Bailout 2.0
I didn’t get a chance to see Geithner’s press conference talking about the plan to stabilize the banks. But I understand that what was presented was an outline of a plan, with details to be provided as they work them out. (Now I see that they unveiled a new website today — still under construction — www.financialstability.gov.)
Fact Sheet on what they are calling: The Financial Stability Plan: Deploying our Full Arsenal to Attack the Credit Crisis on All Fronts.
OK.
A quick read of this says this to me:
- They basically get the overall problem — no one can tell the healthy (relatively) banks from the truly insolvent.
- They really don’t want to nationalize banks. Which is fine, but it isn’t clear to me how they resolve the essentially political question here: making the banks suffer for their sins while making sure taxpayers don’t take them over. There isn’t much recognition in either the political or pundit class that these two things are fundamentally in tension with each other.
- Certainly taxpayers are going to be exposed to even more downside here while trying to entice investors to buy up the toxic stuff. I understand this as a way to try to price these assets, but I’m thinking that Warren Buffet would have gotten way more in return for the majority of the risk.
- What is left just looks awfully tentative.
Basically, they get the problem and are trying to thread a political needle — minimizing risks to investors, minimizing costs to shareholders, increasing visibility to the books. To me, overall, a disappointment. Maybe it will get better in the details, which we’ll look at when they roll out.
What do you think? Make sure to read the Fact Sheet and tell me what jumps out at you, or — even better — what I might have gotten wrong about this.
Tags: Bailouts
It looks like Geither is not expecting to ask for any more money (right now) for the stabilization effort, which prompted this reaction from Congressfolk and aides:
Administration officials were greeted with sarcasm and laughter Monday night when they briefed lawmakers and congressional staff on Treasury Secretary Tim Geithner’s new financial-sector bailout project, according to people who were in the room.
The laughter was at its height when Obama officials explained that the White House planned to guarantee a wide swath of toxic assets — which they referred to as “legacy assets” — but wouldn’t be asking Congress for money. Rep. Brad Sherman (D-CA), a bailout opponent in the fall, asked the officials to give Congress the total dollar figure for which they were on the hook. The officials said that they couldn’t provide a number, a response met by chuckling that was bipartisan, but tilted toward the GOP side. By guaranteeing the assets, Geithner hopes he can persuade the private sector to purchase a portion of them.
Wall Street spoke loud and clear, the speech failed badly.
It all comes down to money, trillions of dollars.
The stimulus bill is hanging by a thread with an almost $1 billion price tag and the bank bailout if done correctly will likely be over $1 trillion.
Can Obama be saddled by over $2 trillion at the taxpayer expense?
More disclosure and assessment is good but the whole plan is flawed due to the fact that it buys in to the fiction that their are real “assets” at the bottom of the shit pile.
The equity investors need to be wiped out, the executives fired and the real credit default swap abusers punished.
Now that I think of it, is it somewhat like the “war crimes” debate. In both cases, we can’t really move forward without honestly confronting our sins.
He’s baaaccckkk! I just got an email from John McInsane. He says he is going to run for prez again! Because the stimulus package presented by the Obama team will fail, he will be ready to serve.
How old will this ole coot be in 4 years! There are two slogans the repukes are playing with for the next election….Country First, or “We Told you so”.
Relative to the bankster bailout, here is where I draw the line. Not one friggin dime to the banksters….there is no bank too large to fail. Let them go into bankruptcy with their bad debts and let the courts figure it out. If there are any bank bailouts it should be too banks who played the game legally, who have a history of lending and giving loans. There is no way we can trust these banks to do the right thing. I am opposed to Geithner, Greenspan, Bernacke, Volker, Paulson all of whom brought this country to its financial knees. No bailout for the banks. Give every citizen $200,000, we can pay off our mortagaes and spend the money..that would truly stimulate the economy. The Federal Reserve must end, the World Bank and their globalism should end…right here, right now.
Protack why arent repukes apologizing to the country for the failures of your horrific supply side economics. Why arent you having a “come to Jesus day”, and repenting for standing beside the financial crimes, war crimes, and violations of Consitution and international law? Do you slugs ever take into account your involvment in the financial demise of the nation? The GOP is in exile for generations.
Geithner’s speech was a failure, but I’m almost at the point that if Wall St. hates it then it must be good. However, it looks like Obama is trying to do everything but nationalize. I’ll guess they’ll try to exhaust all the other options first, but nationalization will still be what happens.
My main problem is that bank executives and their shareholders must be punished, not the taxpayers. I wish all the bank execs would be fired as well.
Well, I’m still a fan of caution in using the stock market as anything other than indicator of its own interests. Bank stocks led the way on today’s tumble and I note that there is the possibility in this that banks will need to take writedowns on their toxic stuff and none of them are going to like that.
There may be something of worth in the big shitpile. What no one wants to do is actually do the work of pricing that. Because once you do, I think that mark to market rules will then make it clear just how insolvent they really are. I might be wrong about that.
Well, I’m still a fan of caution in using the stock market as anything other than indicator of its own interests.
True that. When it is up 500 points in two days you will not hear wingnuts praising the President.