the taxpayers, taking both big government bailouts and big pay bonuses. The good guys are the executives who are acting more responsibly and are willing to work with the government to get the ball rolling again.

"What we're talking about now are private firms that are kind of doing us a favor," Cristina Romer, the chairman of the President's Council of Economic Advisers, said Sunday on Fox News. "And I think they understand that the president realizes they're in a different category." She seemed to be suggesting that if Wall Street executives cooperate with the government, the Obama administration will try to protect them from the backlash that's being directed at Wall Street more generally."

Nah, this is a great idea. Well, unless you are a pensioner, retired, or on a fixed income. Can't figure why?? I will let you think on that for a while.
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depakid Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:33 PM
Response to Reply #10
21. Good guys like former executives of Countrywide?
Fairly or not, Countrywide Financial and its top executives would be on most lists of those who share blame for the nations economic crisis. After all, the banking behemoth made risky loans to tens of thousands of Americans, helping set off a chain of events that has the economy staggering.

So it may come as a surprise that a dozen former top Countrywide executives now stand to make millions from the home mortgage mess.

Stanford L. Kurland, Countrywides former president, and his team have been buying up delinquent home mortgages that the government took over from other failed banks, sometimes for pennies on the dollar. They get a piece of what they can collect.

It has been very successful very strong, John Lawrence, the companys head of loan servicing, told Mr. Kurland one recent morning in a glass-walled boardroom here at PennyMacs spacious headquarters, opened last year in the same Los Angeles suburb where Countrywide once flourished.

In fact, its off-the-charts good, he told Mr. Kurland, who was leaning back comfortably in his leather boardroom chair, even as the financial markets in New York were plunging.

More: http://www.nytimes.com/2009/03/04/business/04penny.html...

So much for accountability. Or meritocracy.

Heck of job!
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leftchick Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:53 PM
Response to Reply #10
28. there is not one economist of merit I have read who likes this
And I would listen to an economist before the fucking crooks who got us here for a plan.
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sufrommich Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:26 PM
Response to Original message
15. I sincerely hope that this all ends with Obama
passing strict corporate regulations after the economy is not teetering on the brink. If not, I'll be very disappointed. I'm willing to give him more that a couple of months to set things straight.
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ColbertWatcher Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:32 PM
Response to Original message
20. Bad assets are "bad" because ...
... they're not worth what you're paying for them.

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Ardent15 Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:37 PM
Response to Original message
23. People to Obama: Drop Geithner
Someone so intimately involved in this mess is not gonna fix it.
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galloglas Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:38 PM
Response to Original message
24. Wrong !!
This is a part of a post from another thread. And totally pertinent.


So with a view to what the Federal Government proposed today, in respect to the "toxic loans" that are abounding, I can say that it should be an excellent vehicle for curing what ails the US. The individual modification of many of these mortgages will result in a higher Net Present Value than now exist. Indeed, there is no current market for the "toxic mortgages" because there in no trading in them!

In the 1980s, the US faced a similar problem with mortgages within the S&L system (having been there and done that as an NASD Registered Rep and Financial Planner, I do know what was happening then). It was largely ignored by the GOP government, and its accomplices, and was allowed to fester until the US finally ate the bad mortgages (low interest fixed mortgages) to the tune of 750 Billion dollars. If they had modified those mortgages instead, the US would have actually made money on the problem.

And all of that raises another point. All of the bellyaching over a Trillion?? That is only 1/3 more than we blew away in the mid 1980s! Comparatively, much less than that now. So the Obama-Geithner plan is very workable and addresses the problem. That is, unless the GOP Doomsayers in Congress and the Chicken Little liberals make so much noise it is torpedoed.

In an old military axiom it is said, "If you can lead,lead. If you can't lead, follow. If you can't follow, get the hell out of the way and let someone else do it."

Good advice, I think, for GOP and incensed liberals alike.



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Pale Blue Dot Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:42 PM
Response to Reply #24
26. Personal, Corporate, State & Local, and National debt wasn't anywhere near what it is today
back in the 80's.

