I think that this is the last "spark" before the fire goes out--

I know that too much debts can be toxic to one's financial holdings---but I have never heard "toxic assets,"---isn't toxic assets "toxic debts?" Now the Secretary of Treasuray is going to apply the "Geithner Rule of Accounting,"--remove it from the balance sheet---and it is all gone--that strategy could have save the taxpayers 787 billion dollars---but then again-–the 787 billion dollars doesn't exit-–except in the minds of those managing-–we could balance the national deficit in a second---remove it from the balance sheet--–

The house prices are driven by supply and demand. You need to stabilize the house prices, this will allow people to sell homes and get out of mortgages they can't afford, in turn this will help stabilize the banks.

To do that you need to put the squeeze on new home building. This is easily achieved by slapping a massive tax on new houses.
Lets say we slapped a 50% tax on all new construction. This will automatically increase the price of existing homes. The increased revenues from the tax can be put back into a program to help first time home buyers, eg. a Government grant towards a downpayment.

If it is important to get rid of these toxic assests and this is the best way to do it , then I am fine with private investors possibly profiting from their participation. This is a government plan not a private plan, so anything the private investors make off of this , they should get to keep. At least the facts are up front on this, not like the the AIG bonuses.

David, your comment about Obama's tone is very key. The recession is at least 50% mob reaction. If people think things are bad and will get worse, they don't spend and it's a self-fulfilling prophecy. At first Obama was all doom and gloom, and the result was the public continued to retrench. Now he is optimistic, and there are some positive signs. As you also point out, his programs have not had time to work. So it is merely the psycological effect that they MAY work, coupled with optimism that's turning things around(if they are indeed turning). So it begs the question, do we need trillions of deficit spending to cure what is basically a lack of optimism, or would more moderate actions done with the right tone work just as well without adding trillions to the national debt? Just like every recession, this one will eventually end. It would end if we did absolutely nothing. It may end a bit faster by our actions. Is the result (minor acceleration of the recovery) worth trillion dollar deficits for the next 10 years? I think not.

David,

Thanks for the breakdown, a great primer for the show tonight, I will be watching. Not sure where I stand about toxic assests but I am interested in the "Obama Effect"- How can the results be measured tangibly and how can we be sure that they are Obama's effect, nothing else. Is it because Obama is directly responsible for everything so he is accountable for everything rite now, both good and bad? Just wondering....

I think that if the private investors make an insane amount of money, it would be in the investors best interest to help the American people out a little bit. They shouldn't be made to give the money back that they could've lost by just investing.

The private investors would earn an immense amount of respect by the American people if they gave back some of it. I however would be completely fine with them keeping it all because they finally came down to help out the average American and the less fortunate.

Mr. Gergen, an interesting article, thank you. Plenty to think about. I agree with your assessment about the "Obama Effect" just like FDR, Obama knows that his sense of optimism is contagious.

What is giving me hope is watching the Market rebound and pick up steam! There are trillions of dollars on the side, just waiting for the right moment to jump back into the Market.

I am not a financial expert, however I have some common sense, and I have been around long enough to see many recessions. This recession, which I call the Bush Disaster, has been a tough one and not so easily remedied. However, we will get through this, and come out of it stronger and wiser than before!

David Gergen,

As always, I really appreciate your analysis. I agree, no one wants to see a repeat of the AIG bonus debacle. I honestly do understand what happened there, but it was handled very poorly.

You've put it in pretty understandable terms here and I think that the administration has to communicate the possibility of the private investors making bags of money off the deal to the American people in terms they understand and appreciate. It's a simple case of Risk vs. Reward, which practically anyone who's had a 401(k) understands. Probably better now than ever, unfortunately.

The other possibility, though I seriously doubt that it would be implemented or palatable to private investors, is a more complicated schedule of returns. For example, after some profit threshold is reached for private investors, a percentage of the profits will flow to the government again (the American taxpayer). This would prevent profit-taking from reaching truly obscene levels, yet allow private investors a fair and generous return on their investments.

Just remember the lessons of John Maynard Keynes and the deficit spending of the Second World War, and you have the answer for getting out of a depression. History proves it. Even the New Deal would have ended it if they had just spent more and printed more money, but unfortunately it took Pearl Harbor before the US government was able to provide the massive stimulus required. It actually ended the depression very fast.

You also have to make sure that enough of this money gets down to the working class and middle class, through social programs, rebates, public works spending, a negative income tax and so on. You can't end a depression just by throwing a lot of money and banks and businesses, although it may be necessary to prop them up during a crisis.

The financial system is showing signs of a recent vitamin B-12 shot, it is temporary

On a day where IBM announced the layoff of 5000 high skilled, high wage jobs being outsourced to India President Obama stated in his town hall meeting that the solution to the outsourcing problem is to create high skill, high wage jobs. The very jobs that he said are the solution to outsourcing are being outsourced. When will our politicians realize that the high tech jobs they promote as an economic panacea are exactly the jobs being sent offshore?

David –

Interesting questions. I do feel the glimmers of hope are a result of the "Obama Effect" - that would be the hope part of the message he has been delivering and the actions he's been taking. While the stimulus hasn't had time to take real effect, I think people are hopeful that it will help and are responding accordingly.

I do feel the private investors should be allowed to keep any profits they make from the "toxic asset" program. Taxpayers need to realize that they won't loose in this scenario, becuase if the private investors make a profit the taxpayers will too - although taxpayer profit will be less, the private investor profit is not at a cost to the taxpayer (as I understand it.) The big part of this will be communicating the need for private investors, the risk = reward, and not at a cost to the taxpayers – aspects of the program.

Looking forward to the Money Summit tonight. Thanks for blogging with us.

What would you rather Obama do? Be pissistic or optomistic? As you can see.. ever since Obama has been optomistic, things have been getting better. This is a crisis entirely created by human beings, and it will be solved by us. The problem is that emotions play a role. We need someone who makes us hopeful in order to pull our own mindset from the gutter. Obama is doing that and its help.

So whats the problem exactly?

David: When you and Ali were taping Money Summit, I guess you missed the next wave - insurance companies and commercial real estate will the next to decline. It is only a matter of time. By 2011, Americans will begin to see rapid inflation in every day items. Oil is down from last summer but has the cost of tomatoes or food items declined since summer? No. Just ask any parent who shops each week.

When you have a chance look at a website called Searching Alpha. It may be too Republican and free market for you but it is good to have both sides of the debate right?

Yes, private equity will make big bucks. What do you think all these hedge fund managers and displaced Merrill employees are doing now? They are gearing up for the removal of the toxic assets and establishing new firms.

I have to agree with Arthur on outsourcing high paying jobs to India. Companies are not given incentives to keep these jobs in America like they are given when they move jobs to foreign lands.

How can anyone believe that what we have now is the Bottom? Mr. David Gergen.. Don’t you fallow the news? Haven’t you heard that Obama has been artificially blowing trillions of dollars in the Housing Bubble? So how can you even ask that question? Is it Denial? Ignorance? Stupidity? Or the result of a collective belief alternative reality, and worshiping of Fantasy Heroes. And to think we just sent Barney Madoof to jail for seeking out sap investors and ripping them off of their assets and retirement savings!!!

Oh my, John Thomas...a 50% tax on new constuction? What kind of a way is that to get the economy moving. Stopping new home starts willnot do a single thing to help exsisting home values. Your whole concept is ignorant!

If private investors want to risk their money then their should certainly be some hope of a reward. You cannot change the rules of the game after the fact.
Either give them the opportunity to make some money or else the government itself should buy up all the toxic assets if it is such a good deal.
There is risk to this so there should also be the hope of reward.
As for the existing uptick in the Dow. It is only temporary. Obama's actions certainly have not taken affect yet. When they do I expect a reversal of the Dow to bring it back into reality. Optimism can only go so far. People out of work is real and that has a much farther reach than listening to an Obama pep rally.

Considering the current administration's potential for going back and changing laws they previously passed, namely the one involving the AIG bonuses, I don't see why any investor would put confidence in any potential profits they can make in the given economic conditions.

This is especially true given that the administration seems very reactionary to popular opinion and when millions are lossing money and jobs and the private investors are reaping benifits directly related to the current crisis (its cause), there will be an outpour of unhappiness that will need to be corrected.

It seems Obama has plenty tax-intensive ideas about how to correct these kinds of problems...

I believe 7% cash down with 93% guarantee on undervalued (auctioned) homes is the kind of deal I would love, love to get. If anyone refuses a deal like this, there not of this world.

I think its fine for private investors to get incentives to take these toxic assets of the balance sheets, with one caveat. Why can't there be a system where the average joe can also buy some of these assets utilizing the same incentives. If there was some sort of market for them with a low minimum purchase requirment, everyone would have a chance to profit.

John Thomas you are crazy... slap a 50% tax on new construction!! that will help things... NOT. What will happen to people whose jobs ARE new construction (this includes my own family thank you!), they will be added to the unemployeed> that is what >because who will buy up all those new houses. Only an idiot would. And what about all the loans these builders have out... who will pay for those when they dont sell.... Contracts were in the works for whole housing developements before the economy went South and people cant just bail on them. Someone has to pay that money back... things arent solved by just slapping a tax on something...please!

There COULD be a glimmer of hope. However, there are some trends that bear watching. One of the issues that certainly didn't help was the spike in fuel prices last summer. If that happens again, kiss any hopes of recovery goodbye, as people will have LESS money to spend on durable goods. The next issue is people have to get rid of the notion that they can become millionaires in a single day by playing Russian roulette with investments. Sorry folks, but there are NO quick riches out there. I have absolutely no compassion for those who lost their shirts in the latest bubbles. People and corporations like IBM need to invest for the long term, not quick instant profits. I hope that IBM and other companies lose ALL tax benefits they have by outsourcing good paying jobs.

The planet Earth is running out of food, water, air, and good weather in general. Recent cutting edge innovations in the latest 3G iPhone have been revealed to be sadly ill-equipped to solve this problem.

I believe that the United States of America is in the process of coming to terms with a reality that everyone senses but no one likes to talk about. I believe our failed economy is a reflection of that, not the reverse.

In this Age of 'Information', it is easy to confuse the 'economy' with reality.

I think the recovery is real and with new regulations over banks and finance industries, it may just last but the fear will be the profit-taking masters of business impatient not to earn an honest return but to recoup lost profits by inflating prices, cheating customers and insisting on getting ahead overnight!!! It happens after every downturn profit-taking, hyperinflation and terrible business practices delay recovery for everyone. Wall Street is the best example of greed gone wild as they are already sucking the life out of every rally!!! As fast as the President enacts our recovery business sucks us dry!!! My local grocery is already hiking prices daily with each small rally or sign of recovery...

I'm fine with a private company buying up toxic assets. Isn't that capitalism: Being able to make a profit when an opportunity is present?

If it works the way it's supposed to, everyone will benefit in the end. I think people who have borrowed beyond their means have learned their lesson (both private and public parties.)

I don't get it. So spending money to grow the economy results in a deficit and everybody's on their soapbox. Republicans constantly do it while they're in power & it's okay because they spout off some voodoo trickle-down economics bs. Just have some patience, people. Rome wasn't built in a day and reversing mindsets (which is really what this is all about) won't happen in a day, either. It will get better.

Economic forecasting is a "scientific" attempt to read the future based on economic fundamentals. However, mass and mob psychology are much more important in determining well-being. Although Mr. Navarette says Obama is losing his moxie, to me Obama seems to be striking just the right balance (political & psychological) between short-term pessimism and long-term hope, with a torrent of spending programs that as yet have no effect. Is your glass half-full or half-empty? The Gallup poll measures such evanescence, reflected "objectively" in wall street and spending.

Belief is more important than money since, even with money, without belief, mountains can't be moved. rel

Weren't most of these "toxic assets" the result of the sub-prime mortgage mess? Can anyone tell me the percentage of home-owners with adjustable rate mortgages that reset who are now refinancing at 5%? What banks are getting that business? Isn't the US government providing assistance to people who filed for bankruptcy due to defaulting on their mortgages? Has the practice of securitizing mortgage loans become illegal or are there at least better regulations now with more effective watchdogs? Sorry for all the questions but what's being done so this mess doesn't happen again? Thanks.

I do not believe that the future lay in the subject of a coin toss which this article portends. The future lay in expected tours down predictable avenues like electric cars and so forth. Once enough people start down these avenues, moneyed people or investors will follow. If GM were to introduce the Chevy Volt now opposed to later, people would be very interested in buying. And since people can effectively wait out GM, hopes for a regeneration in the economy also flags. The Chevy Volt is the manner to introduce the population to an electric domesticated industry weening us off of fossil fuel. If everyone could, everyone would own a Tesla electric roadster but that vehicle only can be had by a select few. Which is why the Chevy Volt is so important to that end. In my view, the Chevy Volt is as key a device as Ford's Model T!

What if everyone who was upside down on their mortgages were allowed for a period of 1 year to try and sell them at what ever the market value is determined to be without penalty of any kind. For example: you have gone upside down on your mortgage for say $50,000. In this example you could sell your home for the lower amount with the "Toxic Asset" being that $50,000 to be bought out by the government. You would also not be required to account for it in the 2009/2010 tax season as well. I wonder how many people would jump at such an offer??? It could in turn move people into more affordable housing while stablizing the markets around the country. I don't know if it would actually work, but it can't hurt to examine the possibility.

With all the debate over public versus private sector solutions, the Geithner plan seems like a nice compromise: a combination of public and private investment sharing the risk. Private investors might realize greater returns, but there is a major upside for us, as well, in terms of stabilizing the markets.

I believe you’re right, after the reaction to the AIG bonuses the private equity firms need to think hard about playing. What Congress and the Administration need to do is resolve the AIG bonus mess in a way that will be looked upon favorably be the private investors. Frankly, Geithner’s plan is a restatement of a plan proposed by Warren Buffet during the election. He's seldom wrong.

Ah, invest wisely, work hard and take risk, but be warned if you make money the government will feel that they have no choice but to redistribute the wealth. Yes, that wealth will come out of the pockets of those who worked hard and took risk and succeeded. This takes away the incentive for those who drive the economy to do so. How many times has this new administration talked about wealth redistribution, taxing those who make over $250,000 a year. I can tell you it is exactly those people right now who are helping keep the economy alive. Those are the people who can still afford to buy new cars, and shop. Those of us who have less and are unemployed aren't doing much for the economy at this time. We have no long term plans to make any major purchases. Unfortunately with the deficit spending that the government is engaged in, there is no way around all of us being taxed into oblivion to pay for all of the old programs let alone the new ones that they are proposing. As some one who has a strong interest in establishing a new business, it scares me to think with the natural odds of a 50% failure rate on top of being targeted for massive taxation, because someone who didn't take the same risk and work to do such, feels that they should have what I worked for. You tell me, where does it end?

Before commercial and private concerns invest their funds, they are going to want to make sure the potential profit will be worth the risk. In this case the government needs to limit the amount of risk investors will be exposed to with some sort of insurance guarantee. If that were in place, it would be reasonable to place a cap on earnings above a defined, but attractive, profit level. That level should be negotiated between the government and potential investors. Further, since these investors are not only investing for their own gain, but helping the country re-establish a fully functioning economy, I'd be in favor of some level of tax relief for investors. With all those features in place, I believe investors, government and public would all be treated fairly.

David:
I always enjoy your intelligent political insights. My feeling about toxic assets is we should have banks and other holders go into structured bankruptcy and these so-called "assets" should be wiped off the books. The Obama administration is entirely too cozy with Wall Street.
What is one to think about Deutsche Bank getting 100 cents on a dollar and the German government not pulling their weight on stimulating their economy? That was very bad negotiation. Okay, I know that was on Paulsen's watch, but why should taxpayers have the short end of the stick?

It's always quiet in the eye of the storm. I think we're simply taking a collective breather after 6 months of misery. It appears hedge fund managers and those who got out early couldn't resist buying back into equities after they hit historic lows below 7500. However, there is a strong feeling on Main St. that Wall St. and WA DC failed miserably, should have seen this coming, and worse – profited then and now will profit again!! The sentiment is that these guys ruined it for the common folk – but irony of ironies, the same traders are now responsible for saving it – odd circumstance, don't you think? I'm not sure that Barack's plan is the best – Wall St likes it, but they've got some penance to do and should take comfort that the pitch forks remain in the national shed.

Everyone who took risks and lost should do the suffering, not sober taxpayers. I say, let the government own all of the houses that have mortgages – with the equity that has been paid reducing the balance owed – government owned housing. Then, let the residents pay the government back. If the house is sold, the new buyer pays the government. Make borrowing much more difficult and based upon real-world ability to pay.
I don't favor a taxpayer bailout of those who took tremendous risk. Let them take the medicine, not us.
When will everyone STOP thinking about something for nothing, get rich quick, etc.
New housing, I agree ... tax it. STOP building new stuff. Reduce, Reuse, Recycle. We need to reduce consumption to reduce climate change.

America has lost some $30 billion in purchasing power and some $20 trillion in assets. Economist claim this doesn't translate into a depression; but, it does. GDP will take a severe hit as more small businesses go out of business because Americans do not have the purchasing power to sustain them. The GDP indicator is misleading in that it encompasses "necessity spending" i.e. food, energy, etc. The cost of these things NOT going DOWN actually exacerbates the problem. A 5% drop in GDP is devastating for quality of life in America without a similar drop in the cost of necessities.

Arthur is right on.
We need to stop this outsourcing and keep jobs here in the US.

I have no problem with wealthy people who invest in hedge funds making money for taking risks, but they must also be willing to pay their fair share of taxes. Hopefully President Obama will honor his promise to the poor and middle class by raising taxes slightly on the wealthy. The top tax bracket should be 39% and the those who make over $250,000 should pay payroll taxes on income over that level. The United States, which provides the best copyright and patent laws in the world as well as other incentives to invest and make money, needs to ask those who have benefitted from this environment to give back to their community. If the middle class shrinks, who will buy the products which drive our economy and which make some people rich? Let's raise all the boats instead of just the yachts for a change!

Tamara R. Johnson

Home prices need to fall...
Bailouts need to stop..People need to learn how to live within their means...save more and produce more, spend less...
We as a nation need to start producing more as percentage of GDP...
We can't continue and economy based on social programs, military and health care...and suing everybody...
Banks and poorly managed business should go Bankrupt...
The so called smart people that created this mess need to get out of finance...and out of the governmet as well...
CEO and board of directors need to stop thinking of themselves...and pay themselves a lot less too...
Inflation is going to be horrible if we continue on this path. This is going to create havoc around the world and USA.. The Federal Gov is out of control...The Fed reserve is out of control...
The problem is being made worst by the governmet, and there will be hell to pay for all of this...
This "toxic" assets plan is just going to buy more time for the banks, but that is all...
we have to wake up and smell the coffee...before it is too late !!!

Have we hit bottom yet? I don't know. I'm pretty sure that it won't last as long as the wonks are comfortable saying it will....if they were so smart then we would't have this problem.

We are seeing an increase in existing home sales. We do have a President that is working through his plan step by step. We are watching as each program gets announced and started and they will begin to gather some traction.

Hosing sales in Pinellas county Florida are up 23% with many first time home buyers using the new tax credit.

If a firm invests in toxic assets and then they make money...Sure they will ...why else would they invest?

Sounds right to me. They put their own money at risk, with or without the government's help, they should be allowed to reap the benefits. There are going to be people hurting regardless if this plan works or if it fails. The difference, however, is if it works, people won't be hurting for as long. Therefore, it is in our best interest that it does.........

The plan isn't going to work unless the private investors are on board, and they won't be unless they are ensured that what ever profit they make from buying into this toxic assests, won't be taken away.

In the last month home sales have gone up in my area, prices for homes are up 7% from last year, sales of homes take 1/2 the time they did last year. 2 months ago I got 1 call for a job in a week when I was looking and my resume was on-line; I've got 3 this week and my resume isn't even posted any longer. My only worry is inflation due the amount of money printed, but from what I see yes the bottom has been hit and we are climbing back of it.

The gov’t now owns corporations and can dictate how they are managed. Foreign countries now own the USA by having purchased the deficit year after year. These countries can now dictate how the USA is managed or no more (or reduced) treasury purchases. They can find alternatives for both their goods and savings.

QUESTION: I am not even close to being smart enough to answer this question...Why doesn't the Government (or the Courts) do with the banks that are "too big to fail", i.e. CitiGroup, B of A, etc., what they did with Ma Bell when it was a monopoly years ago???...Split those banks up into "mini-banks"? That MAY be a dumb idea, and that's probably why I haven't heard the suggestion before...But I'd be curious to have ANYONE answer the question...

Policy decisions now will determine the lasting nature of this good feeling. If there is no real policy change, it's a ledge before we go boom again.

Policies required for sustained recovery:
1. Heavy regulation of industries in the public interest, such as health care, mortgage banking and wall street. (Wall Street will whine. Let them.)
2. Significant tax incentives for starting small businesses that employ at least five other people at wages above the poverty line.

Sean

Corruption in the Government and rampant greed in American society both call for letting the market fix itself as much as possible. We are being confidently led by experts who did not see this coming. We are facing debt that has a Weimar Republic ring to it. We are also facing two bottomless pits of expenditure: Iraq and Afghanistan. And let me mention that al Qaeda is alive and well and has hugely growing support. It will take the country going into bankruptcy before people wake up to the fact that the stimulus is just a short time high given to a debt addict, that the auto industry is bloated and needs to go under, health care gouges people for all it can, contractors are robbing the treasury, and that the whole thing is going to come to a sudden, screeching halt.

I agree it's still too early to assess the effect of the stimulus on jobs. Let's hope to see it working in the summer. The jobs picture will be bleak for a long time but the bright spot is in real estate. Now is the best time to buy a home and that will no doubt increase confidence in that sector which will help stop the bleeding. Of course only people with jobs will be able to take advantage of the historically low rates. THe bank bailout is very complicated. I can't imagine they didn't get tacit agreement from Wall St that they would buy into this plan before it was announced. This one is hard to judge, personally I think the banks are much worse off than we know and we'll see a big one or two go down. David, I think you're the most thoughtful and intelligent commentator out there. I never know what you're going to say which makes you the only must-watch pundit out there. However, I do disagree with your statement that Obama is doing too much. Maybe you just got a little too comfortable with the fact that Congress has done absolutely nothing for the last decade or two.

Ummm...stabilizing home prices is the last thing we want to do. They are artificially high. The "growth" we had in the last 10 years was partially mythical at best. We need to return to a point where we can sustainably produce and manufacture.

David, I don't think the public is overly concerned with private entities or funds making money fixing the "toxic asset" problem as long as it gets fixed and the working class can feel more secure in their personal finances and job outlook. It does take incentive to get some things done, lets just know the rules upfront. I wish larger portions of the TARP, TALF and other government efforts were more concentrated with helping community banks and regional lenders, largely not responsible for the current fiasco related to credit derivatives. These organizations are closer to the small business community and their credit needs...which we all know, these businesses are the TRUE generators of employment needed for recovery.

The problem is that this appears to be a short-term rally. The reason why the Geithner has proposed this plan is because no one in the free market would put up private money to purchase the toxic assets. The fed just printed 1 trillion dollars and monetized the debt to stimulate inflation. Furthermore, Obama has massively increased the debt more than any other president from George Washington to George Bush combined. Now the government is looking for expanded powers to nationalize the banks.

The end result of all of these is that the US is already in considerable debt. We are digging ourselves into a much bigger hole and even with the projected growth by the White House, we may never see getting out of this debt. We will be left with higher taxes, significant inflation, and a lower standard/quality of living. We will be in much bigger trouble i.e. inflation if foreign investors seriously pursue the idea of leaving the dollar for another fiat currency.

Unfortunately, I don't think that CNN has adequately put this picture together and is just focused on the absolute value of the DOW. It makes people happy to see the markets go up but the network's explanations fails to put things into adequate context.

Without an assignment of value to the irresponsible housing and bundles, nothing moves forward. The tricky part is to assign a value that does not destory the value of homes/property that has been handled responsibily (about 90%). The only way to do this is to get rid of mark-to-market.

Get rid of mark-to-market, and you'll see the inventory move and the bundles trade. At that point, banks will be willing to loosen their stranglehold on their reserves and begin lending in greater values - that is key with small business, where most finance their operations with short term loans (and happen to employ about 70% of people).

I still believe that once people think that things are getting better, they'll get better. I believe so much of this recession is a result of the media scaring people into sitting on their money. The sooner the media tells everyone everything will be alright, the sooner people will start spending again, creating demand, and putting people back to work.

Unfortunately, I don't think that CNN has adequately put this picture together and is just focused on the absolute value of the DOW. It makes people happy to see the markets go up but the network's explanations fails to put things into adequate context.

The problem is that this appears to be a short-term rally. The reason why the Geithner has proposed this plan is because no one in the free market would put up private money to purchase the toxic assets. The fed just printed 1 trillion dollars and monetized the debt to stimulate inflation. Furthermore, Obama has massively increased the debt more than any other president from George Washington to George Bush combined. Now the government is looking for expanded powers to nationalize the banks.

The end result of all of these is that the US is already in considerable debt. We are digging ourselves into a much bigger hole and even with the projected growth by the White House, we may never see getting out of this debt. We will be left with higher taxes, significant inflation, and a lower standard/quality of living. We will be in much bigger trouble i.e. inflation if foreign investors seriously pursue the idea of leaving the dollar for another fiat currency.

Mr Gergen-
In light of the fact that government agencies, particularly the SEC, were supposed to be providing oversight designed to prevent the current debacle, it would seem imprudent to put much trust in the process a second time around. That would seem to explain why the general public is reluctant to support the instincts of bankers, investment brokers, and government officials whose incompetence and greed got us into this mess. Hopefully the President will gradually be able to inject some sanity into the process, however that would seem to be wishful thinking given the intractability of the country's current financial system. Here's hoping that you in the media can keep them honest- in the meantime, we consumers will be saving our $ for the next rainy day!

Geithner did such a good job of evading his own taxes for years I'm sure he can find some glitch to handle these toxic assets! Maybe that is the reason Obama picked him, he is good at evading things?

Regardless of what happens in the sort term, the economy cannot be "fixed" without fixing the fundamentals: energy, health-care, and education. This will require investment, including new revenues. Obama's focus is in the right place.

I have an interesting thought on this whole mess. Everybody blames someone else for the problem. Dems blame Repubs and vice-versa. Wealthy, middle-class and poor blame each other. Workers blame executives, and vice-versa. If nobody is at fault, nobody has an incentive to change their behavior. Everyone wants to punish someone else. However, those who get hurt financially have to change their behavior. When enough people get hurt, enough behaviors change that the economy goes in a different direction. So, until there are enough people (whether rich or poor, liberal or conservative, workers or executives) hurting, the economy will continue on its slide because most people will just continue to behave as they always have, which is what got us into this crisis (in other words, it isn't 'them', it's 'us'.

