Login Here
But the Obama administration, like the Bush administration, apparently wants an easier way out. The common element to the Paulson and Geithner plans is the insistence that the bad assets on banks’ books are really worth much, much more than anyone is currently willing to pay for them. In fact, their true value is so high that if they were properly priced, banks wouldn’t be in trouble.
And so the plan is to use taxpayer funds to drive the prices of bad assets up to “fair” levels. Mr. Paulson proposed having the government buy the assets directly. Mr. Geithner instead proposes a complicated scheme in which the government lends money to private investors, who then use the money to buy the stuff. The idea, says Mr. Obama’s top economic adviser, is to use “the expertise of the market” to set the value of toxic assets.
But the Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt. So this isn’t really about letting markets work. It’s just an indirect, disguised way to subsidize purchases of bad assets.
The likely cost to taxpayers aside, there’s something strange going on here. By my count, this is the third time Obama administration officials have floated a scheme that is essentially a rehash of the Paulson plan, each time adding a new set of bells and whistles and claiming that they’re doing something completely different. This is starting to look obsessive.
Geithner isn’t Michael Brown. He’s Hurricane Katrina.
69 Comments
Spotlight
Support this site!
Subscribe to the newsletter
Advertise on Firedoglake
Send
us your tips
Make us your homepage
About TBogg
Advanced search
RSS/XML Feed
Love the photo. Can I drive?
I was watching Planet Earth on Discovery last night. (Gorgeous stuff, catch it when you can.) The episode on “Caves” featured a segment where a huge number of bats, doing what bats do when hanging from the ceiling, had created an enormous pile of guano, which in turn had become the habitat for an even larger number of creatures. And it dawned on me that this – a big shitpile, created by those who could not see it, and serving as the environment of a massive group of cockroaches – is nature providing a perfect illustration of the economic crisis. And, as Atrios says, there’s no pony in that shitpile, no matter how deep down you dit.
LOL : ) That quote is a keeper! Thanks for that : )
Follow the contribution cash:
1) Commercial banks: http://www.opensecrets.org/ind…..hp?ind=F03
2) Hedge Funds: (up almost 4x from ‘06 cycle) http://www.opensecrets.org/ind…..?ind=F2700
3) Insurance Sector: http://www.opensecrets.org/ind…..hp?ind=F09
Looks like Congress is paid for.
If Geithner is Katrina, then Greenspan is Krakatoa.
Bill Gross of PIMCO is on cnbc, loving the Plan.
I can’t provide a link, but I heard a clip of Obama saying that he would not accept geithner’s resignation if offered. Obama then said that geithner was doing a great job. Oh boy, did it ever sound like “Heck of a job, Brownie.”
Seriously, does any-fucking-body really understand any of this shit? (not the post the whole she-bang)
A lot of people seem to think they do. I’m waiting to see.
I’ll put it in a nutshell for you: It doesn’t matter. The rich will get their mega-bailout, the elites of our society will consolidate their power further and people like me will continue to be at the ass-end of everything. You got it figured out now?
I’m a liberal but not the kind of liberal who does nothing but read, write and then go to parties on the Upper West Side every evening. I’m not invited to those parties simply because I’m a nobody. A zero. I don’t know the right people, didn’t get the right education and have no clout at all. I go to work every day thinking it’s my last day. I look over my bills wondering what else I can cut out to make ends meet. I haven’t had an increase in three years even though my bills have gone up. People like me want someone to be on our side, someone to tell the elites of our society to go fuck themselves. I won’t kid myself into thinking that will ever happen.
All I get for my troubles and support are elitists who happen to lean left, telling me in a more polite way to shut my mouth while the “activists” do street theater and think they’re making a difference. Am I angry? You fucking better believe I’m angry. People are living in god damned tents while some clown is marching down the street chanting in rhymes while doing a fucking puppet show.
Excuse me if I don’t give a fuck about anyone starting yesterday.
Good question!
Hey, would somebody tell the doofi at CNN that we’re not trying to fill a million sandbags in Fargo, we’re working on two million. Over half a million already done and distributed.
And hey, track down Matt Taibbi’s article in RS…should be required reading for Teh Villagers.