As any loan shark will tell you, you can only borrow so much before you either pay it back or get your legs broken.
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Tigermoose Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:57 PM
Response to Reply #26
31. As any philosopher will tell you - non sequitur.
nt
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Pale Blue Dot Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:58 PM
Response to Reply #31
32. How? nt
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galloglas Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 05:06 PM
Response to Reply #26
35. You are wrong. Please check it out.
At the risk of being repetitive, I'll repeat:

If we wish to cure the present problems by restoring those artifacts of the past that are appropriate, we should all be sure of what we speak of. Otherwise we lose all credibility.

You will note from the pages below that US debt as a % of GDP was approximately the same during the Eisenhower-Truman years. Lower during the 1980s largely due to inflation.


http://zfacts.com/p/318.html


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Hannah Bell Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 05:21 PM
Response to Reply #26
40. If I take out a 15-yr home loan for $150K on an income of $50K, I'm in bad shape?
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Jim Sagle Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:47 PM
Response to Reply #24
27. Larry Summers, is that you?
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:59 PM
Response to Reply #24
33. But all this post is doing is reasserting the falsehood..
Edited on Mon Mar-23-09 05:02 PM by girl gone mad
that to fix the economy we just need to force the banks to lend again by guaranteeing the downside on their toxic assets.

As Galbraith points out, this assumption has two fatal flaws. 1. This plan does nothing to address the balance sheets of ordinary Americans, which have declined precipitously as the housing bubble has burst (and let's not even get into the commercial real estate collapse). Banks will still have no incentive to lend to already overburdened Americans in a declining economy. 2. The toxic assets are not worth what Geithner and the banks believe they are worth, and investors are unlikely to put up much of their own money, even with the massive government backstop. Scams, however, will likely abound. Transferring debt from the banks to taxpayers still leaves us with massive debt. Now what?
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galloglas Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 05:14 PM
Response to Reply #33
36. Read the post again. It does NOT say that.
The post is stating that a modification program, brought about under Federal auspices, would be used to buy up toxic mortgages at the Next Present Value which would be determined by auctions available after a market is created.

If the assets are bad, the current investors lose their asses (that is good, I think). The "profits" to be derived from the modifications would inure to the benefit of both the Federal Government and new private investment money that is currently lying idle.


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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 05:18 PM
Response to Reply #36
37. What does the loan modification program..
Edited on Mon Mar-23-09 05:18 PM by girl gone mad
have to do with the TALF?

I think you have your bailouts confused.
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galloglas Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 05:34 PM
Response to Reply #37
41. Gone mad, girl??
If you will read it, I have and am in the business! (no, I will not profit, have not profited, would refuse to profit from what has gone on)

Do a couple of years reading on this, write back, and I will answer you. These loans will be modified, whether by bankruptcy courts or other voluntary efforts. SDo you really have an objection to the US Government altering these mortgages to make them worth 40 to 80 cents on the dollar, as opposed to the current 25 cents, if that ???



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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 06:28 PM
Response to Reply #41
49. Cram downs are unrelated to TALF.
We don't need this toxic asset guarantee to force the loans to be modified. That could be done legislatively.
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galloglas Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 07:13 PM
Response to Reply #49
54. Surely you jest.
Why don't you try to whip up the 60 votes for passage in the Senate? :rofl: Have you counted them lately??

Besides, these things are time sensitive. The value of the assets change with each month of the loan, either up or down. Which way does your expertise say it will go? And upon what is that based?

Moreover, this is not a "toxic asset guarantee". It would be a "toxic asset liquidation" very much the same as in any FDIC or FSLIC takeover. And, when the assets are sequestered and auctioned, they will have a market value which should be higher than the US taxpayer paid for them.

You really should study this.





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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 09:10 PM
Response to Reply #54
60. Actually, the cramdown bill is already in the Senate.
and it doesn't need 60 votes.

Please don't patronize me. I'm on the economic forum every day. I've probably read and posted more on this topic than anyone here.
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galloglas Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Mar-24-09 01:25 PM
Response to Reply #60
72. And you worked in the industry, too ??
Yep. Blogging here makes us experts, doesn't it??

Your demeanor, lack of understanding and lack of tact deserve the patronization. You do the Progressive Community a disservice.