If there is an upside, clearly it is the government who is taking the highest risk on behalf of tax payers, who should have the lion's share of profits.

This is complex stuff. The Stimulus plan is really just life support for the country until the economy recovers it is not a game changer. The assistance to local governments will prevent the local governments from raising property taxes higher and adding more wood to the fire. The real game changer comes from Fed Action and proper regulation. Driving mortgage rates lower and bringing more buyers into the market is what will stabilize housing prices. I believe this is already starting to happen. The other thing is to re-introduce proper regulation in various areas of the economy. For example to limit short selling which depresses stocks beyond normal market value and limit purchase of oil by financial institutions. The gas price run up last year was a financial bubble not a supply/demand issue.

Mike Syracuse makes an important point: Much of the downward spiral is unquestionably due to a negative mob mentality, made all the worse by those of us in the media who cast doubt on the effectiveness of anything suggested to help improve our economy.

More to the point, commentary like that of Jack Cafferty's posted on March 17th, about the possibility of America sinking into a Depression, does nothing but frighten people further.

No one's suggesting a Pollyanna stance. But start to cover the evidence that the "glimmer" is real, and watch things pick up. Obama's more positive statements are unquestionably helping. We should, too.

Mike was doing well until he revealed his Republican strategy for dealing with this: do nothing. I don't necessarily agree that the recession will end if we do nothing and certainly ending it by doing something is more than a "bit faster" if it never ends (the Great Depression didn't really end until World War II ended it 10 years later). Laura makes a good point about whether investors should keep the profits and Arthur raises an excellent point about created jobs going offshore to boost corporate profits. If you take Federal bailout money (IBM is asking for some of the stimulus) then you shouldn't be allowed to shift jobs from the U.S. to offshore, which is what IBM is doing. I think a jobless recovery is a real problem that will have a greater impact on long-term recovery. Let the investors keep the profits and give them a tax credit for turning those profits into new jobs or keeping jobs here, not shifting them offshore. Noone said this would be easy.

This rally will abruptly end when it is realized that the light at the end of the tunnel is another train. This will shake out as three things happen over the next few months.

First, the reality will hit that the treasury is throwing money in the toilet, while bankrupting the U. S. Government (the U. S. Government is already "bankrupt" by every definition that I know). The international monetary system is starting to realize what it should already know – the U. S. Government is insovent. We can no longer sell our debt.

Second, private investment into the financial and other sectors of the economy will continue to not happen. Private investors are not putting their money into an institution that can be nationalized at the whim of the government. Our Treasury Secretary only thinks that there will be private investment. Private investors are repeatedly saying that they
are out of this game. This insanity should stop right now. It won't.

Third, the next (and bigger) crisis – commercial real estate foreclosures. These are on the way, like in a matter of a few months. Just how do we think that the Fed will deal with that? Any confidence? I did not think so.

As for me, I am riding this "rally", and then jumping off the train –
hopefully just before it reaches the cliff. My indicator for the timing of this will be at the moment that Obama celebrates an economic recovery in a national presidential address. The trick will be to divest as quickly as possible, while getting as close to the edge of the cliff as possible.

This is just my take...but hey, I am just one of them non-Ivy League educated idiots.

Investors should be allowed to profit when taking risks.

The government is sharing the risk by limiting the downslide for investors. Therefore the government shold share in the profits.

This mess started with the real estate market, and won't end until there is stability in the housing sector. The steps that the Administration announced only goes half-way. Even if the Private Equity Funds decide to play, the manner in which the mortages had been securitized makes them difficult to be worked out. The only way to restore the housing sector is to take the supply off the market, which means finding homebuyers who will live in those houses with a mortgage that they can afford. The mechanism doesn't exist right now for that to happen, since the "toxic assets" are held through a mess of securitized transactions. For an interesting perspective on "Why Real Estate Matters," go to the Peppertine Graziadio Business Report: http://gbr.pepperdine.edu/blog/

In response to John Thomas. If you tax new homes and constrict construction, you are putting a damper on an already heavily affected construction industry. So in a sense you're robbing Peter to pay Paul with the net effect being the same. Sure the housing market would stabalize, but it would further stagnate or worsen the job market.

As has been mentioned by many officials a multi-facetted approach is the only solution to this mess.

America has always been about what is right and just, not about what is the quickest and easiest. The Obama administration seems not to know that. The problem with Geithner's plan is not only will the guilty financial perpetrators not be punished, they will be rewarded tenfold. Obama had a unique opportunity to do what was right and provide some justice to American’s who rightly feel betrayed by the financial wizards of Wall Street. It might have been harder in the long run but the country and the average voter would have felt justice had been served and now we are all in this together. Instead he continues on with Bush’s financial policies keeping in power and rewarding the very corporations and people who brought us to this point. He has allowed a feeling of us, against them to prevail in America, the haves vs. the have nots, fermenting bitterness and rage among the average voter. I am an Obama supporter but I must I am profoundly and deeply disappointed in his economic policies. I cannot understand why he just doesn’t get it.

Yes, if we give them the opportunity to make a boatload of money we must live with it. Only on Wall Street is a deal not a deal...

David,
It appears that Tim Geithner doesn't have a lot practical alternative resources to turn to in support of his plan. I suspect he would have made them known if he had. If Mr. Geithner succeeds at enticing private investors to play, they deserve to make potentially huge profits for putting their necks on the line. What other incentive do they have for playing? They know there are no guarantees they will profit. Sometimes risk begets reward and sometimes it doesn't. So far, I don't see anyone else volunteering to step forward and assume the risk, so I hope private investors are willing to do so. We need their help.
John Schaffeld
Boston, MA

I think the more important sign is the unemployment rate. When it starts declining that will be a sign for me. So the government is going to buy up these toxic assets and repay the government for the assets as they sell them off.....and the taxpayer is left with the fallout. Plus we are going to bailout home owners who want to refinance with Fannie Mae or Freddie Mac. Sound like I am on the hook for a lotta of money that I don't have and everyone else will have something to show for it.

Amen to Arthur. If we want to keep people employed in this country slap a huge tax on the large corporations that are outsourcing work that Americans use to do. That would insure people in our country don't get layed off and the corporations will stop paying next to nothing to overseas employees. As far as the economy, a little something that I learned in economics 101. If you don't have any money in the check book, quit writing checks. I don't have a clue how to fix the mess we are in. Obama seems to be everywhere and his solution seems to be to keep throwing money at the problem. I find it ironic that during world war ll our manufacturing plants could re-tool as fast as they did to start producing products that were needed for the war, while in this day and age, the big 3 car companys are still making F-150 gas hogs and the like when we are relient on oil from regions of the world that don't even like us. Please, will someone in Washinton get a clue?

My comment is concerning the trillions dollars of debt that is being projected from the current administrations plans. Of course none of us want to see future generations stuck with such massive debt, but we are going to have to take on some debt at some point to solve the numerous problems we have in this country. How can we as a nation expect to truly grow this economy if we don't invest in our infrastructure (highways & electric grid), solve the health care crisis, and end our dependence on foreign oil? I don't believe we can solely leave these problems to private industry to solve. If that were the case, then why haven't these issues been solved by now? Afterall, the Bush administration already left us with over a trillion dollars of debt and just what economic problems did they solve with that money? None! They didn't even try to tackle any of these issues. We cannot keep putting these things off and the longer we do, the more it will end up costing us in the end.

I think the more important sign is the unemployment rate. When it starts declining that will be a sign for me. So the government is going to buy up these toxic assets and repay the government for the assets as they sell them off.....and the taxpayer is left with the fallout. Plus we are going to bailout home owners who want to refinance with Fannie Mae or Freddie Mac. Sound like I am on the hook for a lotta of money that I don't have and everyone else will have something to show for it. I think they should legalize pot so I won't care.

david,
to keep things realistic for both us and private investors who may benefit too much from success.....i propose that a "sliding scale" be used for profits for investors....ie that initially profits be ...say 90% in the beginning...then...if profits continue..a 2nd tier lowers it to 80% ...and so on...so that the wealth is propotionate for both.
we do need to protect the American people as well...greed is one of mans worst faults!
john

Let the private sector invest in these assets and let them keep the profits that they will realize. This will keep the taxpayer from fronting more money to these financial institutions. It doesn't bother me in the least if they profit millions. That is the nature of the game isn't it. Obama and Geithner are doing exactly what needs to be done. Doing nothing would prolong the suffering brothers and sisters are feeling for who knows how long. Too many Obama opponents are saying we are spending our children's and grandchildren's money. I hear that from the Right every time a Democrat president spends taxpayer money. I did not hear it when President Bush ran up trillion dollar deficit. I'm glad that President Obama is spending money for the good of the US and not giving hundred of billions of dollars to his political friends in the form of no bid contracts.

If the smart experts in this country are not sure how this will all play out, then how are we mere mortals to know? We will get through this, one way or another, and hopefully, we will have learned an important lesson about greed, impatience and the sense of entitlement that got us here in the first place.

@ Arthur....... We can't have it both ways.

We either allow private industry to run their companies free from government oversight and meddling.

OR

We regulate everyone, and FORCE ALL AMERICAN corporations to bring those outsourced jobs home!

The GOPers are always crying "socialism" however, Free Market Capitalism MEANS that IBM and other American corporations can ship jobs anywhere they want as long as they PROFIT from it!

Outsourcing= Free Market Capitalism & Profits for BIG business!

To answer your question: Like many (very) small investors, I am eager to support the president and also eager to make back some of my losses on the stock market.

I would like ordinary people like me to have a way to invest along with the big players. Obviously our investments would have to be small shares that would somehow be pooled and invested, but the point is that I would like the option of sharing in the risk and potential reward.

If this investment opportunity is limited to an invitation-only crowd, that would be harder to swallow.

As for the risk involved in participating as a small investor, I guess I compare this to two things. First would be my small contributions to the Obama campaign, which yielded no literal return (they were contributions) but paid big dividends by getting him elected. I'm happy to do that again here with a small sum. Second, I think of the people who saved up for war bonds during World War II. This could be thought of (by small investors) in the same light. It is not just about the investment, but about contributing to the country.

Are investors taking that big of a risk? If the government is going to step in and limit the loses private investors could get hit with, then it appears the government and American people win the prize for the biggest risk takers.

Happy Friday!

David: I always enjoy your provocative and insightful (I should add unbiased) thoughts and analysis. This is my 2 cents worth view on this great question.

I think we should temprarily "redefine" at least until we get out of the economic (or may be political) mess that we are in, the conventional terms we are used to for a long time (under normal conditions), including risk, reward, profit and the like.

When you have the public and private sectors playing actively in the risk field, there should also be a "formula" whereby they should share the "reward", let's hope or face the consequence. It will not be fair if one side takes the full burden of risk or the reward. The trick is who will define this risk and reward and where will be the optimal level or balance. That may have to be also set carefully, with at least an acceptable level of participation at "equal terms" by both partners, the public and private sectors.

Now, the still challenging question is would they agree on developing that new magic formula? That is where the third variable in the equation (at least in my mind) i.e. leadership should come in. This leadership shouldn't be just limited with the administration. Some "champions" from the private sector should also be given a chance to grow and show their mark on this historic moment to pass to the next generations.

In brief, I believe with regard to the rewards or profits from the purchase (investment) on the risky, toxic assets, both the public and private sector shoul share the reward with some formula. After all, it is the tax payers money that is being put at risk too, not just the private investors. If we just appeasae the private sector and give 100% profit with the tax payers money put at risk as well, it will be encouraging and sustaining greed forever. I don't think it is right.

I would like to see some of these assets become available to regular investors as part of a government/private mutual fund or bonds. Why should only the already rich get to profit if these go up. Government requirements for hedge fund investors stipulate that they have a net worth of over a million dollars. Since the government is guaranteeing most of the principal, it doesn't seem a very risky investment for anyone, and potentially very lucrative.

Why not let the taxpayers participate in the bonanza if it comes. And if not, getting back 90 cents on the dollar is much better than most people have seen been getting from their 401k's.

Thankfully I am in fine shape during this recession.

But the media coverage is terrifying! I am now holding back on spending, even though my job and finances are solid, because the media has scared me so badly about the dire state of the economy and the fears of worse to come!

Nice to see some glimmers of recovery starting. Don't ruin it by questioning it! Let's feel good about it and start spending again. There are tens of millions of Americans like me out there who have thankfully not taken a hit in this recession. Lay off the sensationalizing and we will feel comfortable spending and putting money back in the economy!

I, for one and I'm sure I'm not alone, don't think we should again get shorted IF this toxic debt plan works. What's in it for the American people whose money is being used to pay the private investors? If this is such a good idea, why isn't the government just buying these debts itself and IF it profits, all that money goes back to the government and the taxpayers? Either way, IF it works, the taxpayers would get paid back, if it loses, the govenment and the taxpayers lose the money, with or without the private investors. What I am seeing is a desparate man-the President-trying to persuade the American public that we are just stupid when it comes to this high finance stuff and, more importantly, he feels he is losing his grip on his charisma.

If private investors are willing to go out on a limb in this uncertain economy and risk their money to help get this economy moving then by God they deserve any profits they'll make just like they'll be taking a loss if that is how it plays out. Would people really be happy if the government runs with it & makes the profit? I'm thinkin hell no! The free market is what will save us, not the government. Please wake the F up out there people. The banking system IMO is the only thing that should be getting help, not failing companies for greedy practices. They should be allowed to fail & restructure, just like private citizens would have to if they ran their finances into the ground- lose it all & start over. The same penalties should apply for both business & individuals. I damn sure cannot continue to operate the way that these failures have, I'd be bankrupt & fined or worse. Good for citizens, good for business.

I think we need to stop this idea that it is somehow wrong for people to make money. NO, I don't have any problem with investors making money off of the toxic assets. The assets are horrible products. A company is taking on major risk by purchasing these products. In investing you are supposed to get more return for higher risk. Look, some one has to buy these toxic assets to fix the banking system. The average everyday person cannot. Investors won't unless they get a good enough deal. So honestly, what other choice do we have? Other than government buying up the bad assets themselves. And how much would that cost tax payers? We tried that with the first bailout and we see how well that went. If a company is willing to risk millions to save the economy, they deserve to make some money on top of that.

But hey, maybe the government can implement some provision to offer an even sweeter deal if an investor is willing to donate some profits to select charities. Maybe that would make their monetary gains more stomachable to the average citizen

Arthur – President Obama does not make staffing decisions for corporate America. It's not necessarily his words or actions that either caused or could have prevented the layoffs you referenced at IBM. You seem to think that because Obama states an interest in creating highly skilled jobs that anyone in those positions today is immune and immediately protected from layoff. Not the case.

The whole thing is a monumental mess beyond the average American's comprehension and that's what scares me the most. Is a positive tone part of the uptick? I'm sure it is. Is the mob mentality, Wall St. witch hunt and uncertainty about Geithner part of what causes Wall St. to tumble? I'm sure it is. That said, I think the biggest problem that got us here not only still exists, it's being encouraged. Gambling with other people's money in the hopes of big profit, and those bets are made on the backs of taxpayer money and our fate is sealed by our collective ignorance for the complexities behind the world's biggest business dealings and the loopholes they take advantage of. I know more now than I ever wanted to about CDO's and toxic this, that and the other, but I STILL have no idea whether things will get better or not under these plans. I voted Obama and I honestly believe the only thing we can do is hope for the best, and plan for the worst. There's no historical equivalent for this situation to base our hopes or plans on, that's what scares me most. It's a 50/50 bet at best.

The issue is not limited, by any means, to how we feel about "private investors getting to keep the profits" they might make. It is rather how we feel about the downside that the taxpayers will almost certainly realize. The Geithner plan is not a new plan, it is the old plan dressed up, lipstick on the (same) pig, if you will. The goal of the treasury has always been to get the trash assets off banks books. This is politically difficult to do directly with taxpayer money, so now they avoid the appearance of doing so by providing investors with limited downside, with deferred taxpayer funds. On Day 1, few taxpayer funds are at risk, but the losses come later! I can't believe the American people are so dumb to fall for this. Why doesn't the article above give equal weight to the downside that taxpayers get stuck with, albeit at a later date? Does the author understand the Geithner plan? This is nothing but theft on the part of the government, from the taxpayer to the incompetent and/or corrupt bankers that got us into this mess.

I know there are plenty of people who have lost jobs and are really hurting. However, we went to an upscale restaurant for our anniversary and there was not one table available and we had to make reservations a week in advance.(ATlanta, Ga.) While we ate, tables became emply only to be filled by those waiting. There is still plenty of money out there and when one sees this it makes us wonder. They are still building 900,000 homes in our area and they are taking longer to sell but are selling. I think some people who do have money are holding on to it longer and are reading the negativity in the papers. I bet, if the tone were to change, they would loosen up their purses.

I believe the President's optimism is helping to spur economic recovery. We should all realize it's not "Seeing is Believing" , rather, it's "Believing is Seeing". We get believing things are improving, most likely they will be improving.
If we have a president who really knows how to change the direction, it will most likely change. If all he is is an optimistic Shepperd, and we all follow, things should get better

If this is such a potentially sweet deal why does the government not allow the American people buy in with a program like savings bonds or the war bonds? It could be called the Economic Recovery Bonds where individuals could buy the bonds at a fraction of the cost of the assets covered and collect the interest from the bonds over time.

I think this would be better than acquiring the monies from other financial institutions or countries that would then hold our assets and our future. Why not let the American people get the benifit from this crisis if we have to bail it out by backing up the program that ultimately resolves it.

Two bits to comment on:

Firstly, the expression of concern over "the nation’s unemployment rate [not returning] to pre-recession levels until 2013' seems to presuppose that we need to drive unemployment down to this level to have a healthy economy. I'd suggest that, in that last decade or so, we have become accustomed to a VERY low level of unemployment. Maybe this is 'good', but, arguably, somewhat higher unemployment accompanied by meaningful real wage growth amongst the employed could be better. Anyway, the slow recovery in virtually full employment may not be so awful. The trajectory of the curve is, perhaps, more important than the slope.

Secondly, regarding the public-private 'solution' to cleaning up the difficult to value ('toxic', if you prefer) debt, the underlying question seems to center on 'fairness'. Not much associated with this economic crisis falls under the category of 'fair', and I am not overly concerned with that consideration with regard to a solution or way forward. What we need is a program that is promptly enacted, practical and implementable. I'd be in favor of most solutions that meet these criteria. Beyond that, I think it is very important that the citizenry of the U.S. keep its word. What I mean is that, once the duly elected representatives of the people agree to a course of action and set out the parameters of the plan, we don't allow the rules to be changed at some later time because someone is 'making more money than we thought they would' or some other arbitrary reason. Credibility and stability matter in the financial markets as in other areas of life.

Well, it is plain that the tone of the conversation is everything. Doom and gloom brings doom and gloom. I do believe all of those standing at the wheel of this ship have to be careful not to overblow the optomism, so as not to look like Pollyanna fools. I believe that some of the signs of life we are seeing in the economy come from the housing market bottoming out. Now is the time to buy and people who had been taught that you buy house after saving a 20% down payment and that the mortgage amount you pay should not exceed 20% of your gross monthly income after expenses are recognizing that and jumping in with both feet. Geithner's plan is contingent upon luring private investors and it is important that we understand the risk and reward go hand in hand. We have to make sure average people understand that these investors are taking the risk and may benefit from the reward. It would be disasterous if the plan worked, the investors saw huge returns on their money and the country develops the same mob mentality that has tinged the AIG mess. I think that in the information age, we suffer from information overload, too much that people do not understand, explained by commentators who have their own personal beliefs and overloaded with politicians who decide what they think based on public reaction. It would be wholly refreshing to see a politician who honestly believed in saying what they think is right not what they think will play well at the next fundraiser. It is my impression that President Obama is as close to that type of politician we have seen for a long time, but he is in danger of having his honesty snuffed out by the chior of bozos singing the "whatever my constiuents think" from the halls of Capital Hill.

The concept is a good one and it is creating a positive reaction amongst my family and friends. Can the government receive a portion of the profits?

Obviously, these assets may not be all that 'toxic'. That said, if has been determined that this action would aid the flow of money, just do it. And if the private sector profits, good for them- they deserve it (Even if their risks are limited).

I would like to know why MSNBC retains Pat Buchanan as a chief political advisor? The guy is on 24/7 and also pops up on other networks frequently. I realized years ago that Buchanan is a right-
wing, racist political hack.
Thank you,
Thomas E. Fuller

Personally, I don't think the current administration, and much of Congress, has a clue how to solve the current crisis, much of which was of their making. I do think that if an investor puts his money at risk he should be allowed to reap the profit. In doing so, he will pay taxes, thereby "paying his dues". If he loses the money, I doubt the government is going to "bail him out". It is unconscionable that some in Congress and other government entities and people in this country think that legally entered into contracts should be altered now because they don't like the terms. The time to negotiate the terms of a contract is BEFORE it is signed. I have bought four houses in my lifetime and several cars and never once have I signed a contract that I didn't read and understand first. I rode out the last big housing crisis in a house that was worth less than I owed but I honored my contract. There was a time in this country that your word was your bond.

I think they should rename the "Bad Bank" something else. Maybe the "Asset Allocation Center". Who wants to invest in something being referred to as a "Bad Bank".

Also, I think they should explore using this "Asset Allocation Center" to shore up social security. They could make an age cut off, say 45 years old, at which people under the cut off receive bonds in the bad bank to compensate for social security holdings. When an individual retires, they can cash in these bonds (or sell them). Anybody over the cut off age simply gets the normal social security payments at retirement.

What these toxic assets need to become profitable are time and investors. The social security pool provides both. At least with this plan the American People will be the ones profiting. Besides, under the current system, I (a 28 year old) pay every paycheck into social security without any guarantee that the money will be there when I retire. My money is paying for someone else to retire. This way I am being given a share in something that I can watch grow and I (and many of you) have a potential to make those big profits instead of some hedge fund.

Whats so special about AIG bonus. Every CEO get unwarranted "pay". Just looked at HUMANA this morning and page 49 shows Mr McCallister's total as $24,794,518.
My question: Is ANYONE really worth that much, relative to pay of workers? Besides, a lot of Humana's revenue is taxpayers money.

Irrespective of what the government is trying to do, it's a fair bet that if the government did nothing it would get worse much faster. Anyone have any other ideas? We could use some. Problem is we'll never really know how bad or how long this recession would last if we did nothing. Again, it's easy to judge from the cheap seats.
I understand that people don't trust the government a whole lot, but at least we get to throw them out of office if things don't work out. Last I checked, we don't get to vote on who the next CEO of IBM is.
If increasing corporate profits through the use of government help means a lot more jobs for us poor souls, it'd be worth it. Yet how can we be asked to trust these private markets to do anything in the interest of the American people after what's been happening over the past few decades. The governments' plan must be very thorough and transparent. Hope they get most of it right – perfection is unattainable.

David,

I like your analysis on TV and on the blogs as usual. We as Americans should honor the commitments that we make to any enterprise (private or public) to instill confidence in the investing community.

Without such commitments we will end up playing the Washinton Politics as usual game which both the GOP and Dems are accused and are partially responsible for. The initiatives by the US Treasury and the US Federal Reserve need to work as envisioned without any major problems for our economy to return to some sense of normalcy.

Yes it will be painful for the working men and women of this great country but we have to play for the same team setting aside the political games at least till we see robust economic recovery and jobs growth.

I do wish our President and his economic team all the best and do pray that they are right in their approach to bring this country back from the brink.

Thanks for the detailed analysis and the insightful comments on your blog as always.

Here in Phoenix, AZ the news channels are all bragging because new home construction is up by almost 5%.

Great.. Where does it end? Just what we need here, more new houses.. We have entire subdivisions (started before the downturn) that are ghost towns now.

Also, resales languish on the market, and people have put their lives on hold. Meanwhile, the federal government seems to be pushing the fast, cheap and easy loans again...

I can't figure any of this out, it makes no sense.

I believe that the recent rise in durable goods orders and increased spending by consumers, as well as the increases in housing starts are all very direct effects of the change in Americans fiscal expectations and outlooks because President Obama has restored our confidence in the nation and ultimately our confidence in our country and our economy. Our new leader is both positive and reassuring and he conveys this confidence and new direction to us on a daily basis with a steady hand and measured responses.

This is clearly what you may term the, "Obama Effect".

It’s hard for me to understand how anyone can have “confidence” in the market we have today. It’s totally corrupt. Madoff is one of many Ponzi Schemers and he was at the top of the echelons of the market just like so many others. He was just the tip of the iceberg.

AIG, bonuses? The bonus are nothing compared to the payouts they made at %100 mark to market when those assets were worth 40 cents on the dollar at most.

We have politicians who don’t even pay their taxes yet create laws for common folks about paying taxes.

Confidence in this system? Really? No Really? Are you on drugs?

The recent upswing in some of the economic indices is a result of stimulation of mood, not real growth...so far. To be successful in a global economy, this country must produce goods and services that are competitive in a global market. The reality is that this country has lost this value proposition in traditional manufacturing. Neither military nor protectionist activity will result in success in this area without a fundamental change in value of the workproduct. So what does this busines called America do? What we can't do is kneel hat-in-hand to cash-rich lendors until credit ratings force bankruptcy and they own us. What we can do is expand the American offering which has always been rooted in innovation toward future value. It appears that Obama 'gets it' and is investing agressively (with much debt) in American populace, fully expecting a rich return on that investment – i.e., in ten years, the world will buy American because it's the best value proposition: energy, technology, healthcare, education, other emerging products. Is this optimistic? I believe it is American. What is the alternative?

If private investors invest 5% of the money towards the investment and the government loans the other 95%, the private investors should get 5% of the profit and the government 95% of the profit. At the very least, private investors should get no more than 10-15% if the government wants to throw out something to entice them into investing 5% into it.

I'm not convinced that the plan is going to work, but if investors go for it they should be allowed to keep every penny of the profits they make no matter how large (and obscene they appear).

But, I also thought that the AIG execs had legitimate contracts well known to both AIG's managment and the government overseers for some time. I saw no reason that they should not have kept their bonuses. Yet, Congress and the President (in this case not knowing what he was talking about despite the two days) did not hesitate to villify them and (Congress) rush to try to confiscate their money.

That episode will haunt the Geithner's plan as it will influence the prices investors are willing to offer for the assets, possibly making them lower than the banks can or are willing to accept.