It will be interesting to see what the banks offer to sell.
As I see it, the banks will offer to sell crap assets.
Who’s going to spend even a nickel for such crap?
Stupid plan, if you ask me.
Voilà!
Timmeh!
Here’s the Taibbi article and it is definitely a MUST READ.
The Big Takeover
fyi – for anyone who missed Christy’s earlier thread
Matt Taibbi will be here tomorrow 5 pm et
Can somebody explain this one please?
The plan from the NY Times.
“The Treasury Department offered this illustrative example of how the program would work: A pool of bad residential mortgage loans with a face value of, say, $100 is auctioned by the F.D.I.C. Private investors would submit bids. In the example, the top bidder, an investor offering $84, would win and purchase the pool. The F.D.I.C. would guarantee loans for $72 of that purchase price. The Treasury would then invest in half the $12 equity, with funds coming from the $700 billion bailout program; the private investor would contribute the remaining $6.
In the worst case, the bulk of the risk would fall on the government. The presumption, of course, is that the auction will lead to realistic purchase prices. “
The banks own and operate Hedge Funds.
Example: a CitiBank hedge fund bids high deliberately to enrich the Citi holding company. When the over-bid garbage tanks, the Citi Hedge Fund walks away and leaves the taxpayer to carry the loss.
Is my understanding correct?
CNN: We interrupt this dispersion of misinformation and bullshit to break for a commercial. Right after that, more sandbags.
The Taibbi piece is extraordinary. I sent it all over hell and creation…even to some wingnuts, not that they will: 1) take the time to read it or 2) be able to digest it if they do. However,…
Whoa! I did miss that. Thanks!
If your first sentence is true, and I think it is, then there doesn’t seem to be much reason to get all worked up.
The way the system is setup, WE will buy crap assets. Any benefits go to the private “investors” but all the risk is ours. Why NOT buy the worst of the worst crap? There’s no downside for a hedge fund or bazillionaire.
Suze Ormand didn’t now what the hell to do with matt the other day!
John Cole says you got it right
The Illness- reckless and irresponsible betting led to huge losses
The Diagnosis- Insufficient gambling.
The Cure- a Trillion dollar stack of chips provided by the house.
The Prognosis- We are so screwed.
am so sorry I missed that !
the l’infant terrible is on a holy tear
Raven, I’m curious, what did Ms Ormand have to say about his piece?
Here it is, you have never seen her on camera for so long with her big mouth shut.
You’re right. My bad. Everything is all better now.
Hey, I wasn’t dissin ya, it’s just that it IS all bullshit.
Krugman was on democracynow this morning. I’m just listening to it on another window. When he was here on December 3, he was a big defender of B-G-S. Amy asked him: Should Geithner resign? Krugman still refuses to condemn Geithner, and places blame on Obama. However, if Geithner was as good as Krugman thought he was on 12/3, he’d be taking a strong stand against what he is, instead, fathering.
Interview begins about 15 min into the program if anyone wants to listen.
Amen.
Yes, it was explained years ago,by none other than…well read it,okay?
The real owners are the big wealthy business interests that control things and make all the important decisions. Forget the politicians, they’re an irrelevancy.
The politicians are put there to give you the idea that you have freedom of choice. You don’t. You have no choice. You have owners. They own you.
They own everything.
They own all the important land. They own and control the corporations. They’ve long since bought and paid for the Senate, the Congress, the statehouses, the city halls.
They’ve got the judges in their back pockets. And they own all the big media companies, so that they control just about all of the news and information you hear. They’ve got you by the balls. They spend billions of dollars every year lobbying – lobbying to get what they want. Well, we know what they want; they want more for themselves and less for everybody else,”
“But I’ll tell you what they DON’T want, they don’t want a population of citizens capable of critical thinking. They don’t want well-informed, well-educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. That’s against their interests.
They don’t want people who are smart enough to sit around the kitchen table and figure out how badly they’re getting fucked by a system that threw them overboard 30 fucking years ago. You know what they want? Obedient workers – people who are just smart enough to run the machines and do the paperwork but just dumb enough to passively accept all these increasingly shittier jobs with the lower pay, the longer hours, reduced benefits, the end of overtime and the vanishing pension that disappears the minute you go to collect it. And, now, they’re coming for your Social Security.