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galloglas Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Mar-26-09 07:37 PM
Response to Reply #33
81. Galbraith said NOTHING. He is DEAD!!
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Individualist Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Mar-26-09 07:51 PM
Response to Reply #81
84. James Galbraith is very much alive. His father, John, is dead.
Edited on Thu Mar-26-09 07:55 PM by Individualist
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Gold Metal Flake Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:39 PM
Response to Original message
25. Hey, want to have some fun? Post this in GD:P.
Go ahead. Toss it in there.

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Sebass1271 Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:53 PM
Response to Original message
29. I don't understand, what do all these economists
propose????? NOt do anything????? President Obama wants to "try" this and if this doesn't work, he will try something else. I really can't comprehend the bruhaha every time he says or does something. He has a strategy. Let his strartegy work and then let the chips fall where they may.

Also, these "assets" will be invested by both, the government and wall street WITH regular inviduals also investing in them. If those assests make a return we will ALL benefit.

I don't understand the outrage. I really don't. He still in the process of working hard for health care and the Employee Free Choice Act...

what gives with you people??? :shrug:
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Tigermoose Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 04:59 PM
Response to Reply #29
34. Emotional investment
These doom and gloomers and class warfare revolutionaries have emotionally invested in the idea that the end is nigh and we need to burn down all the capitalists. Others simply jumped on the Krugman bandwagon because he won a nobel prize and "seems" to know what he is talking about. Personally, I think he makes some academically good points. But politically and pragmatically, his ideas are non-starters.
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QC Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 05:35 PM
Response to Reply #34
42. Krugman is an enemy of the people. n/t
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northernlights Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 06:24 PM
Response to Reply #29
47. they want to put the failed big banks into receivership
Dump the corrupt, criminal management, break them up, sell/re-privatize the pieces, and put regulations into place that prevent "too big to fail" monstrosities from being formed again.

This is basically what Krugman and others have been recommending. Robert Reich recommended it as well, last Sunday on This Week with Steph.
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leftchick Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 07:37 PM
Response to Reply #29
57. have you actually read Stiglitz, Krugman and Galbreith?
Edited on Mon Mar-23-09 07:37 PM by leftchick
they all recommend NATIONALIZATION and RE-REGULATION aka: The Swedish Model. sheesh.
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 08:51 PM
Response to Reply #29
59. Good solutions abound.
How about if we stop bailing out Wall Street and propping up this failed system, and we invest in Main Street instead?

The financial sector became parasitic over the last 2 decades. There is no valid rationale for attempting to keep the parasite engorged. Those debts should be written down. The counterparties and bondholders need to eat their losses. They got rich off of the backs of the rest of us and in good times they didn't want to pay their fair share because they were supposedly "creating value". Turns out it was all a mirage, but now they demand that the public pay their gambling debts at a time when we are still suffering from their reckless pillaging.

Geithner's plan doesn't serve the public interest.
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galloglas Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Mar-26-09 07:42 PM
Response to Reply #29
82. "what gives with you people"
perhaps they are shills for a GOP perspective?? :shrug:


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NashVegas Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 05:20 PM
Response to Original message
38. I Have a Brilliant Solution of What To Do With Toxic Debt
Hold corporate boards liable.
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ProSense Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 05:48 PM
Response to Original message
43. Positive Comments on the Geithner Toxic Plan
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fascisthunter Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 05:55 PM
Response to Original message
44. If People are Going to Disagree with Krugman and Others like Galbraith
support your disagreement rather than throwing shit against a wall and expecting the rest of us to come to your conclusion. Insults and character assassination may work for some people but not me.
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ProSense Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 06:02 PM
Response to Reply #44
45. Some other points of view
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fascisthunter Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 06:04 PM
Response to Reply #45
46. thank you
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leftchick Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 07:48 PM
Response to Reply #44
58. thank you
I have shit stains all over me!
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fascisthunter Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Mar-24-09 09:09 AM
Response to Reply #58
67. you owe me a new keyboard
but you are welcome...
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leftchick Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Mar-24-09 09:36 AM
Response to Reply #67
68. lol
that was after a couple of wines too! :)
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QC Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 06:29 PM
Response to Original message
51. Galbraith is an enemy of the people. n/t
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 06:35 PM
Response to Reply #51
52. His dad was, too..
as I recall.