I think we haven't found the correct solution yet. And indeed we need something that won't be just a band-aid. We are all part of this, and just like how high gas prices for short periods of time do nothing for our dependence on foreign oil, quick fixes for the economy will not be the answer for economic problems that were years in the making. It has to be something that will involve all of us, and I sure wish I knew what that was.

I believe a large part of the economic distress that we're now experiencing was due to wealthy private investors and financial "middle-man" corporations taking high risk gambles because they knew that profits would be privatized to them and losses socialized to the rest of us. This is exactly what the proposed plan would once again incentivize. The rich private investors and financial corporations would once again get to play "fast and loose" investment games, this time with our (taxpayer) assets. I have great respect for Obama, but wish he would listen to the economic advise of those who believe in tough market oversight and garnering wide-ranging public benefit from public investments, as espoused by 2008 Nobel Laureate Paul Krugman and before that by Keynes, instead of listening to the illusory notion of unfettered private markets that will somehow allow part of their profits to magically "trickle down" to the rest of us, as put forth by Geitner and Summers. The trickling down part just never quite happens. I mean, come on, it's those misguided policies and discredited ideology that got us into this mess in the first place!

In my opinion, if the nation's unemployment rate doesn't return to pre-recession levels until 2013, that would be a very slow recovery. That would be more reminiscent of Japan's lost-decade. It is becoming more and more likely that in the absence of some remarkable technological innovation to spur long-term economic growth, the life-style that the middle class takes for granted now will be vastly different 5-10 years from now. We will have to adapt.

If the gov't plan is relying on these private investors to buy up toxic assets in order to free up the flow of credit, and it works and the ecnomy gets a huge jumpstart from it, then they deserve to keep every peeny they make. Asking them to risk their capital, in tough economic times, and offering no potential reward is ludicrous.

Michael Lorton:
let me try to clear up the confusion behind your post: toxic assets and toxic debts are not the same thing at all (they apply to two different sides of a transaction). You borrow money from the bank to buy a house–that's your debt. The bank lends you the money–that's their asset. It's an asset because they have a claim on your future income (you're supposed to pay them back with interest). Now if you can't or won't pay, the loan is non-performing. They foreclose on your home, then find out it's worth much less than what they lent you. That's the beginning of a toxic asset. It gets much more complicated than that, but in the end it's not the banks that have toxic debt, it's the people whom they lent money to. Try to think it through and maybe it (and you) will make more sense next time.

To respond to Mike who states: "Just like every recession, this one will eventually end. It would end if we did absolutely nothing. It may end a bit faster by our actions. Is the result (minor acceleration of the recovery) worth trillion dollar deficits for the next 10 years? I think not." and to others who are promoting the “do nothing” or “no” attitude to the administrations offerings, I ask …. Really? What was the true driving force to pull us out of prior recessions? Was it a true recovery or was it masking the symptoms of a much larger issue?

What do people suggest will be the way our nation can stabilize and grow with its current toolbox? It is not there. Manufacturing come and go in waves – automobiles, technology... what is next? What can we produce that the whole world really needs?

In the current market we are talking Maslow’s basic needs, not what is hot, trendy, and attractive. With the exception of technology, we have been living in false bubbles since the 1970s. This is a time that we pull ourselves up from the boot straps and evaluate want vs. need, not glut so the country looks good on paper.

And to John who proposes a 50% tax on new houses. What will you say to the millions who are in the construction business?

America’s need to stop living in their offices and think about what is going on around them in the country and world.

The government should stay out of it. Private investors will buy up the toxic assets (taking a risk for potential profit) without government help. Right now everyone (banks, investors, individuals) are taking a wait-and-see approach because the government keeps trying to do something. If the government would just say "we're not doing any more" then the economy would fix itself.

The effect of overtaxing new home builders will mean a) thousands of layoffs or loss of income of construction workers, architects, plumbers, electricians, painters, landscapers, appliance salesmen, etc. b) loss of tax revenue

The effect of overtaxing and punishing business will be loss of jobs as these companies close US locations and relocate overseas where laws and taxes are more favorable.

Cancel the H1-B visas. Keep those many tens of thousands of high paying jobs here. Then deal with the rest of the outsourcing and moved production issues.

If the gov't is so keen in spending so much money to prop up banks' toxic assets, it seems to me that instead of giving all this money to the banks, it should give $1M to all Americans 18 yrs and older. Think of how many distressed or toxic mortgages would be paid off. If we could do this, the problem would be solved faster than it was created.

I feel like these questions have been answered already.

A) Stop the outsourcing period! I missed the town hall meeting but CNN why haven't you overviewed it?

B) The day this latest stimulus was announced is the same day the market increased. So WS obviously knows something. THATS WHY the stock market has an uptick. They HAVE money to invest now. Everyone is doing this to put money in their pockets. (the govt, WS). If they cared they would give the money directly to businesses that were sound for expansion or eventual takeover of other businesses (ie: AIG) that aren't. Why they don't is a question for CNN to ask

The people who the government needs to do this are the very same ones people have been vilifying and demonizing over the AIG bonuses and the financial company bailouts. If I was such an investor, there's no way in hell I'd jump in. The likelihood of having the reward that might come from the risk taxed into oblivion, and having busloads of leftist activists camp out on my doorstep and threaten my family, just isn't worth it.

There's no guarantee ironclad enough to ensure that, should the reward come about, that the investor would get to keep it. The politics of envy would drive the demagogues to take it away.

I wish people would stop talking about "first time homebuyers" as if second-time homebuyers are all fine and don't need any help. My husband and I work so hard to pay our mortgage, and have been paying off the debt of our youthful ignorance for about 15 years now. We have been teetering on the brink, just being able to pay our bills for years, slowly repairing our credit, and slowly paying down our balances, making the minimum payments on our mortgage, and making tons of sacrifices just to make ends meet. Now that we finally emerge, more credit-worthy and ready to better our living situation by upgrading our home to one that can better accommodate our growing family, we are amidst a recession in which I keep hearing about programs to help "first-time homebuyers." Why are we not seen as just as deserving of consideration as "first time" homebuyers?

I spoke to Ali on his Radio show this week about how important it is for everyone to just take a deep breath and give all the things going on some time to work. I think you are probably one of the most respected people on CNN because you truly seem fair. I would like to see people like you and Ali encourage a calmness to the 24 Houd News Cycle. Clearly the Congress and Senate can't behave like adults, the responsibility had to fall to us.

I think the glimmers are genuinely indicative of movement in the right direction. And President Obama and his team are to be appreciated for doing the intelligent, difficult things needed on all fronts. Instead of playing politics-as-usual with this dire and volatile situation, they are working each piece carefully and with an eye to preventing another debacle - handed to us by eight years of W and his venial yahoos - down the road. The president's ability to tackle complex problems thoughtfully and to articulate what he's trying to do have helped reassure all but the extreme Republican base who'd rather America blow apart at the seams than recognize the extraordinary capabilities of our new president.

John Thomas, By putting massive tax on all new construction, you are not doing any good to the economy. Infact thats going to create one big bubble which you can never manage. You cant manipulate house prices..

House prices should never been more than 3 or 4 times the annual salary. History has seen many bubbles and we all know what happened when it bust and also we know what happens when you try to stop it by government intervention. Instead of learning things from history, we are trying to beat the history and trying to be smart. Accept it we are not smart. Had we been smart we would never have been in this situation.

Regarding your question about private investors keeping profits from goverment insured toxic assets, here are my thoughts.

If the goverment (we the taxpayers) are going to indemnify private investors againsts losses, we should likewise be entitled to a share of any excessive profits. A gain of 15% over a one year period should be more than plenty to justify a no-risk investment by a private investor. After that, a progressive windfall profit tax should apply to gains in excess of 15%. If the annual gain to the private investor reached 30% the tax rate should be 60% on that portion of the gain in excess of the first 15%. After all, the taxpayers are taking all the risk so there should be some potential reward for us as well.

This arrangement would go a long way toward easing the understandable outrage that the majority of the public feels toward "private investors", many of whom got us in this mess in the first place.

In referring to the private investors and their decisions on whether or not to "play", I believe that the investors should be able to keep a large portion of the profit; on the contrary I believe that a significant amount should also be returned to the government for their taking up the majority of the cost of the toxic assets.

David,
I think individuals should have an option to buy "toxic asset bonds" with limits on the loss and potential for large gains. For example, one could buy a $1000 bond, redeemable for at least $800, but possibly do quite well. This will give the average guy and gal the opportunity to buy in and benefit, thus reducing the legitimacy of later gripes about "private investors" benefiting at taxpayer expense. Their will still be gripes, but if done properly (no early deals for the big guys) and everyone has an equal opportunity to have a stake, then it might work.

Have Ali tell me why it won't.

Things are rarely as bad as they seem which is why my father always advised me only to read the sports page (back before 24 hour news). Since one mans trash is another mans treasure it seems to me that the real question should be regarding the "toxic assets" themselves. The dislocation in this market has been caused largely by a single accounting rule which mandates a write down out of proportion to the relative risk of holding the bonds. It really is that simple. Thus private equity firms can make huge returns by simply buying at deep discounts using government provided leverage and taking advantage of the strong cash flows that these bonds are producing regardless of what they have been written down to. You have to ask yourself are they really that toxic or have we just invented our own problem?

Davis, as Gloria Berger stated, we must accept that in order for the economy to fully recover, we will have to work w/ the "bad guys" who had much to do w/ this recession..... I'm not greedy, nor stupid.... let the high stake players do what they do, so that we can stabilize this economy, and we the American people can continue our journey too on the pursuit of happiness, the fullfilment of the American dream..... I like the President am an eternal optimist.... and lastly if this is the plan and tools we have, we need to use these tools immediately and w/o the extreme outrage awarded AIG..... listen, a deal is a deal, and if this is what it takes to get out of this recession, then let's get to it.....So we can all eventually have a chance a prosperity.

Mr. Gergen,

Thank you for this well written article. I of course will tune in again to this week’s summit.

My concern about letting private organizations purchase toxic assets is that it is no different than the bundling of subprime mortgages. How will the toxic asset purchases be regulated and how can I be sure that my company’s 4013b/401k is not purchasing it on my behalf? This is another way for managers to make money taking risks with private individual’s money and future.

Its an interesting concept, but I fear if the asset is bruised, it needs to be tossed like a banana.

I've always disliked the term "toxic asset" as opposed to "worthless paper", but Isuppose the result is the same. While having an upbeat message from a populist president can't hurt, until there is some real sign that we've stopped the bleeding and that the transfusions are working, I won't be all that confident about the near future.

As for the people willing to buy the seriosuly devalued paper and mortgages, if they are willing to risk their cash, and are taking real risk, they should be allowed real profits. People seem to think that making money on the misery of others is the ultimate evil, but these investors would be doing a service. I'd be afraid of being demonized as the AIG folks were, and being attacked by a Congress that has fine tuned the art of knee-jerk reactions, Who would want to go into battle with a bulls-eye taped to ones back?

Perhaps we could just say, we hope that we are bottoming out, but personally, don't think we are to that point as yet.

I am sure the administration would like us to believe that, but I am prepared for a much longer recovery term. I do not see bottoming out, before this time next year, and do not see real recovery even beginning until 2011, and a decent recovery before 2012 or beyond.

There are no jobs, to fuel the recovery, and creating them, will take a good deal of time.

Hi David,

Let's say the government puts up 97 cents for every 3 cents an investor puts in to buy up these distressed assets – I believe that's Geithner's touted ratio – and the distressed asset doubles in value -

won't the government's investment be worth twice as much,
just as the private investor's investment would be?

If so, it seems like a fair plan that just might work.

The question seems to be not whether investors will buy them, but whether banks will sell them. Sales of some of these assets could force banks to write down the rest of them at a price that moves them from zombie status to actual insolvency.

Hello David,

I think this is a completely different ball game than much of the hub bub that has been going on in the last few weeks...if investors put up money to help take care of the toxic assets, then they should be able to keep the rewards, whatever they are...they are taking the risk (albeit not as much of a risk as the government portion) so they should get the reward. Changing the game midstream because the investors "are making too much profit" would be extremely unfair.

In addition, what these companies do with the profits that they accumulate should be none of our business this time...this is completely different than the "bailout" monies that have been distributed.

If I had the money, I would be taking advantage of the government's offer...sounds pretty sweet (if you know what you are doing with all of this "toxic assets" mess anyway...)

Thank you for considering my opinion. Your perspective on the various topics is always enlightening and a welcome addition to the sometimes very partisan points of view out there.

Warm Regards,

Lisa in St. Louis, MO

I'm not educated in finance and know nothing except what I read. Regarding private investors risking their money to buy toxic assets, I think fair is fair. If they take the risk and it is successful then we all win. I think they should be able to keep the profits of their investment. I agree
with a previous comment that at least we will know this up front. This is at least a plan. I pray it works.

My concern is that the gov't, ie, taxpayer, has all the downside and limited potential on the upside while the PE firms could see hugh payoffs with very limited exposure given they're exposed to about about 6 cents for every dollar of investment.

So, it this just another example of the rich getting richer because average taxpayers/employees are not able to participate?

I believe there is definitely an "Obama effect." The U.S. voted for intelligent leadership and we're trusting that it is exactly what we got. We have no choice but to believe in what intelligent leadership is saying — and if he says things are bad, we brace for it. If he says things are good, we feel better. "Trust" and "Faith" are all the American people have at this point. Such feelings have been renewed since the election. If either (trust or faith) wavers, it's going to be reflected in the markets. I wish we are all savvy enough to understand the markets and how they work, but we don't. It's almost an impossibility to manage a 401K account the way savvy Wall Streeters can jump in and out of stocks many times a day, saving losses and profiting on trends. But we can't. We HAVE to trust our account managers. We HAVE to trust our president. We HAVE to trust our banks. Faith in their intelligence and ethics is all we have to give. And after eight years of placing trust in a government that stepped all over it, I'm more than willing to give this administration — with signs of true intelligence — time to try and work this out. I don't believe that recessions can be cured by doing nothing. And if it means enabling rich hedge fund managers and private equity firms to get richer in the process of coming out of a recession, well I'm fine with that — IF, and only if, they bring the American people up with them! Perhaps, since this is government-backed, once profits reach a certain point, a portion can go toward paying down the deficit or toward financing education. That shouldn't be unreasonable. But let's just stop the incessant arguing, finalize, and get on with it.

David:

The answer is in the question. "How do we get these toxic assets off the banks' books? is simply the wrong question. Better to ask "How do we get over $1,000,000,000,000 in new bank capital on banks' books in three to six months? Don't expect private capital to fill that void in the short run. It is too risky for any single investor or fund to go first. Only after the banks are recapitalized would investing new capital in a bank be prudent. Seems like a puzzle to me.

I think the term "toxic" is a bad choice... we don't normally take toxic stuff and pretty it up and set it out for the public. The name can be promotional and realistic so that it helps deflect the surprise if some of the profits become significant.

As far as achieving obscene profits being a problem? We sort of expect big risk to have a small chance of big gain... Thus if the government reduces the risk then it most likely should not provide uncontrolled big gain and should have some sort of constraint. Perhaps other enticers could be awarded to particiapents so that paticpation becomes perdictable and program results stay within acceptable risk/gain common sense.

David, thanks for the post. We own a successful real estate development company. We have done well during the recession. Here is a thought to those who think a depression is forthcoming. NOT:

1. The Fed funds rate is near zero. It does not take a genius to figure out that as a result, long term interest rates for a conforming thirty year fixed mortgage are getting to the lowest rate than can possible go (somewhere perhaps ranging from 4.5 to 5.5 percent). If you are buying, now is the time. Rates are as low as they are getting, and probably prices are low relative to the highs such that someone who is not massively insane viz greed will see value. In short, buyers know these facts and are going into the market; a good sign. Those following the herd will regret their failure to take advantage of current market conditions if they are able to do so at this time.

2. Positive housing starts (new construction) indicate there is a substantial amount of confidence that there will be buyers when these projects come on-line (typically one year or so). it also signifies that there are builders with access to credit, etc., such that they are moving forward now. It is thus not the numbers of starts. It is what is behind the numbers that is the good news.

3. The average real estate transaction involves multiple professionals, e.g. lawyers, title companies, banks, banks' lawyers, surveyors, inspectors, etc. Construction involves almost incalculable economic activity from drivers, to trades, retail, etc. In short, good conditions to buy, and good effects on the larger economy when people do so.

I appreciate things are not rosy and many are out of work and need help. However, the current glimmers of hope are inconsistent with the doomsday some appear to want to believe in. I see a bit more recovery in 4Q of 2009 and really starting 3/4 Q of 2010. I am cautiously optimistic that the systemic corrections being made will yield dividends throughout the economy in the years and decades to come. That pain will definitely be worth the gain in the long run.

While I initially supported the President on many of his proposals, I've become considerably more skeptical recently. Yes, we're all going to receive a $13 tax cut. But we're also going to get slammed by higher prices to pay for carbon-trading schemes. There's also the potential for a per-mile-driven tax to help pay for road reconstruction. It wouldn't surprise me in the least if the government entices these private investors to buy these toxic debts...and then taxes the living daylights out of any profits they make once on them once the economy recovers (if it recovers).

Oh, yes, let's raise housing prices for the sole reason of getting people out of mortgages they can't afford! John Thomas (and I think I know where that name comes from), that won't do ANYTHING of the sort. All it will do is drive people who might possibly be able to afford a house now out of the market, and the people who are trying to sell their homes will STILL not be able to sell, and on top of all that, you'd kill off the few construction jobs remaining when new housing starts plummet through the floor.

What people need to get through their thick skulls is that homes are supposed to be a long term investment, not a 2-3 year 50% profit turnaround job. If you live in a home for 15-30 years, chances are you'll at least break even, and maybe make a modest profit... but the real key is that even if you DO lose a little money, it's a lot less than you'd lose paying rent (i.e. 100% of your money is GONE). In the end, you have saved money for either a downpayment on a larger house, or to buy a smaller house for retirment and the rest goes to your retirement fund pot. The only people who are in real trouble now, in my opinion, are the ones who were shooting for a quick profit due to the hyper-expanding housing bubble. They took a risk in investing, and it backfired, and now they're crying for help.

Well, I bought a lot of stocks and lost a lot of money on that investment risk. Where's my bailout? My retirement funds are in the toilet now. U giv money plz? Sorry, folks, no sympathy here. You pays your money and you takes your chances!

First lets get the records straight. There is no easy fix to this mess. It took us so many years to create a mess of this big and it will take years before we can come out of this mess. By pumping money into too many things and concentrating on too many things at the same time, we are just creating it even bigger mess. We all know one has to manage many things at the same time. But in the critical situations like this we have to make sure first the patient(Economy) does not die.

We are in this mess because of the great ideas provided by great economist in this country.I am not here to under value or criticise our economist but the truth is no one has a clear idea or knows the way to solve this problem. When you are not clear, its better not to get into things which you cant have control. By pumping more and more money everyday, we are creating one big hyperinflation just like germany in 1923. If we dont stop pumping money, we will end up dumping dollars and facing a decade or longer of depression which can easily beat the great depression we know.

Since this will be an "auction" it seems to me that prices will somehow find the right level. If there really is million$ to be made then won't prices on the assets rise accordingly. I guess it depends on how much information the bidders have on what's inside these "assets". If they are bidding blindly then making money will be more about luck then anything else. If they're willing to take that gamble then more power (and $$$) to them.

First off, I think you, David Gergen are extremely smart, you remind me of one of my greatest college professors at Pepperdine Dr. Fred Casmir and my grandfather. I think the question you pose is interesting and it is correct that it should be asked now. I am sure investors are asking that same question too... what if down the road, Congress gets a feather up their ass like they did with the AIG bonuses and decides to tax investors 90% to appease the pitch fork wielding crowds (I cant understand why people are not scratching their heads more at Congress). If the US Govt is looking for business to be part of the solution and offer deeply discounted rates for toxic assets then they need to be LOUD and CLEAR with everyone – business and the taxpayers about what the potential payoff will be – otherwise how will investors in the USA and around the world ever consider the USA a safe place to invest.

As for hedge fund managers and other investors potentially making huge profits by taking risks on these toxic assets, I think that as long as the profits are proportionate to the risks, then that's the way the world of finance works. We want investors to partner with government to buy up these assets. Clearly, there are associated risks. But if their bets pay off, then they should reap the rewards. It's the essence of our free enterprise system.

David:

I appreciate your experience and insight. It is interesting to try and break this down and see what is happening; is it a result of " a positive mindset" or the result of programs working.

Whatever the case, it amazes me how pundits and Republicans are watching this complicated picture by the second and commenting how things are working or not working. They are criticizing and critiquing Mr Obama's administration and success day be day (the guy hasn't even been in office 3 months).

Lets not lose the forest for the trees here. I think we all need to step back, let them get settled in and do their jobs. This mess was created over many years and it won't be solved in "the first 100 days". Mr Obama has spent more time and energy on his job in this short period of time than unnamed others spent in their entire terms. We need to give them some time and space before we starting congratulating or berating them for what they are doing.

The refusal to work together, lack of partisonship, and inability to come up with alternatives (and only say no to Obama) is not going to help the country or the Republican Party. They need to step up and become grown adults and stop with their playground fighting.

David, as Gloria Berger stated, we must accept that in order for the economy to fully recover, we will have to work w/ the “bad guys” who had much to do w/ this recession….. I’m not greedy, nor stupid…. let the high stake players do what they do, so that we can stabilize this economy, and we the American people can continue our journey too on the pursuit of happiness, the fullfilment of the American dream….. I like the President am an eternal optimist…. and lastly if this is the plan and tools we have, we need to use these tools immediately and w/o the extreme outrage awarded AIG….. listen, a deal is a deal, and if this is what it takes to get out of this recession, then let’s get to it…..So we can all eventually have a chance a prosperity.

We need to separate out the happenings of the recent past from waht's ahead, othewise we'll cut our noses off. We must have ways to draw private money back into the invesment world, by hopefully offering enough motivation [economic and otherwise] to do the trick, without going overboard. Since the downside of offering too little is worse than the alternative, we probably have little choice.

The greatest danger is if folks see that the very entities that got us into this mess, and are being bailed out, turn out to be the ones who handsomely gain from the Treasuyry's actions to draw them in. I can easily see the public screaming for their heads if that happens. I don't know how one protects for that, but it exists.

Dr. Gergen,

I wanted to respond on 2 fronts to your request for comments:

The first, expectations appear to be a huge consideration in the economy at this time: it has stifled consumer and business spending, leaving only government action and international activity as a hope. International activity is not to be expected because the entire world is suffering through the U.S. caused (financial meltdown). This leave government action. Optimism led by the Obama administration supported by concrete actions should help and apparently is. Government spending is absolutely necessary and the Stimulus and proposed budget serve this purpose. Also, to avoid government interfering with private investment (when it finally occurs), appears to be reduced as the stimulus will not go on ad infinitum.

Second (and last), the conditions in the financial sector (lending to consumers/businesses) will likely improve when demand increases, and the fear of consumers/businesses unable to make payments declines. Given these considerations I am hopeful. However, I have been following Paul Krugman's writings in the NYT and I highly respect his thoughts. I hope he is, at least, partially wrong.

Thanks for giving me the opportunity to express my opinion.

Sam

Let's review... Pre-2008, financial institutions reap huge rewards on ill conceived and dubious investments. 2008, 2009, the government covers the fantastic losses of many of these same financial institutions, on these very same investments. 2009, financial institutions use government provided bailout dollars to provide bonuses and parties to the dim wits who created this mess. Flashing forward to 2010, these same dim wits will be buying up, at discount prices, these same dubious investments, and reaping huge profits in the process.

So what do I think ? I think safety nets and entitlement programs for the wealthy are an abomination.

Housing and all the associated set costs, like Real Estate taxes and Insurance needs to be affordable for more people. Banks should use these when they calculate the 31% thresholds for mortgage payments vs net income.

How about all you who bought more house than you can afford start paying your mortgage again. Then the banks do better; then those same banks who screwed around and made all those risky loans and then sold all those esoteric, nonexistent "financial products" that you risky homeowners are now causing to tank can stop jacking up MY credit card interest rates...on cards that I've always paid! I guess they realized I am a reliable source of income, and that others were NOT.
Thanks a lot.

Had not the howl risen, the AIG bonuses would have been upheld in court and paid, as will the profits that may accrue to private investors in toxic assets. The bank stress test will reveal the banks that will be forced to sell assets into the new program and so provide a pricing mechanism dictated by the government. The assets are primarily backed by U.S. real estate; thus we will be financing the sale of our territory on excellent terms to whom? Sovereign wealth funds would have multiple incentives, not the least of which would be the expansion of controlled domain. Sovereign wealth funds will be impervious to howling.

Also please help people understand the price of inaction..... there is a rage among many americans that believe that if we did nothing, no gov't, intervention, that we would still get through this recession.....let them know the theoretic difference between H.Hoover, and FDR..... though gov. spending won't resolve everything, it is a temporary filler for the lack of consumer dollars in the economy right now......Mr. Gergen, and the money summit, please stress this to those who don't understand...

Consumer spending is up for the second month in a row – that's certainly good news. Is it permanent? No telling right now, but it's definitely a good sign. Consumers appear to be feeling more confident.

David, as I understand the Geithner plan for taking the toxic assets off of the balance sheets of troubled banks, the opportunity for gain to the investors will be shared by the government. I suspect that the waterfall of future sales (liquidations) of the pools will follow a pattern seen in most commercial real estate deals, i.e., first the government guaranteed portion of the purchase will be paid back at par plus any carried interest and then the remainder will be split pro rata – the investor's and the government's equity. This will provide for competitive bidding – the tax payers will be compensated for success pro rata with the investors. It is a good approach to clean up this mess with profit for all being the motivator (of course the original holder, the banks, will take a haircut when they sell the toxic assets at a loss, which is only fair).

David Gergen,
Thank you for your insight and comments, as well as those who have responded here. I would absolutely agree that there is am Obama affect, likewise as we look back on history we can see there are similiar affects by preceeding Presidents.
I am encourged to think that the private sector will be involved as soon as practical even as the government is balancing "toxic assests" versus "toxic debts". If there can be a measure of upfront sercuity for those investors, which I believe will be needed as an enticement, then making a profit is good.
The problem is that throughout this abyssmal display of "investing" is the only profits were in the form of bonuses. Had there been real profits, we would not even be here bantering about this. The likes of Lehman Brothers, Bear Stearns and others would not have went down the drain and the likes of Citi Bank, AIG and others would not have needed bailed out the Obscene Tune of Trillions.
I would hope that real profits can be achieved, that would mean real tax revenue even with the present tax code. I can only hope that the Obama affect becomes far more real as a solution and that this trama for many can begin the long road of healing.