They want your fucking retirement money. They want it back, so they can give it to their criminal friends on Wall Street. And you know something? They’ll get it. They’ll get it all, sooner or later, because they own this fucking place. It’s a big club, and you ain’t in it. You and I are NOT in the big club.”
-George Carlin
every day of my life i’ve been the beneficiary of people who didn’t believe that – even though the elites thought they were nobodies. but they weren’t nobodies, they were mostly ordinary people who thought they might be able to help make a difference. so that women could own property in their own name. to end lynching. so that more of us could have access to education and find work in more occupations. so that more of us could vote and find other ways to participate politically.
that’s the legacy i’ve inherited. it’s not a trust fund or a summer home. but still, it’s worth a lot to me and i would hate to see it squandered.
Thanks, Raven.
on every issue i’ve followed, krugman has been behind the curve (free trade, speculative oil bubble, cdss, geithner and summers). still kinda like him though.
Kinda hard to believe he won’t give up on Geithner given all the evidence now available.
Sounds small, but I think even the language.
If this is the language the Obama administration is using it should ring bells in a Naomi Klein Friedman alert kind of way.
Going back outside. BBL.
Last time I checked in and then checked out (seems lie a long time ago. Was it that stimulus bill, and then something else?), Krugman was sounding kind of supportive of the administration’s efforts.
What about all the political capitol invested.
And you guys thought that John McCain would have been Bush’s third term? I think that we all can see that there really isn’t any difference between Obama’s policies and Bush’s. In fact, it almost seems like Bush on steroids – have you ever heard of anything scarier? More war! More Bailouts! More internationalism! Weeeee, I love the one-party system!
turns out there was lots of prior evidence (i just didn’t know any of it).
shorter Matt Taibbi: blame the bald guys.
(OK, I’m a bit “exposed” on that front, so I plead over-sensitivity)
could be, i don’t remember. bigger question for me though is did he support the TARP wo any real accountability, transparency or reregulation? that was just massive theft and one didn’t need to know any econ to see that the process stunk.
selise, it seemed there was a lot of rushing at the time from all quarters.
OMG!
Oh so what do you think of this shell game empty wheel wrote of. AIG> subsidiary > subsidiary ad nauseum > Bahamas.
If you notice, the Teevee is banging the drum against the bonuses, and congress is plenty happy to grandstand on the bonuses. Meanwhile, Wall Street is trying everything that they can do to get their hands on a trillion dollars without anyone noticing.
The Media and Congress: We’re incredibly pissed about $165 million dollars in bonuses!
Krugman and some bloggers: But what about the near trillion dollars in bailout funds?
The Media and Congress: Didn’t you hear us? We feel your pain, we too are incredibly pissed about $165 million dollars in bonuses!
well, there was an election coming up and that was the most important thing ever.
All Geithner, Rubin, Summers, the Clintons, Rattner, etc are doing is trying to save the investment banks as we have known them and the re-insurance industry, what little we know about that. This is a systemtic problem and the people who run the banks in this country are shady, branded institutional types and I am sure that Barack is not one of them and I am sure that Geithner is. The problem is what power does Barack have to change the status quo as we know it? Absolutely none. Who is going to go to, some buffoon like Barney Frank?
Gross seemed to imply that prices of %40-60 would be paid, which seems intuitively what assets secured by houses and land would be really worth, even if all mortgages are in default.
“…They want your fucking retirement money. They want it back, so they can give it to their criminal friends on Wall Street. And you know something? They’ll get it. They’ll get it all, sooner or later, because they own this fucking place. It’s a big club, and you ain’t in it. You and I are NOT in the big club.”
Well, but really, this is the crux of the current situation, is it not? The stinking turd in the center of the punchbowl that polite society doesn’t want to acknowledge: the guys on Wall Street and their corporate titan cronies already have too much of the money for the economy to efficiently function, thanks to years of tax policy and other policies designed to promote exactly that outcome. Funny how consumer economies, like poker games, screech to a halt when one guy has all the money and the other players have already spent all their money plus all they could borrow.