That family must be stopped.
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QC Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 06:40 PM
Response to Reply #52
53. They are kulaks and counterrevolutionaries. n/t
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Life Long Dem Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-23-09 07:32 PM
Response to Original message
56. The banks don't know the market value as well.
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SlowDownFast Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Mar-24-09 04:21 AM
Response to Original message
62. Check this out:
Edited on Tue Mar-24-09 04:31 AM by SlowDownFast


Open Letter To The FDIC Ombudsman

Now that the Treasury Plan to "cleanse" the market of "toxic assets" has been put forward, I have noted that The FDIC is the entity that will both guarantee the debt issued and vet the bidder list.

I also note the following quote from The FDIC:

The FDIC will provide oversight for the formation, funding, and operation of new public-private investment funds (PPIFs) that will purchase loans and other assets from depository institutions. The Legacy Loans Program will attract private capital through an FDIC debt guarantee and Treasury equity co-investment. Private market equity investors (Private Investors) are expected to include but are not limited to financial institutions, individuals, insurance companies, mutual funds, publicly managed investment funds, pension funds, foreign investors with a headquarters in the United States, private equity funds, and hedge funds. The participation of mutual funds, pension plans, insurance companies, and other long term investors is particularly encouraged.

There is a potential problem here.

Let's say that I am a bank ("financial institution") with $100 billion in "toxic assets". I have them on my balance sheet at 80 cents on the dollar. The market has them marked at 30 cents. We do not know what the held-to-maturity performance will be, since that requires knowing the future, although for the moment let's assume that they are cash-flowing at the present time.

What I (the bank) do know, however, is that if I sell them at 30 cents I take a monstrous loss - perhaps enough to force me under Tier Capital limits and thus render me subject to an FDIC enforcement action. I therefore will not sell for 30 cents so long as I have any belief whatsoever that the cash flow - or any government subsidy - will exceed that value.

If I, as a "financial institution" can participate as a bidder in these auctions I can foist off my loss onto the taxpayer. Here is how I can rig the game so as to avoid an otherwise-inevitable loss:

*
I become a "bidder" and "bid" on my own assets at 75 cents.
*
I am providing 5 or 10% of the money. The rest is covered by Treasury, The Fed and the FDIC via guaranteed bond issuance.
*
The loan, ex my contribution, is non-recourse. That is, I can lose 5 or 10% of the total portfolio purchased, but nothing more.

Now the "assets" (a passel of CDOs?) turn out to be worthless. I lose 5% of $75 billion, or $3.75 billion that I put up, plus the other nickel on the original mark, but that's all.

The taxpayer gets hosed for the remaining $71.25 billion dollars.

This can and will be done if the "sellers" of these assets are allowed to bid either directly or indirectly as it provides a means for banks to intentionally dump bad assets at a certain loss that is much smaller than their expected realized loss over time, shifting the rest of the loss to the taxpayer.

This program has the potential to shift literally $500 billion or more in losses onto the taxpayer, not through the operation of "bad luck" but rather through what amounts to a bid rigging operation.

Be aware that I, along with many others, have figured this out. Also be aware that as taxpayers and your ultimate boss, we do not intend to sit still and allow the public treasury to be looted in such a fashion.

The FDIC's job is to prevent that sort of looting operation by prohibiting the sellers of these assets from having any financial interest in the bidding side of the equation, directly or indirectly, and I along with many others intend to hold you to that obligation.

I like the outline of this program if and only if it cannot be gamed in this or similar fashion. Provided that does not occur, this program has the potential to provide great benefit to both the banking system and our economy.

If, however, the financial institutions that created this mess in the first place are allowed by the FDIC and Treasury to use it as a looting operation to intentionally shift their bad assets onto the Taxpayer you can expect that we the people will hold our government to account.

Transmitted by email to ombudsman@fdic.gov

http://market-ticker.org/archives/894-Open-Letter-To-Th...