By "private investors" do you mean banks, and companies like AIG or do you mean mom and pop on Main Street? That's the difference here and it's a biggie...as I'm hearing it, I don't beleive the program is open to the everyday consumer, which again, means the big guys wins and the little guy gets screwed.

As to the uptick in the economy, it has a great deal to do with Obama and attitude. Let's face it, America needs a cheerleader to "sell" the idea of "America" to the rest of the world and to inspire confidence to the people at home. The uptick indicates his tone is working–I know I for one feel much better with him at the helm and communicating every step of the way–it makes me feel like I have a vested interest in the success of his policies. And make no mistake, I do, as does the rest of the country, and the world.

I don't get it. When things are going bad- everyone jumps in to harp on the bad- day in-day out. When things are going good-we are reticient to show signs of happiness. Do you not realize the psychological impact you media people have? I think if we did things like "we're in this together, so let's pitch in and help turn things around" moments rather than doom and gloom we'd be a lot better off. As for the profits- we nned to get our thinking straight. If we are not nationalizing the banks than we better hope the private sector makes big profits. We are either looking for a capitalistic solution or not. Stop trying to walk the po[pulous line and pick a side.

I would love to see an analyst who represents the Obama position respond to Mr. Gergen's analysis.

What troubles me most about everything that's happened since January 20, 2009, is the dearth of voices from Democrats and Obama supporters, and an almost total takeover of commentary from the right. Such a situation did NOT occur during the Bush Adminstration and the 12-year Republican Congressional majority. Indeed - voices of Democrats were muted or non-existent, since they were the "minority" party.

With so many Republicans openly and publically hoping for Obama's policies to fail, don't you think the Main Stream Media might, at least give EQUAL time to the MAJORITY party in this country? I'm waiting to see if anyone responds to this.

And, indeed, psychology is critical. Perhaps, Mr. Gergen, you may recall all those Republicans who kept proclaiming that the economy was "basically sound." Indeed, if my recollection serves me, President Bush and Sen. McCain stated that "the fundamentals of the economy are basically sound," when the financial world was already well into collapse mode.

Now, however, with a Democratic administration and Congress, all we hear are Republicans predicting the worst. I hope those conservatives who truly love their country above their party and ideology, reconsider this strategy.

"The Bush Disaster", huh?

Ever hear of Barney Frank?

Chris Dodd?

Maxine Waters?

Probably not.....have another sip of Kool-Aid

I like the idea of a tax after a certain profit level has been reached. This would assure me that the investors will receive a fair ROI but that part of that profit will go back to the government to pay down the original debt.

It's great to see in black and white that Obama's plans haven't started working yet. I'm already tired of people complaining about what he is doing and how it's working, when it hasn't had a chance to work yet. I think he does radiate hope and that's not a bad thing for all of us right now.

If the solution is another sweet heart deal for the ubber rich, I will be outside the Whitehouse with a mob calling for Obama’s head.
If we were permitted to buy these assets ourselves in small quantities with our pillaged 401-k,s my attitude might be different.
I see our situation as similar to the Romans of antiquity, and if we fail to find more amenable solutions our empire shall also self destruct.

Thanks John Thomas!

A tax on new homes – BRILLIANT! Those are not real people that build them anyway are they. No wonder this nation is in the trouble it's in. Education is the way out. And tax the uneducated 50%.

What were going through right now is like, God forbid, a near terminal illness. If we dont do anything the illness will kill us. But what we need to do to kill the illness brings us near to death and in the end we might die from a heart attack....in other words choose your poison.

Obama's role as leader, Captain of the ship, if you will, is to remain calm during the storm, to encourage the troops to hold the line while the enemy charges, etc. He should remain ebullient and defiant, against the economic whirlwind, we are facing. He should not give us investing advice, as he did a couple of weeks ago, as in when he thought it was a good time to invest. Overall yes, but he's not our chief executive stock broker.

Private investors, and firms, who wish to participate in the toxic asset plan should reap the rewards if they turn out profitably, certainly. Are we prepared as a nation to foresake a risk for reward? I hope not. However, the Gov should not set the terms before hand then apply these terms universally to each toxic asset transaction. The terms should be negotiated separately for each deal with hopefully, switched on people at the Gov, getting the best terms for the People on each deal. Maybe the first deals limit the downside to the private investors, but as deals get done, hopefully, interst grows and the People get better terms.

Tony

To your last point this country has a long history of people risking things in hopes of a bigger payout down the road. From the Revolutionary War Soldier Land Grants, to people who bought War Bonds that could have turn out worthless. I really don't see as big of an issue in this because those that are willing to purchase these assets know full well the risks. Unlike what was being down with the CDO's the risks takers deserve the rewards.

Thanks for that David,

I've always enjoyed your analysis of things. Certainly, some of this is the Obama effect, however, obviously the overwhelming pessimism has helped contribute to the decline in the market.

I do believe that President Obama will inspire confidence in the market at a time when it is very much needed.

Time will tell whether this is the start of the recovery or the "shelf" that you mention.

A progressively increasing tax rate on profits that kicks in above a reasonable rate of return could take of most concerns about excessive profits from this tax payer subsidized program.

Jobs are being outsourced for financial reasons. When a company can send engineering or development work to other countries (like India, Russia etc.) where the workers are as skilled or more skilled than workers in the US, they save money. If you take a developer in the US and say you pay them $90,000 year. A person of the same qualifications, skills etc. in India will cost the company approx. $30,000 year. So US workers, government, and society are all drivers for jobs going overseas since US workers demand X number of dollars, prices are high for housing, food, clothing and personal items etc.

I think that President Obama's inexperience is shinning and shining very brightly in everyones face since he has been sworn in. Although I did not vote for President Obama, I don't want to see him fail as some would. This country needs for him to succeed and to succeed now but not at the cost of our freedoms and our own choices.

I think Mike from Syracuse had it right, its very pscyhological, if those in authority tell people its better they think it is for the most part, in their minds, remembering that people who could not afford it believed the line the could afford hosues during the sub-prime rage. So people are belivers but are more skeptical then before. It will take time and a slow steady uptick in things to change thinking completely..

We have started the uptrends but it is not a linear line, some days will be up some will down, look for trends, no daily or even weekly ups and downs, but a quarter at time gives you an idea of a real trend, so stay tuned, be interesting how the G20meeting will affect all the discussion on this and whether we still are the leaders of the ecomonic if not free world!

In response to the article's title – are those glimmers real? – I believe they are, they may be small compared to what we need to get fully turned around and engaged in a full recovery, but that's how the recovery will start. Small steps ontop of small steps, build consumer confidence and that will be what leads the recovery. Take confidence in the small steps and the "glimmers", they will help all of us build the economy back into robust shape.

If private investors make a lot of money on this deal, then the assets really weren't so toxic after all and questions such as these will be asked:

1) Why did we have to fund private investors with public dollars to buy them?

2) Why couldn't regulations just be changed to allow banks to reflect a more reasonable valuation?

In other words, if they make a ton of money it will look like our government botched it (again).

Private investors will make money one way or the other, by participating in this program now, or waiting until things really tank then buying the same assets even cheaper without government involvement. The real issues are (1) are the rest of us better off with this program than by letting the meltdown run its course and (2) is the government savvy enough to negotiate the best bargains possible in exchange for its sponsorship of the program? Not clear on either point, but I'm inclined to give the Obama team the benefit of the doubt.

First off, I do not think these 'toxic' assets are a toxic as many believe. The issue has been the difficulty to price the asset and the requirement to mark to market. I do not have a problem with 'private' investors gaining from acquiring the assets. While not clearly defined I expect the beneficiaries will include retirement and pension funds. So this gain may tickle down to many who have an interest in those funds. Finally, why not open up this risk/reward investment opportunity to individuals? Maybe start a Treasury sponsored program similar to savings bonds?

What is required is to break the cycle of despair. This whole situation started with a cry of "fire" which everyone believed, not only our decision makers,but the public at large.The result was predictable. To break the cycle requires a belief things are getting better..Obama believes this thus his more positive tone. If the public believes these recent signs are the beginnings of something better it will feed on itself. Unfortunately he had to walk the line, for political reasons not to build up expectations whose failure would have political consequences. Obviously the steps taken to entice homebuyers has had its effect. What is needed is much more optomistic talk. It should be self fulfilling

My uneducated gut feeling is the bottom has been reached. Every dollar I can scrounge for the past two weeks (not alot) has gone into stock market with local companies I can't see completely failing. So far, I've gotten 70% gains. I think that's pretty good for never buying or paying attention to stocks before. Who knows how long that'll last but I'm pretty optimistic recovery is in action.

Risk vs. reward, that is what it is all about in the investment world, including real estate. Not too long ago residential real estate was the 'least" risky in the risk spectrum of real estate.

Normally, homes were bought with 10%-20% down. Just a few short years ago, 150% mortgages were routinely give, some less aggressive, but all had "teaser" rates, which induced people to buying a house they couldn't afford, for they could not do it under normal circumstances. The problem arose when pools of these "subprime" loans were packaged, along with supposed "insurance" called CDS – collateral default swaps – which were marketed as insurance but really weren't. The credit rating agencies, added fuel to the fire by giving them good ratings, when in reality, the underlying mortgages were very risky.

These were gobbled up by major investors, small investors with their 401-k, governments etc.

With all these " additional" buyers, who normally couldn't buy a home, entering the market, guess what happened to housing prices. Starting in 2005, mid year, we, as real estate appraisers, could not justify economically the rapidly rising prices.

Then in 2006, large portfolios of these sub prime mortgages couldn't be sold into the secondary market, and everything backed up. The rest is history.

I think President Obama's administration did an excellent job in addressing and dealing with a catastrophic, economic situation. Was it perfect in all aspects, probably not. But it is doing the job effectively by any economic measure.

The high unemployment is regrettable, but will be short lived. Let us hope that Wall Street, while it does much good, is more constrained in the future to selling to the masses of investors, highly risky investments which are disguised as low risk investments.

I think that once people digest all of the news out there the market will react in an appropriate way.

The Geitner plan has private investors and the public buying the bad debt. What private investor is willing to lose money? Also once the bad debt is off the books and five years down the road or so when the company that originally held the bad debt is profitable and back to their old ways, the American taxpayer is going to be left with this bad debt.

With regards to AIG, Citibank, GM and other companies that are "too big" to fail. I thinking keeping them around is causing future generations significant problems, ruining our economy and ultimately just postponing the inevitable. Can we afford to keep them around?

The Great Depression was no picnic but neither is this recession/depression. At least if you got it all over with you could have a point to begin to fix things. Now we are just in limbo waiting for the next shoe to drop!

All these plans that are coming out are too rosie with their projects. We need to keep it real!

Personally, I believe that the equivalent of an ETF that is available to the public investor should be made available. This was suggested on FBN this am. It's a brilliant idea that would allow the investor/taxpayer to benefit as well as opposed to only the pre-selected well-healed insiders such as Goldman, etc.

Why should the taxpayer always bear the burden. This is an opportunity for the taxpayer to benefit. Remember that "toxic assets" are there only because of an accounting rule that is designed for the upside having blown-up on the down side. The profits will be huge as the up-side begins and the mark to market will yield huge paper profits just as these "toxic assets" have yielded paper loses on the down side.

oh, and I've been laid off 4 out of the last 6 months

I think the programs will be effective, given enough time, and that Obama's actions and way of communicating have increased consumer/borrower confidence. The government should calibrate the "deal" with private funding sources to entice participation without providing more incentive that is needed. Once the deal is struck, it should, of course, be honored. However, the tax treatment of profits whould be carefully managed so that, at the least, capital gains taxes are paid.

Arthur,
I would like to see a better description of the 5000 IBM jobs going to India. You describe them as high skilled. I've searched related articles online and have not found any definitive description, so it's hard to know for sure. However, I doubt these are high level engineering and design jobs – more likely second tier remote IT support for global clients. Such skills are essentially commodities and so much more prone to overseas leeching than other types of skilled and professional work. Designing the next generation technologies – computers, energy, medical, etc. – cannot be efficiently outsourced to India, China, or elsewhere. Once the technologies become established and easily replicated, they are prone to outsourcing. Thus, the goal should be to continually invest in next generation development. I believe that is the intent Obama's vision – certainly that is implicit in what he has said.

Bottom line, unless we are willing to be a nation that is paid to work competitively on back-end manufacturing and support, then we need to continually invest in front-end R&D and all the labor that revolves around that. In a global economy, we can never afford to sit back and relax if we also want to sustain high standards of living.

I have no background in economics. It has seemed to me for a very long time that this bust was inevitable. "More" is finite in the system we have been using. I think we need a new paradigm for capitalism. It seems to have been confused with "consumerism". We have not used our weath or our brains very effectively. A shift in the right direction would include a human rights shift where all people are valued, not only those who make a lot of money. We have gone out on a limb and need to get back to the trunk of the tree.

I am optimistic that recovery has started but there still needs to be a couple high speed bumps to the banking and airlines sector. Overall why am I positive? Technology and knowledge have evolved and this gives hope to believe that our recessions / depressions can be contained and reversed in a much quicker manner than any time in history.

On a downward note, we still have a mountain of debt to deal with and spending coupled redistribution of wealth is not the answer. Hopefully Mr. Obama will come clean with the country and tell them that it is just not the wealthy class that will be taxed.

I suggest dividing the private investors' slots into percentages of return on capital. Specifically, and for example, the first 25% of outside participants get the full return possible on their contribution nased on the current government deal. The 2nd 25% get to invest, but their max returns are 10% less than group one. After that, the max returns are 20% less than group one, etc. In other words, the longer the hedge funds or private investors or whomevwer wait to put their money up, the less the government will participate. First come, first serve........as greed is a fine management tool in America.
Being a retired airline Captain, I saw how successfully the airlines increase revenue by selling a few cheap seats first...opposite of what I propose. TG

IN ALL my adult life, I have yet to find where Government has interceded or launched programs that have had a long term positive effect on the nation's well being. Government is no longer our agent, but our taskmaster and as an individual in 'The Land of the Free" I no longer feel so free.

I'd like to know what the assembled experts have to say about President Obama's refusal to even discuss the option of legalizing, regulating, and taxing cannabis. Given our national expenditure to keep it illegal (law enforcement resources, court and prison costs, etc.) and the potential tens of billions in tax revenue which would be generated, I would think our President of Change would entertain a healthy discussion on the topic. What do you think?

David,

We MUST, no matter what, do business with integrity... even if that means setting aside our emotions for a while. We saw emotions take over with the AIG bonuses and we came close to not honoring contracts and using taxation inappropriately. We also saw the "blame game" attack people that had made decisions that, upon cooler reflection, weren't so horrible after all.

So I am saying that a deal is a deal. If we are asking private investors to risk their money, they must suffer the consequences AND reap the rewards, no matter what they end up being. All we can do is try to price the toxic assets as close to what the market will bare as possible (not easy, and no second guessing allowed!), put them up for sale, and live with the outcome.

My question is this: IF they end up reaping good returns, wouldn't it be likely that WE will be seeing our real estate market recovering as well? Or are these disconnected?

Many of these hedge funds and others that might respond are the very people that got us into this mess to begin with. Risk...my foot!You know they only partner with lots of sweetners. Not only will they be positioned to make obscene amounts of money with the public financing a large portion of this but at the present tax rate they get a huge break there also. And this is supposed to represent change? Come on, the only way to deal with this is to create a toxic bank owned by the taxpayers and as the economy gets better the assets can be sold and the profits returned to the people...which is where they belong

Until the jobs situation turns around, mainstreet USA will not consider the recession over. You can talk about the Stock Market, durable goods, productivity or whatever, but the bottom line is jobs. Its all about the Jobs Jobs Jobs.

Can't really grasp the concept of making chicken salad from chickens–t. If the loans had merit, they wouldn't be "toxic". (Now a banking term)
This must be at least partially true, else the loans to investors wouldn't be necessary. Haven't heard anything at all about rates of delinquency, total non-payment, properties headed for foreclosure, etc. Seems to me the talk of enormous profits may be premature.

David, you raise some interesting points and have made great observations. Your notion that we may have only hit a ledge, rather than the bottom, is something that has troubled me all week. Paul Krugman also touches on these points today in his piece in the NY Times.

My question is this: If the root of the economic collapse was American overspending and debt, then how do we return to a consumer-based economy and expect that everything will be OK? Further more, when the real estate bubble burst we shed approximately 30% of the housing value nationally, on average. Just as the unemployment numbers will remain high for the next several years, so will the housing market take years to recover to pre-2007 numbers.

All things considered, where are Americans supposed to access the free cash or credit to start spending again? The money simply does not exist.

So to answer your general question, I believe we have hit a ledge that is an outgrowth of President Obama's positive remarks, as well as the result of investors/consumers taking advantage of what appears to be fire sale deals. Lets see where we're at in July.

If somone invests money and gets a return, they should be allowed to keep it. That being said, I have been against bail-outs from the outset. I am against people like the President trying to "stimulate" the people into a another long term spending spree to keep this sinking ship afloat. People should not purchase what they can not afford to pay cash for. When growing up, the only things we did not pay cash for was a house, car and large appliances (we had a revolving charge at Sears). Many of the good paying jobs have shifted overseas, while the cost of living in the states has gone through the ceiling. The president can not fix all the problems – there is not enough money: there are too many people and not enough resources (for instance, adequate/affordable healthcare for all etc). Unfortunately, democracy/entreprenuership/freedom has come to mean an individualistic view with an eye to accumulating wealth, instead of putting people before yourself and your quest for monetary success tinged with greed. That change is bringing this country down. Stimulus pkgs will only put off the inevitable. We need to go back to putting people first and living within our means, beginning with big business and big govt. My idea of investing is investing oneself in family and in the company you work for. That is the way is was 50 yrs ago and it worked rather well.

We can't keep putting a bad stigma on profits. All companies need to make profits. If they agree to help the US economy out now by taking a risk and investing in these toxic assets then they should get whatever comes of it in the future.

David,
It's great to be able to communicate with you. Your balanced comments always carry much more weight than the "food fight "people.
I know that credit default swaps are the trillions and trillions of dollars that constitute a lot of the toxic assets. The credit default swaps would have more value if the risk of the underlying mortgage would improve – yes?
So, if investors are the first to take a chance, they are assuming a lot of trust in the system, and deserve to make extra profit when it works out.
But secondly, we need to make sure that there is a good plan to refi or modify or in other ways save all the mortgages possible. In that way, the mortar and brick mortgages that I think were good all the time can be seen as the assets they are.
The swaps won't be so scary once we know the foundation is good. The whole collapse was just Wall Street selling so much "bull" that they even scared themselves. We've corrected – solidify the base of the investments, tighten up some regulations, and let's get back to business.

Does a population have informed consent when that population is not taught the inner workings of its monetary system,and then is drawn, all unknowing, into economic adventures?
- from The Trial of Trials

Correction. In reggart to my comments just submitted, remove last phrase, please. It is incorrect. "Cheap seats first" should close my paragraph. Sorry....and thanks.

The "toxic asset" plan of simply trading these assets around is foolish. Their real worth can't be fabricated artificially by throwing money in the pit and saying buy them at this price. Their value is still tied to the mortgages that people are paying or in a lot of cases not paying. This is a quick fix that may help in the short term but the government will lose every penny they put into this plan because these assets will never be worth what they'll sell for. They'll only lead to government losses while wealthy corporations make more money. I think it's like money laundering- tax payer money goes in, gets washed in this plan and comes out as corporate profits.

The best solution is a measured discipline solution that involves unravelling the tangle yarn. The money that the government wants to spend should go directly to the mortgage crisis. Aggressively renegotiating loans, refinancing loans, relisting foreclosures and somehow tying purchases of the properties to the prior loans and therefore the toxic assets. This will take longer but you could employ a lot of people with this plan and stop the problem from getting worse. These assets will never be worth what they were initially sold for, but if you don't clean up the mortgage mess they'll never be worth anything- this plan would in effect put a bottom on the market. The bank bailout is more top down- trickle down thinking- give the money to the banks and they'll not only do the right thing but it will trickle back down through the masses to the housing market. This won't happen as they think. Too many individuals with the mentality of every man for himself.

Sigh, this is all a shell game. Read Peter Schiff and Karl Denninger. You can't spend money you don't have, bailing yourself out of debt. This is printed money, not real money. See also Krugman's Conscience of a Liberal article as to why this will fail.

For a real eye opener go to Nouriel Roubini's site. The banks are technically insolvent by th etune of 3.4 trillion. Wake up people!

Its a shame, as evidenced from the comments that Americans have done very little to educate themselves about what is happening to them, unless spoon fed by the media.

Hint: YOU are buying Toxic Assets with you and your children's tax dollars, that no one will be capable of paying, while Wall Street and the Banks walk off happy and fat with your money. If the assets they buy from this new program fail, YOU pay for it! This is huge! This makes AIG Bonuses look like giving out Halloween candy.

Its truly sad that many of the American people are asleep at the wheel and clueless.

David,

I always appreciate your calm assessment. it is time for the adults in the room to let their voices ring.

I think the direction and scope of Obama's recovery plans are right on. His calmness and persistence in explaining both that we are all in this together and that sometimes "less worthy" folks have to be helped in the common interest seem right on to me.

As a professional economist, I would have done some things differently but now is the time to appreciate getting the broad direction right. All indications are that Obama is sincere in saying that if the first round isn't enough or isn't working, he will adapt. I think this will turn out to be true on the budget as well.

.

FYI CNN, I always appreciate David Gergen's commentary. He seems to really talk about the issue and isn't a hardliner in any politcal direction.

If we get investors into a deal, we should honor the deal. They won't do it if they won't make money. The purpose of getting them into the deal is so that we won't be overpaying for the assets. And by the way, if they make money, so does the government, just not as much.

We have NOT hit bottom! You cannot spend and borrow your way into propsperity. And socialism won't work, either, or Europe would be booming.
We ae in a ton of trouble; half of the economy is demand and half is supply. BORROWED money has to be paid back. And printing press fiat money results in Argentina-style inflation....which is coming down the road.
Ad to this mess, Obama and his crazy liberal nut ideas like the "Copenhagen Accord" and we are headed into disaster.
I fear ballots will turn to bullets.

Hi

Whole purpose is to bring the economy back. Extra opportunity to private side will do the trick by motivating them to participate. So rule should not be changed when private people make more profit. It is part of their risk. This is America.

Tax the principals' take-home as income and not capital gains and I'm OK with it.

David:

Who are we kidding? This plan is a necessary evil – the by-product of government’s failure in the first instance to enforce and enact the regulation needed to keep capitalism from running amuck. By allowing the private sector all the upside and limited downside, we are in effect offering the private sector a “promote” to get them to play. This is done all the time – albeit, with some ownership of downside risk. The real sin will be if the banks are able to form special purpose vehicles (off-balance sheet) in order to participate in this opportunity. We should have provisions to prevent that. Given we have a small market of would-be players, the government really has no choice but to offer a sweet-heart deal. Who else do we have that can value the assets and take control of them in order to ultimately liquidate them in an orderly fashion? No one that’s who. So, the next time some Republican or staunch conservative rises up to complain about the intrusiveness of government, we should remind them of where our collective laissez-faire attitude has gotten us.

Raw data + common sense = economics, Mr. Gergen, lest we forget the very commonsense rationale behind this economic landslide - homes and general credit were leveraged to the hilt across the nation leading to a capital crazed frenzy at all levels, this was buttressed solely by rising home values which justified, albeit foolishly, the further leveraging of the entire economy. Think of it as a desert oasis – during the leveraging period the water level rose and rose giving more and more their fill, but when the market collapsed, the water drained out and suddenly a tiny pool was left for the many takers surrounding it. The government is now trying to make it rain, but doesn't have enough water, so they ask private investors to pour in their reserves, which they are skeptical of. Dehydrating is a delayed and painful process, but it always wins out in the end – same principle here: the people need more water (capital), but if it doesn't come soon, either through bailout, private investment, liquidity, or a housing rebound that restores equity to houses and individuals, then the spiral could only be at its start. As an aside, Mr. Gergen, you are CNN's intellectual heavyweight – your commentary is dense, never petty, and always measured by your well-calibrated political compass. You never succumb to relevance or factional favoritism, and so I tip my hat.

I agree that Obama needs to be out there talking to the people. Confidence is key – he is not taking his eye off the ball by traveling the country and communicating. He is in touch with his experts who are doing what they do. Most of the country doesn't understand the details – they just want to know something is being done for them.
And if private investors take the risk on the 'toxic assets' then but all means, they should read the rewards!

Mr. Gergen, you have caused me to start scratching and rubbing my temple again. You have raised an excellent and thought provoking question. It seems to me that if you are prepared to take risk there should be some reward in doing so. Assuming the private investors make significant sums then that would be fine to me. Tax payers shouldn't loose too much sleep because private investors also pay capital gains tax therefore everyone benefits in the long term. Will be watching CNN tonight for sure!

I don't think the plan will work, simply because the private investors will not buy the crap assets, even with subsidies from the government, and banks will not sell their good assets at below par price. The only reason the bank cannot unload these toxic stuff is because nobody wants to buy those at higher price, and they are actually worthless.

I cannot believe people actually buy in the story of "no market". There is human body part market with price, and there was a kidney on ebay some time ago.

One way to do this is to 'socialize' the recovery of 'toxic assets'. Mandatory 401 allocation towards the buying of toxic assets by Government will enable a speedy recovery.

I am skeptical of the glimmers. While it has been nice to see my stock portfolio rise, it could reach new lows in a heartbeat. The message and tone eminating from Washington has changed and so people (stupidly) feel better. The rise has not been due to anything fundamental but is all emotional ("animal spirits" as the economists say).

Geithner's toxic assets plan is another give away to the moguls on Wall Street. This Administration whicih campaigned as being for all Americans seems to serve only the poor and the very rich. For example, many of the stimulus benefits phase-out at $75K to $100K of income. Then, however, the big money is dolled out to the likes og AIG and, now, to large money managers who will get 6:1 leverage to buy assets on the cheap from the banks.

The steps being taken in the name of recovery are likely making matters worse and will only prolong the steps, like re-pricing housing assets, that must occur to repair the economy.

If double-digit profits are a serious possibility,why do these assests need to be removed...let the banks manage so as to get the profits.

As I understand the message we are being sold,the banks can not make money off of the assets so the government has stepped in with funding.

If the government thinks the assets are so valuable,let them manage and give the money directly to the people.

When we face any situation and throw logic "out the window"...the end result by definition will not be verifiable.