Surely, no one could have foreseen such a thing.
From 60 Minutes last night:
I don’t know about y’all, but I’m still with Obama. I am loving his detailed answers to questions in interviews and townhalls. I am loving the fact that he is calm about things, despite being attacked from every direction. He seems to have a powerful sense of self.
I am loving that he isn’t a beady-eyed smirking fratboy, with simplistic evasive non-answers to difficult questions.
I don’t think anyone can know exactly what these guys are dealing with. Krugman’s smart, he’s probably right in a tactical sense, but I’m guessing he’s missing it in a strategic sense. If Obama wants Geithner, he can have him and he has my backing.
Forget Krugman. Ok, don’t forget Krugman, add to what he says by linking to Matt Taibbi who describes what’s really going on. The big picture.
“He seems to have a powerful sense of self.” That’s effin’ awesome. Now, if he also displayed a powerful sense of the rest of us, then we might hope to get somewhere. Instead, he’s hired and continues to wholeheartedly trust a guy — Geithner — who apparently only has a powerful sense of his ol’ buddies on Wall Street and their need for greed and who’s idea of a recession cure is to take lots and lots of our money and give them to the very people who just managed to lose a gazillion dollars by gambling like drunk frat boys in ‘Vegas. I’m not sure that’s such a great move. And, so, I don’t really give a shit about his detailed answers to questions in interviews if they don’t correspond with him making appropriately change-y policy decisions.
If this is the era of change we can believe in, then I’d like the cure for this recession to hurt those who caused it; I don’t want my kids to be on the hook for the bill while Geithner’s crowd of asshats and insiders simply shrug it off as just another roller coaster day at the track.
Look, it’s not like I think things are hunky-dory, but you got somebody better in mind?
Please tell me the one magical candidate that would be doing things differently and somehow better right now, after SIXTY days, jackass.
After you name the super Presidential candidate that would be doing better, then give me someone who can do the Treasury job and then pass confirmation in the Senate before June and I’m all ears.
Your use of the words and phrases like “apparently…” and “I’m not sure…” tells me all I need to know, which is – you literally have no idea if he’s any good or not – you’re just striking out in anger.
Change
right fucking nowYou Can Believe In means different things to different people. Your anger is great, but it’s not going to get us anywhere. We need calm intelligent leadership right now, and I think we have it.Yout think Obama is not in charge? I say bullshit. You think he’s beholden to Wall Street? Again I say bullshit. We simply can’t know after 60 fucking days.
larry summers has helped kill millions of people with his economic policies. there is no reason i can think of that he should have any position in gov, let alone running obama’s economic policy. i think obama could be a great president. but larry summers shouldn’t be dog catcher and he’s going to bring obama down if he doesn’t get fired soon.
Oh for fucks sake. We spend 8 fucking years in the wilderness, being made to eat six kinds of shit. Wars, huge deficits, fallen economy, seriously wounded Constitution, Torture, 40% of the country following Villager hypocrites who don’t give a damn about America – and you’re talking about Larry Fucking Summers bringing down Obama?
Jezuz H. Criminy on a cracker. He may be everything you say, but I still say – Perspective, people!
i’m wondering how much you know about larry summers?
the guy who helped get glass-steagall repealed. the guy who helped make sure that otc derivatives were not regulated. the guy who helped get the enron loophole implemented.
yep. that larry summers.
and i’m not even touching on the shit that guy pulled outside the usa. when i wrote that he had helped kill millions with his economic policies that wasn’t hyperbole.
“jackass”… I love it when total strangers talk dirty to me.