Other economic bloggers have picked it up, and here is Mike Morgan's take on Karl's piece (he agrees):

http://realestateandhousing2.blogspot.com/2009/03/geith...

n addition, those that doubt that Geithner's plan is a dangerous and nefarious one ought to see these interviews of James Galbraith's take on the plan from Monday:

Part I: Geithner's Plan "Extremely Dangerous," Economist Galbraith Says
http://finance.yahoo.com/tech-ticker/article/216311/Par...

Part II: Geithner, Obama Kowtowing to "Massively Corrupted" Banks, Galbraith Says
http://finance.yahoo.com/tech-ticker/article/216480/Par...
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SlowDownFast Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Mar-24-09 05:09 AM
Response to Original message
63. Mish doesn't like it either:

"The long awaited details of Geithner's "plan" for dealing with bad bank assets is finally out. Githener's plan is disingenuous at best. If people want to be outraged at something, it should be over Geithner's plan."


More:
http://globaleconomicanalysis.blogspot.com/2009/03/geit...
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BelgianMadCow Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Mar-24-09 06:13 AM
Response to Original message
64. Best part in the video - when the anchors ask "but wasn't the plan the ONLY thing to do?"
A: No, there are plenty good initiatives - followed by a clear and concise description of FDIC receivership.

Galbraith also prefectly outlined the handful big banks against the many small..sad but true.
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Hubert Flottz Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Mar-24-09 06:25 AM
Response to Original message
65. Not as dangerous as Chris Cox was...
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lumberjack_jeff Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Mar-24-09 09:39 AM
Response to Original message
69. My feeling is that it will be effective.
Once all the money is gone from the real economy into the black hole of intercompany debt, the problem will disappear.

The reason that the size of the problem is undefined is because the people who are pulling the strings aren't sure how much they can get away with. They can get away with two trillion... how about three?
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galloglas Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Mar-26-09 03:32 PM
Response to Original message
73. You are SOOO fundamentally dishonest !!
leading with the tag-line "Geithner's Plan "Extremely Dangerous," Economist Galbraith Says".

Could you explain how "J.K. Galbraith" says this, since he died in 2006 ?? About three years before Geithner's plan was announced?? (October 15, 1908 April 29, 2006).

Then you link to Yahoo group site, which is quoted below:

"We spoke with noted economist Galbraith this morning. In the accompanying segment, he calls the Treasury Secretarys plan extremely dangerous.

And they did this interview how?? By seance?? Galbraith has been dead since 2006!


Jesus, why not quote WikiPedia, or Snopes, for your non-founded economic rantings and wailings??

You seem to think us all to be fools. Are you manipulating us or simply less financially competent than we are?



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brentspeak Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Mar-26-09 07:29 PM
Response to Reply #73
79. Er, uh....
Edited on Thu Mar-26-09 07:29 PM by brentspeak
This is John Kenneth Galbraith's son, University of Texas economist James K. Galbraith.
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galloglas Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Mar-26-09 08:03 PM
Response to Reply #79
86. Yes. Exactly my point !!
When you quote a "J. Galbraith" or "J. K. Galbraith" as an economic source, there are inherent dangers. To segue, without elucidation, to what some would call "John Kenneth's idiot son" is disingenuous at best.

John Kenneth Galbraith has been the presumed authority on liberal economics since the 1930s. To float in a "ringer" is not close to credible, particularly when playing on the last name. It is similar to quoting "Buckley", but meaning Christopher instead of William F. Buckley. Or to say that "Reagan said" when you mean Michael Reagan or Ronnie Reagan, except that "James K. Galbraith" cannot be taken seriously except by his name being confused with his father's.

Seriously, how many posters will see through the sleight-of-hand?



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aldo Donating Member (297 posts) Send PM | Profile | Ignore Thu Mar-26-09 03:37 PM
Response to Original message
74. Geithner is also incredibly stupid and arrogant, asserting that no Plan B is needed, that
this plan will work. Does he have a direct line to the Almighty? Maybe his pookah, Harvey, told him.
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C......N......C Donating Member (454 posts) Send PM | Profile | Ignore Fri Mar-27-09 07:22 AM
Response to Original message
89. Because we have nothing to sell to earn money.
All our jobs are leaving. No reason to lend any money unless you are going to make something to sell.
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