David,

I always appreciate your wisdom and sensitivity to the economic considerations before us. As a former Countrywide employee recently laid off due to the acquisition from Bank of America, I truly find it amazing that one corporate giant remains solvent after such a debacle with the Merrill Lynch controversy. Imagine how many jobs could have been saved had only BofA thought more systematically through their acquisition strategy with more human capital interest rather than just share holder satisfaction and job security of the corporate executives.

To think that BofA has now received the benefit of a “clean balance sheet” while many competent people have lost their jobs is perplexing. Many of us struggle to pay our mortgage while this corporate giant can benefit from the tax payers hard earned dollars. I would have to default on my loan in order to receive a “clean balance sheet” now being offered through the stimulus loan modification plan. In the mean time, my 790 credit rating would be toast. Do you think I could walk away from this consequence as BofA will most certainly do? I think not.

If the hedge funds and private equity firms investments makes a profit more power to them…but I wonder how many jobs will be lost if they don’t! I guess it is a risk we tax payers will just have to trust and see what happens.

The slightest good news creates a more positive feeling in the marketplace. I think a lot of the problems has been from fear especially since people get their news 24 hours a day.

Housing has got to lead the recovery. There are many long term investors that are out of the market because of the "no more than 10 loan" requirement by Fannie/Freddie. These investors cannot purchase any property at the current price levels, nor can they refinance at the lower interest rates. The government is categorizing investors as speculators, when most are not. Investing in housing is no different than investing in a stock. You purchase it for profit.

Some sort of incentive or stimulus needs to be added at the bottom of the chain, rather than at the top with the banks and wall street.

Too early to tell in my opinion if these glimmers are real. Wonder what history has shown in terms of these types of glimmers.

whatever measures taken is not going to solve the problem immediately.
The only permanent solution will be to get election reforms.Once politicians stop taking donations from the business houses economy will be back to normal. This holds good to all the nations in the world.

It's all about jobs. Ali's prediction about 4 years to restore jobs to pre-recession levels is likely very realistic. While people are out of work, or afraid they will be out of work, spending will stay limited and building savings will continue. Painful for the economy, but just what the doctor ordered to fix over 20 years of excessive spending beyond our means and borrowing to do it all because many Americans need instant gratification and have become greedy, arrogant and dishonest.

A sad cry from the vision of our founding fathers. We must get back to God and country!

I don't think private investment should make any money at all. They took advantage of the consumer by coming up with all these "exotic" investment types that have plunged our economy downward, all the while making millions of dollars off the backs of Americans. Now they're going to make millions more off of us when the economy 'eventually' goes back up? It just doesn't sound right to me. I think we should let those companies fail, then rebuild. The housing market bubble has popped, but the gov't wants to plug the hole .... I don't agree with it at all.

Daniel B
US Citizen

I have a suggestion: instead of asking such a stupid question as "is this the Obama effect" you should be asking if this stupid president of ours have decided it's time yet to fill the rest of his economic cabinet, or is it his wise decision to let Geitner do it all??
Anyone who patiently thinks Obama's budget will do anything but Rob the private sector of jobs, and $ is mostly just hoping for a miracle...
Guess what happens when his budget double the Federal workforce,,,,?? How long do you think us in the private sector are going ot pay taxes and see how irresponsible any administration is and continue to be calm

David,

So long as the media tells me how dire and gloomy things are, then as a single person amongst some 300 million others, I think we are headed for a deep fall. But tell me the jump in housing starts is a good sign, even if short-lived, and I may go out and buy that car I need to replace my old clunker. And so will many others. Then guess what, consumer spending is on its way up, and then Wall street will be encouraged, and everything will begin to feed positively on itself.

I agree with a lot of these comments, esp. Mike's right above mine. There needs to be genuine incentive for investors. Anyone who buys up toxic assets is a hero.

Once this atmosphere of fear dissipates, we will be on the road to recovery. I do think we are at or near the bottom now. Things will get better by year's end, but in the meantime those who are unemployed need to work on their skills. You can't just sit home at wait for things to get better. Enhance your skill set. Learn to do something different.

The retail in January and February picks up as Federal employees and retires recive pay increase, social security payments increase, and more so since the new electronic filings the tax refunds and recieved and spent earlier in the year that it used to be. Most recipient of the tax refunds plan to and spend the money on major purchases.
With people losing jobs at the rate of over 500,000 a month It is hard to see how the spending increases can hold up.

I don't begrudge anyone making money if the net result is that I can keep my job.

Rather than behaving like crabs pulling down anyone who can crawl out of the bucket, we need to accept distasteful tonics to alleviate this terrible sickness in the economy. Short of illicit and illegal activities, let's do what we need to do to fix the banks, so the entire country is not brought to its knees from endless stimulus packages and excessive government spending that will balloon the debt.

Here's another (more likely) scenario. The economy bottomed out in December, maintained through January, then started to claw it's way back in late February and on through March as part of a normal business cycle. This was well before the stimulus package spent it's first dollar or Obama shifted tone. Think about it, you don't decide buying a house today and then purchase it tomorrow. The process takes weeks of searching, finding, appointments, appraisals, etc.. The same goes for businesses. A large business does not decide to lay off workers today and start handing out pink slips tomorrow. There are meetings, evaluations, more meetings, budget analysis, etc. It takes weeks. The same goes for hiring and the interview process. So what we are seeing now in February's and March's numbers actually had their seeds planted in January and early February. Like I said, well before the stimulus or Obama's tone shift.

While the TARP funds have helped some, the Stimulus package that we "had to have immediately" was nothing more than an agenda driven boondoggle that pushed our nation almost $1 trillion deeper into debt. Thanks, Dems!

Country who has Outsourced:
Blue Collar Manufacturing to China and Mexico
High paying jobs to India
Local Farm Jobs to south american
And peoples left with education and skills were in Finance business to make fortunes and results are here...

These are basic flaws in US which need to be addressed, you need to bring back real jobs to US – looking back in depression and recovery plan for todays crises dont have same building blocks.. you dont make anything here.....................................

These are things which pundits and excited amatuer anchors on TV shows/news wouldnt look and niether focus on it for some very delibrate reasons.

@Rick Cox

Supply and Demand.
If you don't make new ones there is a higher demand for existing ones. Very simple. Nothing hard to understand there.

If there are 10 houses and 8 potential buyers and you suddenly make another 3 houses dont you think that will change the amount people pay for the original 10 houses?

Mr. Gergen:

Interesting analysis. In my opinion why would any private hedge fund or investment group want to participate in Geithner's scheme? First off, they are purchasing assets that are not worth anything – if they were, the private industry would already have purchased them. So essentially, the US government is subsidizing the losses on these assets in order to remove them from the banks balance sheet. This is going to result in extreme tax payer liabilities with little to no risk to the private industry. EXCEPT, Geithner hasn't laid out the details to his new oversight and regulation that will give either the Treasury, the Fed, or FDIC sweeping new powers to take over private industry whenever they feel like it, and for whatever reason. So, from a private industry point of view, why would I invest in a program that, if it ever turned profitable for me, the Fed can come in and take me over.

Second point, the rally in the stock market is justified if we just look at it from a COMMON SENSE point of view: who is receiving the majority of benefits from Geithner/Obama's plan? Wall Street. Where are stocks traded? Wall Street. What companies lobbied the hardest for the stimulus package? Wall Street. Who owns most of the stock traded on Wall Street? Wall Street. From a purely conspiracy theory point of view (which I’m reluctant to agree with) if Wall Street wanted to rally support for any politicians plan by sending the Dow up all it would take is a few phone calls and it could happen. So is it Barack Obama's policies: No. Is it necessarily the progression of events I just mentioned? Probably not. However, how many Main Streeters are trading stocks right now? Very few have any money left to trade with – so it is not consumer confidence that is rising, its day traders who are pushing the market upward. Just as with oil prices this past summer we know day traders rarely lead to sustained increases in the Dow.

In response to John Thomas – that is by far the worst idea I've heard all day, and I hear a lot of bad ideas! First off, if this was imposed what do you think would happen with the revenue from that 50% tax. You say it will be used as a down payment for a home purchase? So now the government has to save money for you, too? (In reality the revenue from that 50% tax would go into the "black hole" that is our federal budget – not one single penny would make it back to the taxpayers!) If you cannot afford to purchase a home with a decent amount of down payment, DO NOT PURCHASE A HOME! We have slid so far away from the values this nation was built on – when a house transitioned into a part of the American dream it wasn't the physical title or piece of property that made it so, it was the PRIDE and DIGNITY one EARNED when they saved the money to purchase the home and made the payments until it was theirs outright. It was never a guarantee or right, in this nation, to own a home – never! Our government IS NOT your personal piggy bank nor should it be – why in the world would I pay 50% tax on a new home so you can have a down payment on yours? Ignorance, John, ignorance – learn history – your true colors (they look red and yellow with a sickle and a hammer) are showing through.

I must ask.. Is the Obama affect the same as the Reagan affect?

Here is my simplistict theory, and some may say it is conincidence, but I have never seen it addressed:
1) People over spent and overinflated home prices on speculation
2) This was ok (although not healthy) because the values continued to inflate
3) GAS PRICE WENT THROUGH THE ROOF for no particular reason
4) People started to become concerned, and spending shifted to gas
5) Prices on consumer goods increased (gas, airline tickets, etc...)
6) The economy slowed due to a shift in bugets
7) The slow down started to slowly chip away at incomes and those on the edge of not making their mortgage paymets
Home values began to plummit as this continued, and it snowballed
9) Everything went to H*** in a handbasket
10) Gas prices reurned to normal, but by this time the wheels were set in motion and the econmy was on the slide
11) Gas prices are back, the weakness in the economy was discovered, and everyone is chanting the sky is falling – LACK OF CONFIDENCE

My thoery – the inital cause of concern – fuel prices have stabilized – and now we are too scared about what else has happened to return to typical spending, wating for an optimistic report. Any economic slowdown is percevied confidence....Lets realize that nothing should have changed, sure some BIG players got knocked out, but the consumer will live on as long as the buy and sell cycle continues. If we just promote ignoring the headlines, things will turn around much faster.....I have to think some people are thriving in the ups and downs and are attmepting to perpetuate it.

thats it give the rich sweet deals and the poor pay bmw prices for a golfcart at 20% intrest. wow what a change mark these words if we continue on this path the US will be lost in 10 years. when you treat the disabled the way this country does by taking thier homes and slashing any possible income by cutting funds for the poor disabled and elderly because they can't defend themselves and everyone looks the other way. wake up your cutting your own throught.

The need to revalue the "toxic assets" seems to be at the heart of the problem. The big concern I have is how they are revalued. If they are sold at too low a price that is where the real money can be made by someone getting a bargain. I would hope that there is sufficient oversight to limit the cases where that happens. This obviously makes it less attractive to investors who want to maximize their returns.

I am in favor of getting the "toxic assets" cleared up, but I do not want the government to subsidize some private companies getting a windfall. As usual the devil is in the details.

This is like a person facing a life threatening illness. You have two choices while you navigate all the medical possibilities. Either you want to live another day and you find a way to nurture optimism or you pull down the shades, sit in your rocker and stress.

If there are multiple ways to solve our financial situation can your money summit define them all in some pictorial way? Since we have been in recessions before are there not historical precedents that can be analyzed and discussed? I am waiting to hear what all the possibilities are. What I hear mostly are Obama's solutions and the Republicans criticism. I few pundits have offered sketchy alternatives.

Mr. Gergan's question is loaded. One needs to consider that the actual % of BAD housing loans is relatively small. The problem is that they have been mixed in with al ot of good loans and like rotten apples have spoiled the whole barrel. However, if someone takes the time to sort things out, they are going to make ALOT of money, especially on the coasts, where the demand for housing will rebound more quickly. The banks know this and are holding out to get a higher return up front. The "investors", however, smell blood in the air and are holding out for the bargain basement prices. So we have this Mexican stand off, and the government is proposing to provide enough of our childrens cash so the two sides can meet in the middle. Bottom line, if the "investors" include my 403B, then I can live with it, however, I am not thrilled with providing the Hedge fund masters of the world with the opportunity to stick it to us further. Unfortunately, there is no good end to this. We have ringside seats to the biggest bank robbery in history!

John Thomas is exactly right, putting a squeeze on new home construction would do wonders for the housing market. Maybe a 50% tax is too high and would lead to another "bubble," but I'm sure there's an amount that's both fair and safe. A nice side effect of limited new construction would be that people will spend money fixing up their older homes (putting money into the economy!) and the revitalization of older neighborhoods that may have fallen into disrepair. It's so sad that in cities like Detroit and Cleveland, it's not uncommon for a beautiful older house to be sold for $10,000. Generally these houses either get torn down and the land is made into a parking lot, or they're sold to slumlords who won't fix up or maintain the property. By no means would the new construction tax be a magic bullet, but it would take strides towards economic recovery and more importantly, economic stability and sustainability in the future.

I say they keep the profits. If they don't, what's the point of the whole toxic asset program?!?

Desperate times, desperate measures. If their willingness to take a risk plays a significant role in stabilizing the larger economy, then good for them. The rules of this new game are set. Now it's time to play.

I think the toxic assets, broken down into individual properties, should be offered to investors, and even home buyers, at Federally-sponsored auctions across the country in a sort of "The American Dream" program at the same terms they are being offered to investment funds. If I have a $25,000 cash downpayment sitting around, and I can qualify for a secured loan at reasonable terms (standard FNMA for example), I'm willing to roll up my shirtsleeves and work to rehab a foreclosed home that has dropped so much in value due to the market or deferred maintenance, why shouldn't I benefit my investment portfolio, or help out my adult children get into their first home, or help restore a distressed neighborhood? I'm the taxpayer footing the bill for these toxic assets! Why should only the investment funds benefit from being able to buy back the toxic assets at pennies on the dollar?!

To borrow liberally from one of Mellencamp's tunes, "this may not be the end of the world, but you can see it from here." Hate to sound like a pessimistic optimist, but the markets will have their way toward a balance point. It's gonna be a hairy ride!

the fact that the banks cannot sell the so-called 'toxic' assets on the market means that their worth is a lot less than we have been led to believe – and the taxpayers are, again, going to end up paying for them (another form of bank bailout) with the Geithner plan (with government guarantees); again, its the financial institutions and private equity firms that are going to benefit. This simply will result in more capital accumulation in institutions and instruments that have shown no management skill or investment in long term economic goals or products. The gov't has been sinking billions into the banks, credit is not flowing – both because banks won't lend, but also the economy is in such shambles that there aren't as many capable or credit-worthy borrowers. Rather than investing money at the top (and hoping it will trickle down), think we would be better off investing all these trillions into tangible projects that need to be done (energy, etc.) and allow the wealth to flow back up to the financial institutions (even if it means allowing many of the current ones to fail and/or be nationalized, broken up, etc.)

It does seem as though the market is headed the right direction. Near the end of the article it says:
"Question: how do you feel about private investors making lots and lots of money if they decide to play? What if we wake up one day and find that a private firm, enticed by the government, has made hundreds of millions of dollars from these toxic assets? Do you think they should be able to keep it?"

The thing about Obama's administration is that he doesn't seem intent on letting those that make money keep it. Lately I haven't been afraid so much of his budget but rather how he intends to fund it while cutting down our deficit. It seems as though somewhere in the process one side is going to get screwed.

I agree with the premise of risk and reward for investing but the problem is that our tax payer dollars are being used to remove the risk for the "private" investors. Washington has continued to reward bad behavior. The bank/mortgage companies that took the biggest risks and lost the most get the most bailout money. How is that fair or even going to encourage good behavior in the future? All of the blame does not fall on the banks who wrote the obviously bad loans but also needs and is falling on the shoulders of the people who spent way more then they could afford. Neither the banks that wrote the bad loans nor the people who asked for and got more than they could afford deserve a bailout. When us "regular people" go to a casino and place a bet on the roulette table and lose, we are not screaming bailout and don't deserve one. The idea of "private" investors making insane profits from a low to no risk, tax-dollar backed investment is the same thinking that gave AIG and others the bonuses for crashing the bus they were driving. In regards to the AIG bonuses the wording was included to protect those bonuses by politicians that benefited from AIG through campaign contribution etc... Another question that has come up many times but hasn't gotten an answer is what about the PMI that many people were paying each month that is supposed to back that mortgage? Currently in America responsibility is inversely proportional to your wealth and your social status. Any company or business that is "too big to allow to fail" is too big to allow to exist and needs to be broken up before it get that large. When will "common sense" be used as a guide in public policy?

Well if there is an "Obama Effect", I for one am only too happy to wallow in it as years of wading through the "Bush Effect" has left me self employed, on the edge of financial collapse and struggling to keep my home.

Speculative investing has always led to busts, from Holland's Tulip Bulb panic to the sub prime mortgage crisis, financial innovators and greedy financiers have always been able to play the market to make a buck. Fundamentals are the conservative way to value stocks and by the fundamentals there are incredible bargains out there...the majority of stocks are undervalued by as much as 50% based on their fundamentals...doesn't help anyone to know that except for the long haul investor's who couldn't find good bargains a year ago.

Remember, in these panicky bad times "Potter's not selling, he's buying!" Jimmy Stewart still has the odd bit of wisdom to offer us even if it's from the 1940's (Its a Wonderful Life).

None of the actions of our government have altered the systemic issues within our financial sector. It starts with fractional reserve banking and flows down from there.

Wall Street gets all the profits and the taxpayer takes all the risk.

What's scary is the Treasury and the private bank called the Federal Reserve are using this crisis as their own personal 9-11 to grab more power for their institutions.....because you know, the Federal Reserve is the fourth attempt at a Central Bank in the United States history and look how well it's worked.

Remember those conspiracy theories about a global currency? It seems Russia, China, the UN, and Geithner were listening.

I worked on a paper in my MBA on efficiency of the free market economy in 1983. The paper outlined the perspective that survival of the fittest will always occur and is imperative even in the capitalistic , socialistic and communistic systems. The definition of fittest changes. This is reality, we can be outraged all we want, however we as the people need to be outraged by our ignorance of the system not by the system itself.

If private investors take limited risks- they should make limited rewards. Crooked capitalism when Bush was in office didn't seem to effect the wealthy nearly as much as the poor. Now, those with excess get another "rigged" game to offset the first?

I was just reading an article yesterday describing the effect one home builder's bankruptcy had on numerous local banks several of which have failed this year as a result. The total $ defaulted on exceeds $93 million.
The devastation of the "toxic assets" is sweeping the country. I find it difficult to understand any other way to help the country move beyond this moment in time. It seems completely painful to me as a taxpayer but I wonder how much more pain I would feel if my husband, myself, or anyone in my family lost their job because the government wasn't actively working for a solution that will move this country's economy forward quickly.

If the government (taxpayers) are taking the bulk of the risk with little potential reward, and the private investors are taking little risk but getting the bulk of any potential reward... then why doesn't the government just finance this whole thing by istelf? They seem to have no problem printing trillions of dollars. Why not let the taxpayer have a chance at a decent reward for assuming most of the risk.

As it is now proposed, if these toxic assets are sold as overvalued and turn out to be losers, the taxpayers lose. If they turn out to be undervalued and generate profits, the private investors win.

At minimum, the idea of limiting potential profits to some fair level for private investors, with a sharing of profits with the govenrment if profits excede certain levels seems to be a fair option.

A lot of people are concerned about what's "fair". The AIG bonus debacle is not fair. The smoking ruin of the Bush fiscal policy is not fair either. On the other hand, 5.5 million people unemployed is not fair as is not thousands of people losing their homes and kids living in tents. Our esteemed Congress with their 17% approval rating, 6 figure salaries and "gold plated healthcare program [which is not fair either] may be concerned that private investors will unfairly benefit from the "toxic asset purchase program" but it may take another unfair windfall profit arrangement in order to clean all the other "unfairness" out of the system. The American people may have to "get some fleas" from sleeping with the dogs who caused the problem in the first place.

Your last question is key. No one will play if they think that congress will confiscate their gains later after the fact. The answer is obvious: clearly define the gain and loss sharing between the public and private partners up-front and in detail, consdering the ranges of gain/loss that might occur. That way, no one can have regrets later – they knew al the parameters up-front.

Mr. Gergen,
Question: how do you feel about private investors making lots and lots of money if they decide to play? What if we wake up one day and find that a private firm, enticed by the government, has made hundreds of millions of dollars from these toxic assets? Do you think they should be able to keep it?

YES, they should keep it.

If some private investor (who by the way is not part of the team of rogues who brought this economic downfall) comes forward, takes a risk and invests in an economy that majority affirmatively say is in tatters, and makes money while economy recovers...I am not going to stop the investor. They should take the credit wherever it is due.

See this is a game no one has played before atleast for a couple of generations. One doesn't make as much money playing softball as much one makes in Basket ball or Football.

This new game could be paying back a lot and others shouldn't punish the players for playing well.

I agree with Dulcie from Denver – the government should be able to take back some of the profits after a certain threshhold. It is Rsk and Reward, however right now the taxpayers take the Risk and the investors get the Reward. There is a lot of upside for them, but virtually no downside. However, no matter how the government constructs this, it needs to be done upfront and not subject to change after the fact. Set the rules in such a way the investors know those will be the rules for the duration. Uncertainity will cause the investors to be reluctant to act.

I do not think it is ok for them to make money out of the situation. That deal would never be offered to the average American citizen. It is time for politicians to look out for the average citizen, not themselves, or investors who have large amounts of capital to invest. We cannot spend our way out of the recession, we have to become fiscally prudent with much smaller budget deficits.

It is very hard to tell where we are in this economic cycle, but I think it's a bit early to think that recovery has started. As for the toxic asset plans, the only way the plan can work is if the private investores are allowed to make potentially large profits because they would be taking large risks. Given the AIG spectacle, however, I think it is unlikely that they will be allowed to do that. It has been disheartening to see the government get all caught up in the populist fervor for short term political gain and take away compensation that people had been contractually promised. Two key executives for AIG in France just quit over it and AIG is now scrambling to replace them. I think that private investors would be nuts to get in bed with the government now since even written promises don't seem to mean much.

Why would anyone venture a large monetary investment in "toxic assets" with hopes that the government would not add stipulations capping profits or passing legislation to tax profits at a high rate.

With the TARP, Stimulus & Omnibus just being passed with little or no conference/committee debate as well as other repugent action, I don't believe the congress can be trusted to guard the safety of private investors.

I believe it is the only way to entice private investors back in the market. The plan could also work in favor of the government if it was set up correctly to split any "profits" earned. Meaning definition of profits is after all funds have been returned to both government and private investors before determining "profit". Government alone cannot bail out this entire mess. Wake up and realize all people need to help. Yes, investors may come out extremely profitable in a upturn and deserve to if they take the risk now to help all. That is business and without business nobody is employed!

We Americans can be so fickle. We are not sure if we want the President to tell us the truth, the whole truth, and nothing but the truth or not. We punish him either way so we may ultimately teach him to lie to us because "we can't handle the truth" or the consequences (i.e., the stock market declines). That said, we need a sliding scale of for % profit whereby the govt. gets an increasing share of the profits as profits rise if taxpayers are taking most of the risk – I want to be on the "efficient frontier" of the risk-reward tradeoff. If the hedge funds and private investors don't go for the sliding scale, move quickly with nationalizing a few big and bad banks and break them up into smaller ones that can be re-privatized after new national and international regulations and laws can be put in place to prevent large, negative systemic risks in the future. Also, I have heard but not verified that private investors made out like "fat cats" after the savings and loan debacle and recovery so if that's true, I don't think private investors should worry to much about making money on this deal.

Regarding the Toxic Assets, this is what was originally supposed to be done when the $700 Billion TARP bill was passed last fall. Then Paulson pulled a 'bait and switch' and went in a different direction. I am glad they are finally getting back to what should have been done 6 months ago.

Regarding the new Geithner plan, the Devil is in the details. I would like to see a more comprehensive examination of the details.

The example I saw, used an example of an $84 B asset. The partnering company would put up $ 6B and the Treasury would put up $ 6B. The remainder would be raised from private investors. The Govt would than stand good for the entire amount. If the asset went to zero, the taxpayers would lose $ 78 B and the partner comapny would lose their $6B, but the private investors would be made whole. If the asset were utlimately sold for less than $ 84 B, then presumably the taxpayer is on the hook for the rest of the $84 B. If the asset were ultimately sold for more than $84 B, then the profits would be shared, but no details were given about who gets what percentage of the profits.

In this scenario, the government assumes almost all of the risk, but only shares in a small percentage of the profits. It seems to me that the party assuming most of the risk should enjoy a majority of the profits, in this case, the government / taxppayers.

Let's see; take taxpayer money and help investors make money for themselves. This makes about as much sense as all the rest of the bailout legislation in the works. In fact, it's just more of the same. The rich get richer, or at least stay rich. The rest of us? Well, if we give away all our money to the rich, we might be able to keep our jobs so that we might be able to borrow money to buy something we can't afford. WOW! Now that's a great deal!

The American public may be powerless to stop this runaway train, but it's certainly not as ignorant as Uncle Sam thinks it is...

The plan, as I see it, is an attempt by the government to create a market in which these "toxic assets", i.e. bad debts, are sold. To entice buyers into the market, the government is guaranteeing (in the form of loans that don't have to be repaid) nearly all the money being put into the market. The private companies being enticed to buy into the market (who are many of the same folks who caused the problem in the first place) have very limited money of their own at risk but yet have an opportunity to win big.

The dynamics of the market are such that the prices to be paid for these debts will be too high. So, taxpayers will lose under any outcome of this plan.

Another indicator that the Obama factor is really a non-factor is that the consumer sentiment numbers out today show only a 1 point uptick over last month. Not exactly awe-inspiring.

David,

For years, my wife and I knew that we could never afford a home of our own, even on a teacher's salary. What the current housing market has done, though, is to bring prices back down to reasonable levels again. Right now my brother and I are in escrow for our first homes. Another friend of mine is doing something similar. While times are hard, I hope that those who have lost their properties learn a valuable lesson about taking on risks.

As far as the toxic assets are concerned, we can't ignore the fact that they are weighing us down and keepinging us from moving forward. If someone is willing to purchase these assets, shouldn't they benefit? Wouldn't our economy and banking industry show marked improvement? The rich are getting richer. Big surprise. At least they could do some good for the rest of us at the same time. I guess it's that or leave them where they are which isn't good for anyone!

Mari – So, Bush made people buy homes that they couldn't afford, and live off of credit cards, like money would just keep growing on trees? I must have missed that somewhere along the line.

What needs to happen is that the younger generations need to live like older generations used to. You pay for small and medium items with cash, and if you need to buy a house or a car, you buy one that affords you to put down at least 20-40% in cash. Too many young people (18-40) have the wrong mindset about money. I'm 29 with lots of common sense.