It’s not about showing you a magical candidate that can do better. Obama claimed to be the magical change candidate, quite specifically challenging the cushy relationship between DC and moneyed interests, and I’m merely questioning his ability to (and sincerity in) deliver on his promise. I’m simply asking him to show his work, and in return I get your vapid crap about him “not being beholden to Wall Street” — which you immediately concede we cannot know anything about. So, apparently, you’re either as much of a jackass as I am, jackass, or maybe we’re just of differing opinions. But what is it with you Koolaid drinkers out there? You gave us this “silence or else” shit all along during the election campaign: “ooh, don’t question his decisions, don’t you go be critical of him — he’s *so* awesome, he’s our only hope.” Hey, I’m sure McCain would personally be fellating Wall Street had he won, so, yes, Obama is certainly “better”: he’s hired Wall Street’s old friend Geithner to do that dirty work for him. We were told to “wait until he’s elected” before we criticized him for clean coal and his votes for TARP and fifth amendment violations.
Then, when he started picking one ex-Clinton Beltway asshat after another for his cabinet, we were told they were all somehow part of his master plan, so we should shut up and wait. And now you’re saying he couldn’t possibly do anything in a mere 60 days, just shut up and wait. It’ll only be a few short month, then you can start talking about his warm-up for re-election, which we skeptics of course can’t be allowed to jeopardize by criticizing him…
It’s odd that even now, 60 days later, it’s still verboten to raise any criticism of Obama and his decisions — it’s as if the dream of him as The Infallible One with the Master Plan will only work until someone dares to challenge that ludicrous concept…
The image, oh the image: I wouldn’t touch that with a ten-foot pole.
housing bubble burst —>
mortgages worth much less —>
banks using mortgages or mortgage-backed securities have uncertain reserves —>
banks can’t lend to one another for fear the other won’t repay —>
Geithner helps remove uncertain value assets (toxic assets) from banks —>
private firms can hold uncertain value assets to long-term —>
banks now have more capital (from sale of toxics) and can loan again —>
IF IF the private firms will buy and the banks will sell them.
If it doesn’t happen Geithner has to use other means to get the toxic assets out of banks.
Obama in the clutches of Goldman Sachs is like Howard Beale being lectured by Arthur Jensen.
Arthur Jensen: One vast and ecumenical holding company, for whom all men will work to serve a common profit, in which all men will hold a share of stock. All necessities provided, all anxieties tranquilized, all boredom amused. And I have chosen you, Mr. Beale, to preach this evangel.
Howard Beale: Why me?
Arthur Jensen: Because you’re on television, dummy. Sixty million people watch you every night of the week, Monday through Friday.
Many plans are considered. Few are chosen. None are great. Yours is likely as bad.
That’s why the private equity firms have to put up something, to have skin in the game, which will encourage them to price wisely and not lose their own skin.
Whether Geithner’s percentages are right (or close) is fully up to debate and we’ll see whether it works. One presumes he has enough bright economists working with him that he’s probably got it as right as it’s going to be.
“One presumes [Geithner] he has enough bright economists working with him that he’s probably got it as right as it’s going to be.”
Please give me one good reason why that sentence can’t read:
“One realizes [Geithner] has enough Wall Street insiders working with him that they’re probably going to pay as small a price as possible for their follies.”
It’s not the criticism I have a problem with, it’s the fucking screeching I’m talking about.
But I must admit, calling me a Koolaid Drinker and lumping me in with a bunch of nonexistent straw men makes your points perfectly.
What did you expect? Obama is exactly who we knew him to be. Cautious to a fault, working with his opponents to reach consensus, etc.
The fact that Obama has made Republicans look silly every step of the way so far, in my mind, earns him some respect and some time. Yet, for me to point out his effectiveness so far as a leader and calling for, again, some perspective, makes me some kind of simpleton follower.
Love you Mr. Bogg — but how the hell do you know? Our Lord Krugman says so? Nobel Prize and all? You mean like the one Milton Friedman won? Obama: “We have cured cancer.” Krugman: “Cancer schmancer. Ever heard of heart disease, Barack? Get back to me.”
Not you too, T. Enough of the blind certainty that the genius Krugman knows all the answers. You can express concern that it may not work, or it’s too big a giveaway to Wall Street, but just saying “fire this guy and hire Paul Krugman” is lazy, lame and stupid.
I’m not saying hire Paul Krugman. I’m saying that Geithner is so in the pocket of his buddies that when they jingle their change his face gets bruised.
I think Geithner was a horrible choice. The balloon has popped and he’s still trying to convince us that he can sell the helium.