Brian
SC

This plan is just more of the same issue we've had in America for decades. We want reward with no risk, benefit with no work.

These bailouts and are rewarding the guilty while punishing the innocent. All those people who bought a McMansion when they couldn't afford it should have their home forclosed. All those banks and insurance companies that made risky gambles and lost should go bankrupt and their assets sold at auction.

Doing otherwise just encourages foolish behavior in the future and punishes those of us who were responsible with our money and didn't borrow more than we could pay.

MS Word does a adequate job of fixing grammar of them what can't write. Maybe – just maybe – those of you who write on this here blog should either write right or be knocked off by the computer. Smart people are smart in lots of weighs, and dumb people like me who can't write should not have my opinions put out there like they were good or something.

Your QUESTION is the REASON why NO private company will TOUCH this TOXIC ASSET. Why spend good money on a risky asset with a much of power hunger FOOL"S in washington,that don't know from day to day how to react. You have to be a DAM FOOL.

In 2007, the median annual household income rose 1.3% to $50,233.00 according to the Census Bureau.[

3]The real median earnings of men who worked full time, year-round climbed between 2006 and 2007, from $43,460 to $45,113.

For women, the corresponding increase was from $33,437 to $35,102.

The median income per household member (including all working and non-working members above the age of 14) was $26,036 in 2006.[4]

49% of American society is single.

These are the median and average prices for a new home from Census:

2005 $240,900 $297,000
2006 $246,500 $305,900

A lot of people are getting kicked out of their apartments because real estate firms are collasping. Ownership used to provide some protection from suddenly winding up in the street.

We've been screaming for affordable housing for years. I still don't think it will be coming anytime soon.

Now Obama wants everybody to be college educated. Add more to our debt. That just creates more competition for jobs that aren't going to be here. Everyone cannot be a nurse. Everyone cannot be a teacher (because that a dirt poor profession for the money you have to spend to become a teacher (avg. spent-$35,000 bachelor's and master's).

Obama and his advisor's are extremely out of touch. And I don't think that they care about this situation. One term for Obama.

I think the risk-taking investors should be able to keep all their money but have to pay a windfall profits tax if their investments turn out to be lolla-paloozas. No lolla-palooza, no windfall profits tax. Now if I were to say to you, I'm going to give you a chance to make some money with an investment. You might lose money, so I am going to sell you this opportunity cheap, cheap, cheap, for $100 (imaginary amount).

You might make a little money (for the sake of argument, I will assign an arbitrary number such as $1,000). You might make a ton of money ($1,000,000). Now if you make a ton, I'm going to tax you 50% of those profits, above and beyond $5,000 (another figure pulled out of the air). But if you make under $5,000, then I'm going to charge you the standard tax rate that you would pay for any and all investments.

The Republicans have some good points. The amount of money the Obama government is spending sounds frighteningly high. And we have only ourselves to blame, for electing people that dismantled our carefully-crafted system of economic regulation, starting in the 1970s. Both parties - and every administration since - share the blame for this.

On the other hand, we would not be needing to create huge deficits if G.W. Bush had simply kept his nose out of affairs he did not understand (e.g. economics), creating huge, unsustainable tax cuts and frittering away trillions of dollars of budget surpluses.

Regardless of political leanings, I think everyone here that is honest must accept and agree that things would be worse had GWB remained president. Obama is clearly making some mistakes, but I am certain that 95% of the people know in their hearts that he is a better option than GW Bush.

Hey Mr. Gergen,

How's Bohemian Grove been?

John Thomas is insane... Do you realize how many people are employed through construction? This would also present the slippery slope of it possibly bleeding over to commercial construction....So basically your plan is to but hundred of thousands of people out of work in order to raise housing prices...All you would do is start a new cycle of unemployment and foreclosure and produce new toxic assets...
I'm not sure if we are at the bottom yet but I hope we are. I am in the construction industry and I am watching it bleed. More people are getting layed off because new construction can't find money from the banks and consumers have stopped spending. It is not a coincidence that when the economy is booming construction is going strong...The amount of workers and municipalities that make money off of construction is insane... I'm not even talking about the tax revenue after the construction is completed...
If private investors want to risk their money then they deserve to get every bit of the reward. Right now..we as american people need them to risk their money. I hope some folks get ridiculously rich out of this because in the end it will mean the economy has recovered.

"What if we wake up one day and find that a private firm, enticed by the government, has made hundreds of millions of dollars from these toxic assets?" – So we're to worry about a private firm doing things correctly and making a profit? People seem to have no problem with AIG giving 70+ BILLION (not the measly 167 million bonus money) of our tax dollars to companies/countries outside the US. Heaven forbid a company in the US that employs US workers makes a dime.

Mr.David Gergen :
You are the first journalist that is neutral about expressing his ideas. It is time we think that whether we like it or not the people who manage this country are the big investors. In there hands is for them to help or finish this country. After all investing is a risk.
Now one thing I am in favor of Obama is that he is trying to keep everybody happy . This is a tough job he has in his hands.
This is like a building the top are the investors and rich , the foundation are the consumer ordinary working people. Without the foundation all the building will collapse.
Everybody says he is spending a lot of money. Then tell him how can he change the economy? with companies closing resulting in massive unemployment.
Do you think is best that health , energy and other unnecessary programs should continue without any restructuring?That's another way government money is thrown out and the budget will also increase with consequences to our grandchildren. If they have to pay the cost it better be with a reformed health, energy and if possible a better social security system.
who says these reforms won't help the government to save money?
It's time we help reconstruct the US if not there won't be anything left for our grandchildren of the land of opportunity.
Sincerely
Gloria

John, Wow you clearly do not understand basic economics or the influence of government intervention in the market place. The only way to revitalize the housing industry is to allow large builders to clear out inventory. You do this by lowering the income tax and encouraging states to address high local property taxes. This puts more money in the hands of the working class, will stimulate the job market and increase home ownership in a healthy way. Why do you want to artificially raise the values of houses? Do you have something against low income families? Why would you want to levy a tax on working American's during a recession? Do you support a government regulated housing industry? A few topics for you to read about: business cycle, subsidies and interest rates. Government intervention creates the problem and offers no real solution.

If the private investors make money at their own risk, I say they should be able to keep it. If we manage to get out of this mess with the government's help – while still maintaining our capitalist system – we have a win win situation. The plan sounds quite brilliant., let's see if it survives what Congress does to it.

I do feel that there is a glimmer of hope. And I do think some of it is attributable to President Obama's thoughtful, intelligent treatment of our difficulties.

I've been living in a recession since 2001, so for me the effects have become old hat. I was in telecommunications before that cratered, and have spent the last 8 years trying to come back. In the interim, I've been through bankruptcy, almost lost my modest VA-backed home twice, have had no health coverage, and have lived literally from day to day. I survived. It wasn't easy, and I had the help of friends, but I made it through. What helped me most was that there were some people willing to help me keep my optimism going (well, obviously, NOT the Bush Administration).

Have we bottomed out? Hmm. I'm not an economist, so I don't know, but I suspect we have about 6 more months of trickles of bad news interspersed with glimmerings of good news before we see a positive shift upward. Will we get back to the halcyon days anytime soon? No. We as a nation are carrying too much debt, and it will take more money to grease the wheels of recovery. Getting out of Iraq and Afghanistan (and STAYING out of Pakistan and North Korea) will help. Getting some of the stimulus projects underway will help.

The most important thing I see is that we need to change our attitudes from instant gratification and moremoremore to planning and conservation of resources. We no longer have the option of strip mining somewhere new, or becoming too dependent on products from countries that can become our enemies overnight.

good article. cnn needs more unbiased opinions and thought provoking questions like those that gergen provides. as for his question about whether or not private investors should be allowed to make large profits by putting in money now- of course they should. they will be taking the risk with their money and helping out the nation. why not allow them to gain if it works? we are out for the good of the country, right? we need investment now.

I hope that the glimmer continues, key word hope. Remember when people criticized Obama for that ? Anyway, my family and I are just as middle class working poor as we were before the recession/depression. Nothing has changed except I received my tax cut from the President. As to the private investors, let them make their money and keep it. That's how it is in real estate. Buy low, sell high. If I had any cash, I would buy toxic assets. Remember, in 1-5 years, they aren't going to be toxic anymore. The economy has always been cyclical, real estate will come back, but prices will be more in line with what they should have been 5 years ago.

Isn't it obvious? Investors will make big money. they will then be considered rich, very rich and will be taxed to death. This is a win-win for the government and a screwing for the average man. Remember that rich can be considered as low as $125 K (review your campaign speeches) and capital gains will play a role. Why get rich to be taxed to pieces when you can be poor and get taken care of by the government for life.

This is finally a good move. It is at least a recognition that the government is incapable, in and of itself, to actually run a credible entity in the financing system or rescue the system by itself. The government's challenge should be to structure it so that there is enough incentive there to entice the investors to invest, but not to give away the bank (pun). Of course total disclosure is an absolute necessity to discourage fraud and establish the best use of the money that the government will have to pay.

It would be folly to suggest that investors cannot keep their earnings, but if that seems to be impeding the big players, I think a good plan B would be then to open the opportunity up to the big mutual funds managers like T Rowe Price, Fidelity, TIAA-CREF, etc. to offer new funds for anyone to buy into, subject to some minimum first investment. That way we taxpayers can jump in if we want to take a little risk with the so-called "legacy assets". No one is going to holler if big profits are made by mutual fund investors, which basically is us!

There's one very fundamental element to the plan that I don't understand: how will this change "toxic assets" into "non-toxic assets"? Is it just me, or does this sound eerily familiar to how we got into this mess in the first place–hedge funds trading essentially worthless products to create an artificial revenue stream?

Enticing hedge funds to start buying and selling them again won't turn back the clock on all those foreclosed mortgages. It won't create value where none exists. It will just create another bubble, and a government-financed one at that.

The government needs somehow make vigorous re-financing options available to homeowners in trouble, either by taking over the mortgages or making the banks offer refinancing, so that remaining homeowners can stay in their homes–even the dumb ones who let themselves get suckered into buying way above their means. Then these "toxic assets" will finally have some stability behind them, and genuine value over the long term. Otherwise it's just a return to the same old shell game.

I'm a huge supporter of Obama but I have to say, I don't like this plan at all.

If they take the risk, they should be able to keep the profits. The whole point of this exercise is to create a market and set a price for these assets that is a reasonable compromise between the promise of making gobs of profit and the risk of losing one's shirt. It's up to Treasury to make sure that this market works properly. If the potential benefit is too low, then this market, if working properly, will price the value of the toxic assets very low, and turn a lot of major banks into verified zombies. I'm not sure that this is the result that Treasury has in mind, or the result that would be best for the taxpayer.

For fixing the current situation, there are no good choices; just "least bad" ones. If The People want to punish the folks that got us into this, then listen to Treasury & give it the regulatory power it is requesting to prevent future meltdowns. That's cold comfort, but it's the best we can do without hurting ourselves in order to inconvenience someone else.

It is all about how the plan is structured. When companies do well, many complain that the salespeople are making too much money. However, it the comp plan is properly structured highly paid salespeople are a sure sign that the company is doing well. Similarly, if this plan is properly structured and the private investors make a great deal of money from their investment, that should be an indication that the government and the taxpayers are reaping great benefits as well.

At this junctionure, it is sort of "if you don't play my way, I'll take my ball and go home." The wealthiest, greediest in our society that caused this fiasco are only going to help out if they can continue with their greed.

Unfortunately, absent another option, we may have to swallow the bitter pill and not with our fingers crossed. Backing out of the deal after the fact would further erode our financial credibility in the eyes of the world.

Right now I think we have to get things shored up and stabilized in the short term, then start to address financial inequities going forward. I don't fully advocate "robbing from the rich and giving to the poor", but in all honesty the last 30 years have been "robbing from the poor and giving to the rich."

Let them make their money, then lets figure out a way to level the playing field later.

If we let the private investors in on the deal then we better make sure it is fairly structured (no blatant giveaways) but once they make the money Congress better not even think about taking it back.

The scariest thing for investors is the knowledge that they are dealing with a Congress more obsessed with posturing than real policy. The 90% tax on bonuses law was an unconstitutional gimmick designed to cover up past failures to regulate and will fall on the first court challenge thrown at it – if it ever even leaves the Senate. All it did was damage market confidence.

Obama has been an island of maturity in this whole fiasco. This recession is bad, but constant fear mongering can make it MUCH worse so he's trying to lift the mood while being realistic. Instead of just scaring people CNN (and other media) should be doing hard-nosed journalism that will call out self-serving posturers in Congress more obsessed with re-election than the future of the country. For example, why does CNN need creepy Iraq-war-style music for its economic shows? Stop the theatrics and do your job of JOURNALISM!

IF, and that is a very big if, investors/fund managers invest AND their investing helps put the country back on its feet, then they should reap the rewards – big risk = big rewards, although they are not taking that big of a risk.

That resolves the banking issue, but no one addresses the real issue – REAL jobs. Countries and companies, and therefore people, survive and thrive by producing THINGS – not betting on money. Whether it is food we produce, disposable or durable goods or a technical/customer service, we cannot proper without producing value!

There is too much imbalace in the economy and in society. When a huge excess of flow goes to the few, then the many suffer for the lack of food, clothing, shelter, medical care and education. This is due to greed and finite resources.

Communism and Capitalism were allowed to grow uncontroled, now the true socialists will have to step up to the plate to solve this one.

The good news is we will be better – more human – after this fall and our recovery.

"The basic ingredient for building a healthy society is simply genuine love" - a great thinker you hardly know.

This uptick won't last long or be very broad until the job market starts to improve. The only answer out of the administration is that the jobs will come from Green jobs that can't be outsourced. While that may create some jobs it is only one sector of the economy and is being subsidized by the government to make it cost effective in the marketplace. If we are not ever going back to having a manufacturing base then someone needs to start figuring out this "new economy" that has been talked about ever since all the trade deals were enacted. The whole globalization plan has been implemented way too fast and with little regard to mainstreet and the economic principals that it is built on is not present in the world today. Specifically currency manipulation by China and artificial trade barriers in countries like Japan and some in Europe. Although our exports have gone up to places like China the biggest category is for equipment from factories here to equip factories there to make goods to send back here. These are not real exports these are investments that are being made there unstead of here.
This problem has been building for the last 8-12 years and we would of been having a much slower economy during the Bush years except for the housing which he perpetuated unstead of dealing with this issue. I am not blaming all of this on Bush but the fact it has not been dealt with earlier has made the current crisis much worse and will much harder to get out of.
At least get rid of the Foreign Investment Tax Credit!!!!!!!!
Well it at least I feel better now – nothing will be changed but I feel better.

I believe that the economy will by necessity come back. There is a huge amount of money from 401k plans and other individual retirement plans, that has no place to go except the stock market. So I see more of the same (rake it in and bubble bursts) for the forseeable future. The only question is, will the average worker ever be able to retire?

Assuming the biggest banks and investment firms caused the lionshare of the problem, while smaller, regional banks and credit unions generally (with some exceptions) performed better as corporate citizens and stewards of our dollars. Why not let the big banks fail and give the trillions in bailout money to the smaller banks which would lend more directly in their communities without the scale of derivatives and windfall bonuses, with less reaming of the taxpayer. Isn't that capitalism at its best?

There is a lot about this plan that doesn't pass the smell test, but there is one thing that needs to be made clear before we start (that whole 'transparency' thing, remember?): just how much book value are we talking about here? We keep being told that the problem is due to these toxic assets on the banks' books, but no one seems willing to say just how much that amounts to. The banks don't want to sell because the markets don't want to pay anywhere near what the banks insist these things are worth. And there's a good reason for that. According to the numbers I've seen some economists discuss, the unpleasant truth is that there's not enough money in the world to pay anything near the book value on these derivatives.

So how much crap are we talking about here? On the _best_ of these toxic assets, there appears to be a 30% difference between what the banks are willing to sell for and what the markets are willing to pay. So, if the total holdings of toxic assets are book valued at, say $2-3 trillion, then throwing $750B out there amounts to 25-35%, which might make up the difference. But if the total book value is higher, say $20-30T, then $750B only makes a tiny 2.5-3.5% difference and is unlikely to persuade anyone to take the risk. And if, god forbid, the total book value is higher still, say $200-300T, then $750B makes no difference whatsoever.

So, before we go any further, it's time for real transparency: just how big is this pile of crap?

Good afternoon.

My big concern - how can Gov't find qualified people from business to serve in the ever expanding Gov't. Having been in the mfg. business for 30 years, my wife and I as owners know how difficult it is to find qualified people. Washington's treatment of anyone who is successful and makes money will drive away more qualified people who would like to serve their country.

Thank you

Acramold Inc

5 stage of grief

Denial,anger, barginning, depression, acceptance

We are starting to move into the 3rd stage; bargaining. Look who we are we negoiating with, and who is negoating for us.? the same institutions that have failed. This iike a divorce, where one spouse tries to negoiate for the loyalty of the cheating spouse. Maybe if we gave them a new car they would change who the are. We are the children hoping mom and dad will work it out, when, what we really need to do is jusr move out of their house and build our own.

I think we will have to honor it, we are asking these people to help get us out of this mess, and offering them an incentive to do it.

There are a lot of problems in the country and the world right now, and it's going to take a lot of bold ideas to get through all this.

The thing that is most upsetting are the people who just go around saying "The administration is trying to do too much at once", this is an argument that been used over and over again for years. Instead of taking a step back and trying to view the problems we are facing as a whole and bring up ideas that will resolve them all, they just say, we need to work on this one think right now and worry about the other stuff like global warming or health care later. And that is one of the main reasons we are in this mess now.

The cost of health care can and has crippled many familes that would otherwise be financially sound, if we don't step upto the plate on global warming now, instead of the possible debt the repbulicans like to say we are mounting on our childrens backs, we will be giving them a planet that cannot sustain them.

I'm not saying this is all the republicans of W's fault though they do share the blame, but so do a lot of the past administrations and government as a whole.

Now is the time to start doing something to fix all our problems, because if we don't, there may not be anything left.

The proclamations that the economy is bottoming out and that the recession will end and our lives will stabilize by the end of the year is part of the thorough hysteria fueled by the media and the politicians (who are as guilty as any one in AIG for allowing the TARP bill to pass without reading it and passing on their Platinum Parachutes and Retention Packages). There is no politician who actually goes out shopping for food or anything else and walks along the street to see what the average American citizen sees: stores closing, houses being foreclosed, and people out of work. Yet, they proclaim the economy is on the rebound. They are only out to save their jobs. And as a CT resident who voted for Dodd, I will never vote for him again. He's done. And how many in the media who do the reporting actually do their own shopping? Both groups of people just don't get it: What happens in the stock market or the Dow Jones doesn't matter anymore. Wealthy people pick up the bargains, but the average person can't pay the rent or the mortgage. The money that goes into the companies through the stock market goes directly into the pockets of the executives. They do not hire more workers because there are no customers to buy their products or services. The only way to rebuild this economy is precisely what President Obama has stated he would like to do, but is getting derailed at every turn because of political and special interests: Put the American people back to work so that they can have enough money to pay their bills and then maybe, just maybe, to out to dinner or buy a book. This whole ranting and raving about each momentary surge in the stock market is a temporary anesthetic on an economy dying of greed and special interests where the consumer comes last, whether at the supermarket or the mortgage market.

David as one of the only truly balanced observers on the tube i respect your views but the mere question of "should we let them keep it" disturbs me especially when this administration appears to have no respect for the rule of contract law. AIG employees signed contracts with the knowledge and grudging approval of Congress (Dodd) – lenders and borrowers signed contracts supposedly with their eyes wide open and now the courts may disregard.

If you expect private investors to invest then they will do it according to some agreement to terms of a contract. Now that they know their partner – the government – may decide at a later date to disregard the terms of the agreement why would they do it.

David,

Very interesting article. I think one thing people should realize is that the profits the private investors make will be subject to taxation (as either short term or long term capital gains) so the taxpayers will get a little something back should these "toxic" assets prove to be a windfall to investors who are willing to take the risk.

Optimism from leaders is great but credibility is better. The first trillion (don’t buy the 787 Billion as the ultimate amount) is appropriated and most of it won’t do anything to encourage risk taking in the private sector where wealth is created (read jobs). Since there were no tax increases in that stimulus bill, it was all based on the government’s ability to borrow a trillion dollars. Already we see difficulty in Treasury bond auctions. All that borrowing, much of it from the Chinese and other foreigners, will only be possible if we increase the interest rates we pay. I, and others, don’t enjoy seeing the first trillion wasted like this. Optimism is not contagious if it has no basis.

Deficit spending in hard times makes sense if you husbanded your resources during the good times. Congress and a republican president failed to do that so we started this recession without much ammunition in our guns, so to speak. If President Obama wanted credibility to support his optimism, he would have been up front about that. Instead, in his first press conference, he stated that republican detractors shouldn’t be given much credibility since they doubled the national debt in eight years. Then he details plans for the largest deficit spending in history, making his detractors look frugal by comparison. Anyone can be optimistic. Credibility must be earned.

This is just more fear-mongering down a whole new path. We need to stop calling them "toxic assets" and call them what they are (and I don't know if anybody really knows or will come clean about it). If these are mortgage-backed securites, let's tell the American public that private investors are going to buy up your mortgage for pennies on the dollar – keep collecting payments from you and then when the market starts to rebound, sell your mortgage for a huge profit. If these assets are so toxic, why not give every homeowner the chance to buy out their mortgage for pennies on the dollar, rather than a select group of investors who have hoarded large stashes of cash? I hear what you're saying about private investors being unwilling to invest, but it really gets tiresome to see a small group of insiders get ridiculously wealthy off the backs of middle-class, working Americans and small business owners. The government and the media keep trying to calm down the citizenry and mollify us by telling us that the only way for us all to recover is to keep giving these morally and financially bankrupt institutions the tax dollars we all work so hard to earn. Frankly I think these problems have come about because we have been too complacent.

The problem with these "toxic assets" is pricing, the gap that exists between what the sellers want and the buyers are willing to pay. The government enticement is designed to bring the sellers and buyers closer together by making the buyers willing to pay a little more. If there is a perceived threat that the government may assess a special tax on the buyers when the market stabilizes and the profits are too much, then the buyers will sit on the sidelines.

The buyers have to get these assets off their balance sheet because the cost of carrying these properties is enormous but can ill afford to take the losses a true sale will cause.

I do not have an answer, but I would prefer that the government stay out of this mess, as the taxpayers are going to lose.

I agree with Rick, John's proposal to "tax" 50% on new housing reflects a ratical shift in America... control "free markets" with policy and tax.

If there is too much supply, builders wont be able to sell houses. if they build houses that people want more than existing homes, that's "free market" and they should benefit.

Come on America... let's not forget why our economy is so strong – because Capitalism works.

As for capping upside on private investors, that simply reduces their risk tolerance because the "offchance" of obsene upside offsets the risk of the investment going to zero. Again, a flawed populist view of government controlling "free markets".

Let's show some compassion and contraint but not kill the spark that drives this economy.

Great question David. I believe the toxic asset program is necessary as it was during the former S&L crisis. However, I hope Mr. GeithnerI carefully considers the terms of agreements. think we can find a balance between the private investors' and the federal government's share of risk and rewards. Right now it seems the government is set to take on all the risk, and the private investors the reward. Under such generous terms, if I were a private investor I would be nervous that of a future backlash for profiting heavily to clean up a mess I may have created, while the governent recoups little of its investment. Instead, let's back up and redraw the balance so the government and the private sector shares more evenly in the reward and the risk, so such a backlash will not occur, not to mention its the "right thing to do."

David – I think the investors would have to know how much profit they keep before investing, and this can't be changed after the fact. The high price of gas and oil for several months probably was a big contributor to the recession. People who were just making ends meet could not pay their mortgages once oil prices went up. So maybe now people can spend more and the economy looks better. Can you ask the panel whether or not they agree with Paul Krugman who doesn't like Geithner's plan? Is Krugman's plan any better? Would nationalizing the banks have been a better idea? Would Congress ever pass a National sales tax if it was a very low tax? A National sales tax on everything people buy could help pay off the debt. Thank you. Enjoy your comments and I will be watching Ali.

David,
Thank you for your blog and your request for input. I don't have a problem with the approach as long as the risk is shared equally by the public and private sectors. If private investors are going to make money on the deal, so should the government. If the government is going to lose money, so should the private investors.

I would be in favor of a risk / reward scenario that rewards private investors Iand gives them the opportunity to make lots of money) IF the government (and, therefore, the American citizens) also gets rewarded in the event of substantial earnings.

Since these are toxic assets, investors need to see the potential upside - the ability to make more return on their investment than they would if poured money into safer investments.

Since the plan is for the governement to put up most of the money for these investments, the government should be able to recoup its investment if the private sector makes money - and recoup even more if they make lots of money. I

'd like to see the governement and private investors agreeing on a table of returns For example;
* At some agreed rate of return, in exchange for investing, the investors retain most (or all) of the returns.
* At some higher agreed rate of return, the government would recoup its investment.
* At some even higher rates of return (maybe 3 to 5 other brackets), the government would get its defined portion of these returns and the investors would get the rest.

As a result,
* If the return is small, private investors get most or all of it.
* If the return is reasonable, governments gets its money back and private investors get more than they would if they had invested elsewhere.
* If the return is substantial, then the government gets more than it invested but the private investors who agreed to participate will also reap the benefits. This is the big payoff that entices them to participate.

If the private investors do, in fact, make alot of money off of this, what we must avoid is the government funding these investments and not getting its fair share of the return. If this happens then the American people have a right to be outraged. But, in this case, a fair share for the government could still result in private investors making a lot of money.

And, what would be good about this approach is its transparency. Everyone knows the rules up front. The American people can understand that the distribution of funds is basically a simple math equation.

Yes people who decide to risk backing Ms Smith who should have never been given a loan in the first place should make money on the transaction. Bear in mind NO ONE wants these assets now.

However, I would like to think that ordinary investors could participate in the "risk". My fear is the same small group of people who made millions from "packaging" these loans, then got out, leaving us this mess will be the same people who will reap the double digit rewards.

Part of the angst being felt by the public is that the market tanked AND then the financial world collapsed. They were left holding the bag. People said hey I did what I was supposed to do and now I have nothng. The smart money got their cut and left. Now this new economic theory is being created and they fear they will be left out again.

BTW I am in the insurance business. AIG insurance units make and have made billions. I really feel for the insurance manager who made his numbers (selling medical malpractice insurance for example) then was told sorry because someone took all the money you made and flushed it away due to phantom investments you get nothing.

David....I always enjoy – and often agree with – your thoughtful analysis.

"....offering very sweet deals in which the government puts up most of the money for the purchases and limits the losses to the private investors." This sounds a lot like privatizing profits and socializing risk. This sounds patently unfair to tax payers. Seems to me the government (and really mean tax payers) should have some upside in any arrangment made related to these toxic assets.

If these private investors are willing to take that kind of risk then I believe they deserve the reward and money they make off of their investment.
It would be interesting to set it up for ordinary citizens to invest somehow. There would probably be quite a few who would be willing to put forth $100 – $1000 for a chance to help the economy and possibly make some money as well.

Since the ratio of private:public funds for buying these toxic assets are 1:10 or something of that order, the profits should be – at worst 1:5 and at best 1:10 (that is.. at one extreme private co makes $2 profit for every $1 profit that the govt/public make and at the other extreme the private co makes $1 out of every $11 of profits in keeping with the ratio of investment). The fact that there is a lot of money on the sidelines and no real place to invest it, these funds, using simple hedginglogic should look at this as a good opportunity to make profits, because eventually they will. The govt should not give them a ratio more favorable than this because there is good money tobe made from these because if there is anything hedging does well it is to undervalue assets at the time of buying!

There is validity to the pschological calming, or "Obama effect." Also, as so many different strategies are attempted at the same time, some of them will work. To use a military analogy, it is a Russian approach. Russian military tactics, both in defense and offense, have a wide but shallow front absorbing the first wave and by their progress or ability to defend, show the enemy's weaknesses. They then throw in their reserves much more judiciously. So if infrastructure spending helps and is politically acceptable, it will be "reinforced" later. If toxic asset buyouts work, maybe we do more of those. Aid to the States, maybe we extend credit later. But we certainly will need to do more and some of these approaches will simply fail. This is not the bottom. We have stopped the free fall, nothing more.

If they are getting a limit to their exposure, then they need to agree to a limit on their profits. Excess profits go back to the goverment to offset any losses. How hard is this?

The stimulous package hasn't touched the mortgage holders the American people are still suffering with their home loans. I wish someone at the top level would start at the bottom and work there way through Wachovia, Wells Fargo Banks etc. as if they had a troubled loan to understand that these banks are not helping modify these loans and they offer to refinance you at a lower rate with one condition that you pay $3,000-$4000 for closing costs! Wachovia Bank has a website that allows you to click an icon for assistance and then it says the details are not worked out and keep trying the website until it's updated. Where did the bailout money go to these banks and they are not passing it down to the American people.

My question is, where do these toxic loans go. Why not just pay the homeowners directly and forget the middle man. By paying off these loans for the homeowner, there would be no need to sell these toxic loans.

I have no problem with the investers making boat loads of money so long as the government recoups their investment & maybe takes 10-20% of any the profits. Limited risk & 80-90% return on profits sounds like a sweetheart deal to me.

On a side note to JT, 50% tax on new housing? Are you nuts? You want to take people who are allready strugling (roofers, plumbers, electricians, drywallers, masons, carpenters, painters) & put them totally out of business. New construction is allready in the toilet & you want to stop it all together. You must have been one of W's economic advisers.

The base of any strong economy begins with its manufacturing, all American manufacturing has been shipped over seas to create short-term profits for investors. Investors ideas of transforming home loans into mortgage-backed securities (again for short-term profits) to fill the void left behind by our manufacturing losses lead to an entire collapse our financial system. At this point, Obama's only option is to create an entirely new economic system based off of long term investments into energy, education, and health care. If Wallstreet cannot plan for long-term, sustainable, economic growth then Washington must.

John Thomas, were you serious?
If such a huge tax was levied on the construction industry it would stop what little home construction is occurring right now in its tracks. That would put a significant portion of construction workers in the unemployment lines. The money that would supposedly come from this tax wouldn't materialize because it would be too expensive to make houses, therefore the government wouldn't even have extra revenue to pay for the unemployment it would cause.

When will people realize that government isn't the solution? Inept tinkering with the economy by the government and the Federal Reserve caused these financial problems – more of it won't solve them.

I agree with John Thomas.

The decline in the housing prices started this mess.

- The demand of new houses is low,
- but the supply is high.
- If the supply of new houses is controlled, by putting a huge tax on new houses, for example,
- the prices of older houses will shoot up.
- This will allow millions of home owners to sell their homes.
- Banks will get their reserves refueled again.
- The "toxic" assets will not be toxic any more.
- Of course, this time around, the government can impose the right checks and balances on Credit Swaps.

David,
I feel that the very fact that this solution raises your question shows how weak the solution is.
Phyllis
Montclair, NJ

All of this is unfair and is not being handled very well by the Obama Administration. The very people who made "toxic assets" toxic are the the ones that may now reap the reward for re-investing in them. If not, then the American people will get stuck again with another hefty price tag of greed and failure. While its not a lose-lose proposition, it is yet another big punch in the face for Americans.

It truly seems to me like the Barack Obama that was elected to the presidency is not the same man that sits now in the oval office. What I see now is all confidence and ego – a man who want to totally reform American from day 1. He isn't content with merely being the President of the United States. Sorry folks, but this "messiah" complex has got to go!

And that worries me terribly. He is standing by his pick of Sec Geithner – who is a serious lightweight when dealing with these problems. There are times when it seems to me that the President sees this economic crisis as a hindrance to his "real" agenda – like some fly in the kitchen. He should perhaps wake up and realize that he is only one person – and human at that. He will not reform America with a wave of his hand any more than he will part the Red Sea. Yes, his election has great historical importance on many levels. At some point he has to realize that he can't be smarter than every intelligent person in Washington. And yes, there are and have been intelligent and capable people in our government – long before all of us were born.

Our country will go through a long and protracted recovery. At times, it will seem better simply because we are getting used to how bad it has become. I think that's the way of all change. No one is steering it. As usual, we will blunder our way through this mess. Unfortunately we have a President who really isn't taking the time to help things along. He is too obsessed with getting his picture on the next piece of currency.

Since the plan calls for the government (us) to participate in the profits, if any, I believe this to be fair. At the same time, the government bears most, but not all the risks, which is essential to getting the plan to work. This is also an acceptable, indeed, a creative idea.

Where I have a problem is with the rates of taxation. If private equity firms, such as PIMCO, are going to make hundreds of millions of dollars, and their executives are to be highly enriched, the tax rates on these profits, both corporate and individual, are unreasonably low, especially the miniscule taxes on hedge funds. I do not advocate 90% taxation, but the lack of progressivity in the tax code is partly responsible for the concentration of wealth in a few hands. According to Prof. G. William Domhoff, the top 20% of the population in this country controlled 84.4% of the wealth in 2001, and the top 1% alone controls a third. The gap has only widened since then. If you talk about fairness, you should talk about the larger picture.

I think its ironic how the big whigs seem to totally misunderstand the root of the problem. If mortgage-backed securities have become "toxic assets" (which as a previous poster mentioned actually means they are not assets, they are liabilities/debts) because people can't pay their mortgages, how is getting rid of the mortgage-backed securities going to help? The root of the problem is still there, people cannot pay their mortgages. As long as banks will not allow people to refinance their homes to the actual market value of the house, more and more people will continue to default creating more and more so-called toxic assets. Unless the Fed tackles the housing crisis, our economy will continue to go downhill. Our economic meltdown is about as simple as economics can get. We need a simple solution to a simple problem. I say the government should use all of that bailout money to subsidize wages. Then people can afford their homes, bills, food and fun and the economy will come back to life. Of course we all know that will never happen.

Hmmm, so the very type of people who have made money getting us to this point stand to make even more money from causing it?

People need to stop buying the package of the 'investor' potentially making money. These 'investors' are the industries and people that caused the situation in the first place. It is a deal created by insiders, for the profit of insiders. In a strange way it is really little than 'insider' trading on the backs of the taxpayer.

From what I have read about the non-mortgage consumer debt out there in the U.S. - crdeit cards, lines of credit, home equity loans - there is another HUGE problem out there perhaps as bad as subprime. I think the investors MUST buy, yes for pennies on the dollar perhaps, as much of this stuff as they are willing to, and MUST be able to keep the profits from that activity, if and when they come.

The Obama Administration is playing a very very dangerous game by changing the rules after the fact or penalizing or taxing profits or bonuses. It sucks that some rich folks will get a lot richer, but the government does not have other options. The US economy is on the verge of the abyss...... if there are white knights out there, and let's hope there are, they are going to be paid handsomely and will, frankly, have earned it. As the old saying goes: it takes money to make money.

Wow! Civil discourse. It is refreshing to see readers voicing their opinion without finger pointing and name calling. I had stopped reading reader comments because they had become so "toxic", but I took a chance on this one and am pleasantly surprise. I will now become a more regular reader of Mr. Gergen's article. It appears that he attracts readers (posters) of intelligence. Thank you all for renewing my faith that civility still exists online.

To answer an earlier posting (Mr. Michael "C. Lorton, Virginia), optimism can only go so far without substantive measures. The economy will still need people back at work in order to fully make it back. Any spending that helps create "real" jobs is not money wasted. I'm sure that whoever is unemployed today, cannot wait 2 to 3 years to get back to work. To them, the economy cannot turn back fast enough.

David,

I think that if private investors take the risk, they should be able to reap the reward. After all, they go hand in hand. I also think that the Government should insert a provision in it's guarantee that they should get 10% of the reward if the reward is greater than, say 40%. For example, if an Investor puts up $100,000 and makes $50,000 on his investment. The government should be able to ask for $5,000 in exchange for the guarantee of the investment. That's not to much to ask from my point of view. If the investment only earns $25,000, then the investor keeps all of it, taxes excepted, of course.

That's my 2 cents.

I think, as a lay non-economist, that if private investors are making a huge profit on assets previously near-worthless, it means that their price has increased, which also translates to mortgages being paid, credit flowing and , especially if government co-owns some of these assets, revenue flowing back into our depleted federal coffers. If this is the case, who cares! Let them all buy up islands on the Carribean, we will be buying small timeshares in the same place ... I personally do not need an island...

If the risky (or "toxic") investments had anything to them, investors would already be buying them without the sweeteners. So maybe the question is why is the government going to such lengths to take the assets (or debts) and repackage them to entice folks to invest? Isn't that kind of like the derivatives swaps that got us here in the first place?

If the government buys them up front and there is something to gain, the American people should benefit – forget the private investment. If there is nothing to gain why is the government stepping in when it might be preferable to let the banks fail? Why should all Americans assume that risky debt? And if we do, why should private investors enticed to put up cash benefit any more than those of us who are along for the ride? I am not an economist but it seems very dumb – and kind of insulting – to ask the entire country to invest in something the "smartest", most adventurous risk takers are not willing to touch (or will approach only with protective gear provided by our government.)

I have never heard of investors failing to play a game due to the possible bad press associated with them winning. They play if there is something to gain and walk away if it does not add up. The bundled, packaged and repackaged assets are called toxic for a reason. Instead of repackaging them again, they should be buried in a lined landfill and not left out to poison us all.

If the private sector wants to buy the "toxic assets", let them. If they make money its theirs, not the governments. If they lose money, the government does NOT bail them out.
As for the uptick in the Dow, it's only temporary. It will go down again. Obama, Nancy and Harry can have all the pep rally's they want, it's not going to put people back to work.

Seems as if the vitamin B-12 shot has helped, now if we could just get a double dose of vitamin C and D we'll be off to a great start. I'm optimistic about the near future. The American people are resilient!

This is a no brainer question.
Unless we no longer live in a capitalistic and democratic society, if someone invests his money, he should be able to keep this gains as long as they were made legally. What's all this talk about whether or not they should be allowed to keep it?

But having said that, with investments comes risk. If these private investors hope to make double digit gains or more, then the risk should reflect that. I don't know if the government should guarantee their investments because there should be no free lunch which inevitably comes at the public's expense. The government should be careful with the type of incentives given. Nothing is guaranteed in investing. People should learn that by now.

I hope they take it. It's a bold idea but something needs to be done. I am sure there will be problems down the road if they benefit from playing, but we are not hearing anything better right now, so why not try it with the hope the impact is good for getting things moving forward. I guess we’ll need to worry about any fallout when the time comes. Hmm – shades of subprime, S&L, etc, etc, etc. Now a question for you: are we witnessing the collapse of capitalism in some way, shape or form? I think we are. Perception is a powerful thing. What happens when perception no longer works?

Thanks for the interesting, and somewhat optimistic, analysis. I am looking forward to the session tonight.

My question for Ali Velshi: Why did AIG distribute billions of dollars of bail-out funds to European countries/banks? Did it have to do with insurance premiums those countries paid to AIG?

Thanks.

I can not think of any time in my lifetime that the American public has been exposed to so much discussion of capitalism, its meaning and complex requirements for recovery. Perhaps President Obama should explain that one major sacrifice we all should make is understanding that some may profit greatly from this recovery program, and if they do, then that may be a good indicator that the economy is headed in the right direction.

Hi David,
As always, your mindful approach is like the eye within the storm. While the rest of the media and public are swirling around us with great drama and hysteria, you offer a calm respite of objectivity.

You describe this as a game between the public taxpayers and the the private investors. If I open up the box of a new board game, the first thing I look at are the instructions. It begins with the basic rules of the game, followed by instructions on how to address unique situations which may arise. There is also a clear definition on how the game ends.

Before I begin the game, I make sure that all players agree on those rules. We might even want to modify some of the rules: eliminate the wild card, set a time limit, allow a rethrow if the dice are accidentally thrown off the board. What's important is that we all understand and agree on the rules before we begin. No surprises. No going back and changing the rules. And no cheating – we have to make sure throughout the game that everyone is playing fairly.

In the game you propose, I would want a clearer understanding of the rules. But my initial instinct is to say, "I'm in". At the end of the game, my opponent may have more cards or cash or points, but at least I got to play instead of just sitting passively on the sidelines. I gained something just by participating and next time, I may be the one with the hotel on Boardwalk.

David:
I always look forward to your clarity of thought.

My personal opinion is that we have seen the worst. My business which is involved with new product development is strong. I believe my activity level is a very early leading indicator. Perhaps tellingly, I am seeing business from the new green economy types of companies; such as alternative fuels, electric vehicles, and energy generation/storage.

As regards toxic assets: I think a workable model is how some of the SBA programs work. The SBA 504 program for commercial real estate is, in my mind and experience, a program that works well. The government guarantees on behalf of a borrower, which encourages financial institutions to lend to those who otherwise wouldn't qualify. However, the borrower has to have substantial skin in the game. The government benefits by having helped a business and increasing employment which results in higher tax revenues. It has worked well in my case and in many others that I know.

We are at a critical juncture for the future of the country. The three critical components of the Obama plan health care, energy and education are the foundation on which a new economy will be built. The economic downturn will last a decade at least and will see
periods of false optimism and deep gloom but if we truly are interested in building a stable economy a sustainable economy
must be built. Sanity must be returned to the financial sector and
the casino factor creating wealth removed. Betting on the bet creates
nothing but chaos.

Those that take the risks should enjoy the profits. Since the taxpayers are sharing the risk they should share the profits.

In a true partnership, partners split the profits/losses in proportion to the level of investment. This is a much different case where one party is enticing the other party to join the partnership. This should change only the percentages of a gain. (the loss is already stated) So to entice the private investers you negotiate say a 60/40 or 70/30 split (or whatever in their favor) before the transaction then eveyone knows the situation and should be happy. I think this is fair because what we're paying for is their knowledge of how to price these assets.

They should have nationalized – at least temporarily – these financial institutions and fired the bozos who ruined them – without a dime of compensation – from the get go. To reward these idiots with bail out money is the biggest robbery of taxpayers in human history... much bigger than the G-dubya "make the rich richer" tax breaks!

First and foremost and on a light note, I need to say, you have the sexiest voice ever"
In regards to a more cirtical thought though, I beleive that if private investors do opt to invest in something that contains risks, then yes they should be rewarded if there is profit.
The Obama administration, for tthe record, in my eyes, doing a great job. Why do people get so worried about multi-taksing. I mean these are huge endeavors he is taking on, but they all flow together, and if you leave health care out, for example, it will be left behind forever. People must rememeber, that it is not just Obama physically and mentally taking on everything. He has experts in each area working on individual and customized plans for each large endeavor. He is the orchestra leader, and if he can not orchestrate than why would he have accepted the job of president. He is doing ir right!! His people are working on a symphony and he will pull it all together. We Americans believe in him and watch!! We are going to rise above all of this, and be in the best positon yet EVER!! Thanks sexy, keep reporting!!

If the administration really wants teh economy to recover, it needs to doa couple things.

1. Stop punishing investors. Who would want to buy these "toxic: assets if they know their capital gains taxes are going up?
2. Stop the Class warfare. Some pinhead in congress, in order to save his cushy governmnet job, is likely to raise a fuss about investors making profist at taxpayer expense and try to raise taxes on the profits. We saw this with AIG. All of the indignation from Congress was a smoke screen to hide what really happaned and protect teh guilty parties that did not take time to read what they voted for
3. The government needs to butt out. The people in the White House and in the halls of congress are incapable of running a business. They can set guidelines, e.g GM must restructure and cut costs etc.. but they can't run the auto industry.
4. Get rid of the "czars!" Puttng power in the hands of political appointees is a recipe for disaster. At least when congress messes up we can vote them out.

Obama supporters look closely. Everytime Obama or Timmy Geithner speaks or tries to show they know something about economics the MARKETS DROPS.

What dont you Obama supporters understand, Its not Bush, Its not Wall Street, ITS OBAMA AND ONLY OBAMA.

More privatized profits and more socialized losses?? If the same investors who got us into this mess turn around and make unheard-of profits re-inflating another bubble, than we have clearly not learned any lessons from this fiasco. This plan to get these "toxic assets" off the bank balance sheets is nothing more than throwing pearls to the swine.

As I understand it, the private investor buys a $100 "share" of the toxic assets for $6. If the value goes up, he gets 50% of the profit. If it goes down, he's stuck for only 6%.

Not a bad deal. They should tale it. And PIMCO already says they will.

Do your homework. The largest bull runs occur during bear markets.

David:

Like many things, the way out of these problems is really a collection of solutions– add a little bit of Obama optimism (would be nice to hear some positive comments from the Republicans every now and then), sprinkle in a semblance of a "plan" to fix the problems (i.e bailout, toxic assets plan, new regulations, lower interest rates for cars, houses) and with a little uptick in consumer confidence and little market rallies (even if they are only 2-3 day rallies) they pcture starts to change. No one will buy a new fridge if they think the country's economy is spiraling down. But, if there is some–and please excuse the campaign reference here– hope that things are going to get better, you are more likely to make the purchase, buy the house, plan for the new paint job or the kitchen renovation. Little by little, the consumer comes back, the 401K money starts to come out of money market funds and back into index funds (don't want to miss the train) and we all wake up in mid 2010 thinking that we are looking better than we did one year ago.

As for private investors making a boat load of money? Well, it may not be "fair" and it may seem kinda screwy that the gov't takes alot of the risk (the investors are not really shouldering too much risk here, let's be brutally honest), but the fact of the matter is that our economy needs the private sector investment to take over. Right now, these assets are not too attractive to most. That said, if I had $250,000 lying around right now, that is right where I would put it. There are some amazingly undervalued assets right now, both in the broader market and in real market. This country's history is littered with families who made their fortunes by jumping in at times like these. So, maybe a slightly better deal could be cut with the private equity and hedge fund groups.

but we are really not holding all the cards now, are we?

Whether it's the bottom or not, long term looks too attractive for America! If it's not the bottom, let's look at it this way...you just missed the best opportunity.

Work hard, save smart, enjoy!

This recession has so many moving parts that it is very scary compared to other recessions. I think everything that is being done is GOOD. We have to move on many fronts to address all the things that are wrong.

But....my husband, PhD, MS Computer Science, has been looking unsuccessfully for work for many months. We won't be putting that addition on the house, buying a new car (or any other durable goods), taking any vacations, and so on until he is working.

Extending unemployment is a godsend. It is keeping us (with my job still here) from sinking into the abyss.

WE NEED JOBS RECOVERY TOO for this to be behind us.

I feel strongly that any private investor even considering buying these "toxic assets" SHOULD be allowed to profit, even "insanely", should these underwater assets ever be righted. With even the hint of capping their profits, the investors will be forced to drive down the offers they make for the assets, and deals will be much harder to strike- these negotiations on where to price these things are going to be hard enough to begin with. These private investors have no obligation to buy these assets.

I think it is less the Obama effect than an effect of people realizing they can't stop spending etirely, forever. In the aftermath of the banking debacle last September, people simply stopped spending. Over the next few months they eked out the holidays, but held the purse-strings closed as much as possible. Now, over the past couple of months, people have re-opened their wallets just a little bit, maybe 1 dinner out per month (vs. zero Sept – Dec, and three before Sept.) Spending won't go back to levels seen before Sept. for a long time (maybe never, which would be good for the future of the country- we need savings) but people are just letting up a little bit. Maybe not a whole new wardrobe, but I'm getting that sweater! Take up that restaurant's enticing lower-than-usual priced offering... that's what we're seeing. (IMHO!)

The first thing that has to take place is a stop to all the greed, our main down fall was just that, people were to focused on making a big profit from the housing market. Go back to when the intrest rate was 5 or even 6 percent that was a perfect rate for the common working person to get a house, before long everybody started to price this factor into the price of the home that was for sale, in turn the price of the same house that would of sold for 90k was on the market for 125 k
and was selling. Thats when people thought there would be no end to what a house would sell for. When you price the common working person out of any factor the bottom will fall. My stand on this is the banks had to know in some form that this was going to end in a bad way, but the money was the motive. Let the same banks bail themselfs out of this, if the toxic loans are for sale then buy them at there own risk, why ask us the tax payer to take the risk with them?

I think Dulcie's comment was built on sound logic and I agree with her. I wonder though what mechanism there would be for ensuring that "repayment" of private investors' profits would go to paying down the deficit created by the stimulus, rather than to new government spending?

Putting a heavy tax on new construction also indirectly taxes all the goods and services that go into new homes – labor, appliances, furniture, and the jobs that go into making those goods.
Not a brilliant idea.

The government is throwing so much money at the problem that I actually think this is the beginning of the bottom. I think that means that by the third quarter of 2009 we will begin a leveling off of the unemployment numbers at around 10.5%. The fourth quarter should be flat with low to moderate 1.5 – 2.5 % growth in 2010. Job recovery will be slow but if people feel secure in the positions that remain we will begin to come out of this.

The key is bank lending for commercial credit. The loss of companies because they cannot refinance debt is a serious problem. Good companies with profitable enterprises that may have debt coming due that in normal circumstances would get refinanced are being either forced out of business or forced to make drastic cuts is seriously hurting us today and could make my somewhat rosy forecast above fail to come through. We are still not out of the woods but I am hopeful.

To echo what has already been said, If the corporate officers are willing to risk their capital and their positions as fiduciaries to the companies that they pilot than they and their shareholders should be rewarded by reaping the benefit of their risk. Moreover, after all, these private entities only have a duty to themselves and their investors and not to the public. If we were to do it any other way, we would be setting a precedent that no longer encourages business enterprise and could expose every audacious entrepreneurs' investments to the whims of a general public that is afflicted with ADHD.

I am staggered (but not surprised) that IBM is so utterly out of touch with today's realities. For IBM to be off-shoring those positions is bad enough, but to simultaneously be seeking federal bail-out money while furthering our current problems is unconscionable and contemptuous.

"If you think, well, we offered them a bargain, they took it and put their money at risk, now we should honor it — if that is what you think, they may decide to invest. But if you think, well, that just seems unfair for private investors to make a lot of money with government help and at a time when so many are hurting — if that is what you think, there is a real possibility they will decide not to play. That’s why it is important to think through this issue up front."

So refreshing that we are taking a look at this ahead of the fact and having an intelligent discussion about it. Please explain how bad the risk and how big the reward may be. If it is a small risk with a big reward, I would feel differently than if it were a big risk and a small reward. I am sure they would as well. If the risk is big and we ask them to take it, I wish them plenty of luck in realizing a big reward. It should be all theirs (after taxes of course)!

David,

I look forward to seeing this Money Summit segment. Given both the state of the credit markets and the need for private liquidity to clean up bank balance sheets through these toxic asset sales, we should be hopeful (and even a bit lucky) these private investors generate significant profits as a result of their investments.

This would signal success by encouraging additional investors, allow primary bank lending to expand, positively shift future economic expectations, and solve our biggest current problem.

Tempers over "excess profits" will cool over time as Americans see the economy turning for the better. Presumably the government can continually revalue the toxic assets and ease up on the sweetness of the subsequent deals they put on the market as market liquidity and asset values improve, lowering the marginal profitability potential of later toxic asset slugs if the profitability of earlier sales becomes politically tricky.

Worry about "too much" profitability seems a bit gratuitous at this moment in time.

As long as the government gets the dollars back it invests I have no problem with individuals making money off the supposed "toxic assets", but with projections of it being 10 years before prices return to pre bubble pricing I am not sure how many investors will be that patient.

There is truth to the notion that consumer confidence can make a good economy better, and a bad economy worse but it has never been a trigger for an economic downturn or uplift. It lags what is actually happening in the market place which is why people were so supprised that the recession started long before the banks started going bust.

The overwhelming flaw in Obama's plan is it considers credit tantamount to fixing the problem when credit is the problem. In his press conference last week he briefly mentioned how the majority of Americans have not experienced an increased standard of living through wage gains in thirty years. He also mentioned that the time for investors to make (and I am paraphrasing) "easy double digit" gains needs to be over. But no plans on how to temper that.

In short the problem is most Americans are underpaid and lose ground ever year with sub inflation raises. Our ability to correct the problem diminishes each year because of inflation.

Obama is not addressing the problem but merely buying time for the next guy to worry about an even worse economic downturn.

The situation "stinks" anyway you cut it! Damed if we do and damed if we don't! With a growing national deficit, increasing nation debt and the country losing millions of jobs by the result of foolish political policies. Why would any one think they could trust the government to return the financial system to a mode of responsibility!

I think that the economy will definitely rebound in 2010. In the meantime, if we have the Regulations in place and carefully monitor how the Stimulus money is being spent, we should be O.K. We all have to face the challenge, and apply our intelligence and ideas (which the Republican Party have none), America will emerge on top!!

The toxic – or is it legacy now – assests are the results of greedy financial manipulations using smoke and mirrors for at least the last 10 years. Like our fiat money system, there never was any real money backing up most investments. What we are left with now is the real value of the economy. The rest was just puff and stuff and needs to die a slow death without any government interference. The strong will survive. The rest can learn a lesson.

Talking optomistically about the economy without actions to back them up is like using laughter to cure cancer. While it may improve a person's general outlook on life and boost their immune system, they still have cancer.

Solutions are few. Last time I checked we still live in Capitalism where contracts are honored. If such contract is made it will have to be honored without hesitation and as it should be. After all the private investor is the one risking their funds and should reap full benefits of that investment. We need help now as we were unable or unwilling to address this issue while the going was good. I had a casual conversation with someone about this about 2 years ago. He told me "You have no idea how ugly it is going to get", I smirked as if I knew... I didn't – his name? M. Asencio. So I say lets get back to our Capitalism and focus on the road ahead, learning from the past but leaving it in the past otherwise we will make this recovery last a lifetime.
My best to all.

That IDIOT Obama has no idea what he is doing. He has talked the economy down to win the election and force his waste-filled 'stimulus' plan on us. Now he can reap what he sowed. The economy will be worse than it had to be becaus eof his arrogance.

The government wins if the private investors win – its income tax. The only question is whether the gov't will decide to implement different brackets on the gain. If the private investor loses – well the loses of tax revenue will be limited, under the current rules.
My opinion – is that the tax rates will change for investments regardless of what happens with the private investors. Capital gain rates are at historic lows (not that many people have capital gains at the moment) – the rates frequently shift up – and probably will with our deficits. But in fairness to everyone – why not increase the capital gain rates now, so the private investor doesn't feel scammed later, if he makes money.
Also, to help everyone at the moment – let's raise the amount of capital losses that can be deducted from ordinary income – $3000 just isn't sufficient to help.

David,

As always a good warm up article for the wonderful program, To me this is really a mixed bag, I believe that any President has an obligation to be open, honest, realistic and at the same time look for a positive way to deliever the message, Seems to me each and everytime there is a dip in the economic forcast the Administration blames the previous bunch, while that all may be true it keeps the american people in a negative frame of mind, having said that, I support the President, we only have one and will fail or prosper with him, However, his inexperience is begining to show, the blame game is wearing people out, it like when a little kid eats two cookies and should have only had one, and when caught blames his brother as well because he had 3..............Mr. Obama sought this job, it is now his, people voted for him because they wanted Bush policies gone, as a result of accetping this job he needs to be accountable, if he did not know then, he now knows that no matter how hard one campaigns for the office of the presidency that the events of reality are not solved by applying campaign style rethoric...For his own sake and the success of this Administration he ought not make mention of the last Administration at all, nobody in the cabinet should, nobody in an independent agency should, this is his watch now, and with power comes responsbility, that is the beauty of our form of Government...

David-
Great article. Thanks. What happens if the private investors make double-digit profit and then sell when the market drifts down again as markets always do? Doesn't that flood the market with the same toxic assets and drive their price down again-creating a similar situation as we are going through today? Are they going to put some type of controls in place so that they can ward of mass-dumping?

Mr. Gergen, always a pleasure to hear you level-headed commentary.

I feel that at this point, whatever it takes to turn things around, please do it now. I think if Obama explains to the public what the risk/rewards are of the private investors UP FRONT to the American people, and what the real long term positives (turning the economy around) are for each American, then it wins approval without hiding anything. I think everyone is ready to try whatever it will take, as the longer we wait, the deeper we fall and the longer it will take to get out of this mess.

I wish the American people could free themselves of looking only ahead to each month or quarter – and exhibit the kind of sacrifice necessary to set us up for the next 50 or 100 years.

As much as it hurts to say it, it would set an extremely bad precedent to change the terms after the fact. That would about guarantee that it will be hard to get investors based on the government's word.

Narietta, OH

I continue to be struck by how steadfast Obama is, in his words "persistence". The economy is in really bad shape and it's going to take a consistent, measured attack to turn it around again. In some cases, a simple bandaid will do, but large bandages and sometimes multiple surgeries will be required. The patient will need plenty of time to recuperate and build their strength back up. We are a capitalist society, and if investors are willing to step up and assume the risk, why should they be rewarded for , essentially saving our economy. I just wish I had that kind of money!

Sorry, my town is Marietta

“…how do you feel about private investors making lots and lots of money... Do you think they should be able to keep it?”
_____________________________________________________

That could be the silliest question I have read/heard to date with respect to the current economic environment. If any investor risks his/her money to financially back a toxic asset – enticed by the govt or not – and in so doing helping to drive an economic recovery felt across the country, how can one even contemplate asking for this money back. Just what we need, economic reform based on the principles of Karl Marx.

I am very much in favor of supporting private investors who buy up the toxic assets. Double-digit profits may be made, but isn't this what free enterprise is about? Seems to me you might have the best of two worlds: getting rid of toxic assets and massaging private investment.

Why shouldn't the investors buying the toxic assets be allowed to keep the big profits? They are the ones putting their money at risk, and if it helps pull the country (and the world) out of recession and keeps people in their homes, we're all better off. And eventually, some of those profits will trickle down in the way of other investment and spending.

David,

I'd like to see private investors invest in the toxic assets together with the government. Why? I believe in a free market economy. There are many benefits to a free market economy – innovation and growth – but we also have to realize there are drawbacks to a free market economy namely greed. On the one hand, if we let greed get out of control, then we have a mess such as the one we are currently in today. On the other hand, without greed a free market economy will not grow. Therefore, if private investors are willing to risk their money on the toxic assets, then they should be rewarded with resulting profits for taking on the high risk. That's how a free market economy works.

Toxic assets are just that Toxic . Don't be lured by the greed! Private investors want to recope money they have already lost. The government wants to take what they can get, if private investers buy the bad assets then the government and the investors are right back in the same positions we were in before the downturn, together! I don't trust either! I am sure that "private" investors will make money. Lots of it and then in another ten years we will meet the next AIG or Madolf . Our system is greed driven, all anyone wants, is to fix the problems quick and make money! Looks to me like government and private investers are just switching sides of the bed, for a while, soon we will be back to the blame game.

If "toxic assets" are diced-up repackaged defaulted mortgages how could investors, private or otherwise, profit from them - foreclose them all and sell the underlying properties? I'm serious and also a - very small - private investor, almost twice as small as a year ago.

There is nothing the person in the White House called Obama will do to fix the ailing economy as he does not have the experience or people in his cabinet that knows how. For example workers are getting a tax break, on my check it amounts to $10.00 a week or $40.00 a month and in a year it will amount to appr. $480.00 . The more you make the more you will gain. Will people in Congress and the Senate also get this tax break plus Obama. This tax credit is cutting down on the amount you will be receiving on retirement so in the long run it is hurting you more than helping.

First, Thank You David for your ability to express your many years of experiences and different perspectives.

Secondly, as the the many differing comments show, there is no clear solution to these problems. BUT a positive approach clearly helps. Listening to the Republic leadership doing nothing but bashing day in and day out is enough.

Obama is a leader. While he might not get it all right, I trust him to watch, evaluate, and make adjustments along the way until he does. I will take that over the hard headed, stubborn politicians any time.

Those wanting him to fail so early in his first term are not any better than the terrorists that want us to fail too. Rush Limbaugh should receive the Benedict Arnold Award for Patriotism.

After reading a number of opinions by qualified people, I don't think anyone knows for sure if Giethner's plan will work. My impression is that they're sticking a line in the water to see if they can get private investment to bite. If they take on all the toxic assets through taking over the entities, it's about $4 trillion or some very large number. If they get private investment, they reduce their risk and can ease into it. It makes sense to me as something worth trying when nobody seems to know for sure.

As to the overall projections for the economy, to me, the signs have been there for decades – see the trade deficit gushing money ($6 trillion since Reagan). Obama has inherited a disgraceful mess and things like interest rates, tax cuts for the rich, currency games and lower level stimulus efforts – traditional government tricks are exhausted to revive a fundamentally flawed situation where the US has been living beyond it's means for decades.

I think this time the correction will be painful and long no matter what Obama does. All Obama can do during his first term is try to cushion how low we'd otherwise go and get us going in a better direction. There is no silver bullet.

The one thing I haven't heard enough about is addressing the trade deficit because when they do that, the economy will have truly turned a corner for a better long term from that point. Infrastructure investment will help some. Getting away from oil would help a lot. Education will take a long time for a return on that investment.

Some emphasis on fair trade as opposed to merely free trade would help if they avoid being construed as protectionist. Also the protection of US proprietary designs such that China can't wantonly rip them off and clone them for half price. And currency policy to improve/maximize trade fairness. Obama raised this during the campaign and I expect he'll get to it in the relative near future.

These things are going to take time. In a 24/7 news cycle with a typically short attention span, I hope America has the patience because generally, I think Obama is on to doing the right things.

i would not put so much emphasis on the stock market and investors. Although important, they can often mask problems in the overall economy. In the last forty years, we have seen extended periods of stock growth, yet only from 1970-72 and from 1998-2000 did we see real income growth across all levels.We will have to see job growth, then income growth, then spending and savings growth. Before the housing market tanked, the bottom forty percent of Americans owned seven tenths of one percent of the wealth. Its probably negative by now. That leaves a very large segment of society in a very vulnerable position.Unless we want to tax the rich enough to support the bottom eighty percent, we need to return to policies that allow the whole country to grow.

So, putting a "squeeze" on new home building would really lead to...? Let's see, I am in the market to buy a brand new home, but because of the price surge as a result of the "squeeze", I am forced to purchase a resale home at an overinflated price that was caused by: a bank that encouraged people to get in over their heads..OR..someone who "should've had a V-8"...OR...both.
Putting pressure on new home building punishes the innocent, while the guilty get a minor slap.
We recently (within the last 10 months) purchased a brand new home. The bank told us we qualified for $XXXXXXX amount of mortgage. We did our budget and purchased within reality, with the Plan B in mind that if something should happen to our income, what could we still afford?
We have a beautiful home in Myrtle Beach. My spouse is retired and draws company retirement and social security. I am employed and will not be of retirment age for 11 more years. However, we plannned our budget around my spouses income alone, because jobs, no matter how stable they may seem, may not be here tomorrow.

CNN please print or at least read it. (good conversation piece) Thanks.

Here is what I think...

For many weeks we have bashed nearly everything coming out of the White House, with absolutely no real solutions of our own.

Say, we do nothing like the GOP so proudly profess, then we all watch as the Nation and possibly the world crumble. Perhaps even sparking a "Third World War".

All this talk about Trillions and leaving it for our kids, do nothing
and our kids will have nothing to look forward to. They will be too busy in the soup lines, or at the War we saved for them.

We want change, but we are afraid to take the risk...Change is always hard. Especially for older people.

I could write a book, but I won't.

Stop all of the negative talk and put the pressure on all of our lawmakers especially the GOP to come up with solutions for the future. Not, tax cut, turn your head mentality...This stuff will still be hear waiting for your children...

If these private companies,firms and or people are enticed to participate and the government makes money along with those firms making money, then let them make their profits!!

because it's going to take these type of deals,that is to say we need the private firms,companies and other groups to buy up these toxic assets to get things moving again.

Eddie Mullins

I run a small store in Maine, and I know that I have not ordered from many of my distributors for almost 2 months now...however, my inventory in stock is very low, and I am now ordering lots of stuff from lots of distributors....I think there are probably many other retail outlets in the same frame, that is orders will start taking off, people will start getting hours again, and spending will begin to flow for summer....esp here in Maine, nobody or nothing will screw up our summer (that's 3 weeks in August)

Hello David! I see that your old Nazi uniform still fits as well as ever; A little big around the crotch and shoulders, but plenty of room for that jello-like spine to move around in. When will people learn that a moderate Republican is just like a moderate Nazi: They both get squeamish when it's time to gun down the women and children, but are none to happy to stand to one side reloading the rifles.

Personally, I think if they decide to play ball with the administration, then we should honor our end of the bargain. Not being an economist, I can't say that I know exactly how any of these ideas will turn out. According to everything I can read or watch, however, investing in the loan market is what caused all of these problems in the first place. I simply don't understand how continuing in a failed practice of leverage is going to fix the problems caused by that very same practice.

I would appreciate any insight into this question.

Dear Mr. Gergen, Why should investors who have enough money left for any kind of investment, put their money in a very large gamble? Why wouldn't they invest in something that they know will eventually make them money, maybe not double digit, by the second home, kind of payoff, but a secure investment for the long haul? Isn't that what investment should be about anyway? Didn't gambling with these derivatives get a lot of investment companies in a lot of trouble? Why not invest in the future of America buy purchasing stock in wind energy or solar energy? There are plenty of good, sound investments out there, without having to take a chance on "toxic assets". People have already been burned by investing in "toxic investments", so why should they invest in a gamble that may or may not reap any rewards?

I think the answer to your question is really kind of simple. People who make "obscene" profits also usually pay "obscene" taxes. I know there are a lot of conspiracy theorists out there who are convinced that the rich have magic waye to avoid giving Uncle Sam his share, but I would be willing to bet that in this case that wouldn't happen (if it really does anyway).

Someone mentioned having a schedule that allowed the Feds to increasingly shared the profits as they increased....it's called a progressive tax code.

As you note, sentiment is key and can be self-perpetuating, so in that regard, I'm pleased to hear Obama talking up the economy. I'm not sure Geithner is up to the task, but that's a different question than the one you asked.

Looking at 'sentiment' from a different side of the table, professional investors will not participate in any market where the deals can be re-traded by an opposing party after the fact (ignoring that they often do this, or recognizing it and not want ing to be on the recieivng end). For better or worse, our current financial system needs these investors to function, so we must allow them to benefit in order to get them to participate.

I would argue that the degree to which the government and taxpayer also benefit is contingent on the deal they strike with these professional investors. On this front, I have little faith, given that the govenrment's negotiating team comes from this group and will almost certainly return to it after their govenrment jobs come to a close. I'd rather see union negotiators representing the govenrment in these discussions – not because I think the unions are necessarily on the right track, but because I want a bulldog in my corner to go nose to nose with their bulldogs...all, of course, done with enough decorum and good will to actually get a deal done (rather un-union-like I know).

Good point David, as always, your clarity of thought is always sound. I do believe this is the beginning of the best yet to come. Smart for President to be positive, it's working. The economy will turn around as long as the Regulations are put in place, monitored, we should do just fine. Above all, we have the best man for the job, doing the job, people may argue this but Obama is doing a great job, on the right track too!

If conservative Republicans complain about private investors making money off of their own investment into these toxic assets (albeit government aided) then they are hypocrites. This IS a practical application of capitalism at work.

And if the liberal Democrats complain about private investors making money off of their own investments into these toxic assets, then they are very short sighted. As David indicated in the article, the financial betterment of the country may reside in these private investors willingness to take on these toxic asset investments in order to stimulate the economy. So it is in the interest of the masses to want these private investors to take on the toxic assets, make their windfall for their investment and in turn be the catalyst to helping put the economy back on track, which will help all in the long run.

This is an example of governing from the center; government aid to stimulate capitalist greed / need in order to repair the economy for the masses.

The only thing that could make this better in my opinion was if there was some clause that stated 5% of all profits from these toxic assets (or some arbitrary number mutually agreed upon by the investors & the government) would be paid back to the government to pay down the national debt.

Sorry but I don't agree with writing down the values on mortgages.... While some seem to think that will cure the problems, why single out homeowners? They made a bet and lost... it should be treated no differently than anyone who buys a car that is subsequently worth less money down the road. Rewarding people who gambled on the housing market by buying more than they could reasonably afford not only rewards the wrong behavior, it's a slap in the face to the rest of us who purchased only what we could afford on terms we could afford. Why should I bail out my neighbors mortgage, he's not going to bail out what I lost in my 401K! And trust me, I lost more than he did! Let the bankruptcy laws work the way they were meant to!

David - the nub of the issue is that we (US)builds momentum to economic recovery when the private sector risks its own capital along with the taxpayers to buy up the toxic assets(subprime mortgages). Therefore, if in fact there is money to be made both private investors and US taxpayer will make money. Both parties have lost big to this point. In sum, weigh the rules of the agreements to buy the toxic assets with incentitives, then honor these if they should come to pay. You can't have it both ways. Private investors making a killing means that these assets have become valuable and the US economy is benefiting in multiple ways. Recovery underwhich private investors see lucrative profits with have a multiplier effect in this economy both nationally and globally. Say what you mean; stand by what you mean; and encourage others to take reasonable risks for reasonable gains.
Integrity is at stake. Make the agreements to entice private investors and then let the economic marketplace work. This is the American way!

Obama doesn't look worried. He's laughing and playing basketball because he knows that the economy has started to turn around.

I think that the now "toxic assets" will likely be worth much more in the future than their carrying value now. When I first heard of Paulson's original TARP plan, which obviously fizzled, my first thought was that this could be the most lucrative investment banking deal of all time. The assets are hard to value, but they are not worthless. I still think huge amounts will be made by investors who buy and hold them, particurly with the extent of leverage built into the proposed plan. Investors need the staying power and the patience to wait. The global banking system, facing mark-to-market and near panic by the public, lacked both.

My concern about the current plan is that the private equity investment is small and the leverage, provided by the FDIC and Fed, is both free to the private investors and large. Private investors should play in the game, pricing the assets especially. But they should have more skin in it. With non-recourse financing and relying on their own pricing models before bidding, the investors have a teriffic deal. I hope the Treas bargained hard. The government, one way or another is putting up 93% of the investment and getting only 50% of the upside. I probably don't understand all the features of the "deal", and I like the concept, but it seems the risk/ reward split is a bit off.

Right now I don't believe this Congress and administration has much credibility with the investment community. As last weeks over reaction to the AIG bonuses indicated, they are as likely to break and agreement or contract as not. Any government that seriously proposes a 90% tax on bonuses or "obscene profits" is a government I would want to do business with or trust.

Take note of how the healthier banks don't want TARP money or some states are refusing Spendulus money. That's because the money attaches damaging strings and creates potentially harmful long-term effects. While the federal government will certainly hold companies to these strings, there is no assurance they would not arbitrarily change the rules without forewarning.

The message to all corporations: "Avoid doing business with the Geithner/Obama loan sharks unless you are on your death bed and have now other choice. Even then bankrupcy might still be the preferred path."

Economic is one of three legs that forms the well being of any nation, the other two legs are the political stability and the society maturity. These three legas are interconnected in equally importnat traingular base. The US economy is so big and diverse that can not be sinked by the large waves of turbulance in the market. However what would sink it are the failures of the other two legs, the political stability and the society maturity. The political instability would come from the rigid ideology that does not confer to any scientific reasons or common sense directions, and this is exactly what the Republican Party stands for during the Bush erafor faith and God driven policies which have left deep scars on the US stability on all front, and also have hurt the US stand in the world for Generation to come. Having said that, however the moderate Republican Party is a needed counter force against the far left movement that would destroy the third leg of society maturity. The far left movements are of equally sworn enemy to the US as of that far of the right wing movements.

1- Private investors keeping the profits: Its clear that to entice private money the government "limits the losses to the private investors". I think many private equity will play, it's the investment risk of a limited downside, with much bigger upside potential. (I think that's the definition of thier business model.)
2 – The Obama Effect: If only economic optimism was as infectious as economic pessimism and fear – - – If only the reaction to optimism was as swift and steady as fear – - – if only ... you get the picture

GERGEN!!!!! Where did decide to put your Obama+Gergs 4ever tattoo? I think first of all that today's American media is trying way to hard to brainwash it's consumers rather than delivering the news. The question that you pose is an oversimplification. I don't see home values magically jumping back up to their pre-crash values any time soon. The values were grossly inflated.

There is NO accountability or assignment of responsibility by Washington. What is being considered is to beg the scoundrels responsible for creating this fiscal debacle to now bail themselves out with taxpayer money and make [potentially huge] additional profits. The executives continue to run the fiscal machine and blame the system because it showed they were up to no good.

We need Draconian measures but they will not be undertaken by our spineless self-serving politicians. There is ever decreasing trust in our form of two- party government and there will be long-term Hell to pay. Perhaps a revolution at the ballot box?

Noted economists and other knowledgeable people have said to nationalize the banks. Instead we are rewarding the “bad guys” by giving our financial institutions more money so they can continue their detrimental [to the country] behavior.

Regarding the housing situation, two points:

1. Housing is really just another 'possession' (although for most all of us, the most significant one). Unfortunately, housing values do NOT always appreciate, and as with any other purchase, you get what you pay for; in the case of a house, location, location, location is the key number one aspect that creates and contributes to the value of such an investment– IF you look at buying a house as an investment. Some locations (areas of the country, states, counties, cities, and neighborhoods) are more valuable locations than others– and always have been.

2. The housing market/evaluation basis has been WAY out-of-whack for many years in this country– it's time for a reality check and 'adjustment'– just like what's taking place in our overall economy right now. The 'standard of living' in this country is WAY too large in comparison to the rest of the world, and we don't have a 'right' to expect such a position!

Mr. Gergen,
It seems to me that if the government (read-taxpayers) limit downside risk for the private sector's investment in these "assets" and apparently supplying funding at an extremely favorable rate, then shouldn't we be entitled to participate in the benefit of any windfall profit that may occur? If we're downside partners, we should also be upside partners.

"should they be allowed to keep the double-digit profits?'

Do we in this country have such an aversion to people making money that we penalize people who take the most risk from making the most profit?

That shouldn't even be a part of the equation. If the private sector takes some of the risk of these 'toxic assets', they should take all the profits.

why wouldn't the hedge funds and the few wealthy investors want to jump in and buy up the toxic assets for pennies on the dollar, since the government is backing most of the risk? they were the ones largely responsible for the whole fall in the housing market in the first place. it stands to reason that they are waiting for the right moment to pounce back in on the bundled mortgages and make all the money back AGAIN, while homeowners lost their shirts. the only problem is they'll actually have to get their hands dirty by actually working to restore all the foreclosed homes and actually touch an asset rather than just sell creatively packaging paper assets, which is wy too easy and convenient. shame on the hedge funds for what they've done to the housing market.

The idea of instant gratification continuing to cloud our perceptions is misleading. Just because the stocks went up at the start of the week doesn't mean that we are out of the woods and should return to excessive consumption of resources without considering the risks – it is no longer business as usual. Stocks can go up however much anyone wishes them to – but they reflect on what is happening on Wall Street – which, dare I say, is separate from Main Street. The heart of this economy is Main Street. Let us face it, Wall Street wouldn't be, minus Main Street. I strongly believe that there is a paradigm shift not just in political and economic fronts, but even in social aspects. The stocks may recover, but I believe where we go from here points in the direction of a more "green" and conscious populace. The truth is – society as a whole is headed in the direction of more rustication and less sophistication. Yes, it is rustication, but it will be complimented by the wonderful technology that exists today. I doubt that people will blindly buy houses and spend without much thinking. Main Street is learning its lessons. Is Wall Street?

I think we're finally seeing a light at the end of the tunnel – but will still be in the tunnel for a long time yet.

Geithner's plan is doomed to fail.It is these very same toxic assets that set off the unraveling of the economy that he is asking us to invest in again. Why in the world any rational person would buy these useless deriviatives is beyond me. However, with the government doing about all it can to encourage this throwing away of good money after bad money we can be sure that those of the same ilk that invested in these worthless instruments in the first place will be the only ones to take up Geithner's offer. It is nothing but a gamble. You can be sure that the likes of Warren Buffet won't ask to be dealt a hand in this game.This viewpoint is expressed by the most recent Nobel winner of economics Paul Krugman. Why President Obama isn't consulting with Krugman is mystifying.

Welcome to the new world order of the federal government meddling in every part of your life. Would any of the posters here agree that the federal government should be able to come in and deduct more from their wage when they decide that you make too much money (oh wait, they're about to do that anyway)? It makes zero sense to try to entice private investment in this toxic asset plan and then tax them once you feel like those private investors have made enough money. You can't change the rules after the contract has been signed – or can you?

I've never been more regretful of all the decisions I've made – getting a good engineering education, working diligently to pay off school loans, and making responsible choices regarding marriage, buying a house, and having my beautiful daughter. This adminstration wants to penalize folks in my position and bail out all the junkies who can't run their own lives responsibly. Then again, that's the liberal left for you.

Mr. Gergen, please provide some people qualified to address the strengths/weaknesses of Mr. Geithner's plan – which is no different in substance than the abandoned plan already paraded out by Hank Paulson. The reason we are doing this as stated by numerous involved parties is the "fix the banks" and "get credit flowing again" – there is a problem with this premise though. The asset values must be allowed to decline! Removing these "bad assets" from the banks just allows bad businesses to survive their mistakes without bankruptcy, and there shoudl be some real debate on why they are receiving such an astounding protection. The American people need to understand why an investor will buy this crippled paper and how the price will be set for investors. To my understanding, if based on market, then the banks wouldn't sell it, because they'd still have to take the exact same mark-to-market loss that they are concealing presently. If below market (as an investor might desire), it is the same problem for the banks. If above market, the only reason the private investor/hedge fund participates is because the taxpayer bails them out via guarantee. There is absolutely no substance to these planned transactions except to transfer the systemic risks accumulated in the banking system to the US taxpayer with a handful of insiders and their wealthy clients receiving a guaranteed profit. How does removing these assets from the banking system without overpaying for them fix the banking/asset value crisis? It simply doesn't. This isn't capitalism.

Geithner's plan is a good one. The private firm and taxpayer each foot roughly 6% of the cost of these assets. The gov't then issues a loan to the private firm for the remaining 88%. This loan will be paid back at a low interest rate to the gov't and the firm will be rewarded for its productivity in converting the bad asset. This program is very strong because it relies on people who know how to handle assets such as these. Their risk is limited thanks to the taxpayers and loan program (insured by the FDIC) and gives the private firm very little to lose, while offering a very large incentive to be productive.

Fantastic plan Mr. Geithner, reflected in wall street's 500pt bump the day this plan was announced.

As far as the stimulus bill goes: it needs time. A large portion of that bill was investment. Which is a good thing. We saw with Mr. Bush's stimulus that simply injecting cash ($600 checks) into the economy resulted in very little stimulus. Unfortunately people want to see solutions now, and do not realize that it takes time for the multiplier effect to be seen.

Obama gets about a 7.7/10 for his handling of this economy in this tough time.

As I understand it, if there are profits, the profits are split 50/50 with the government getting half and the investor getting half.

Seems like it would be fine to me.

I just don't like the downside risk for the government.

My beef with the concept is that it's STILL "heads I win, tails you lose". Privatizing profits while socializing losses. It's patently un-American. Choices have consequences. We have to let that play out; instead we're trying to interrupt it or soften the blow. The markets have to reach a natural equilibrium.

Selling these so called toxic assets to private investors is not going to solve the problem. Since the government is backing a portion of the cost as well as providing loans (which investors don't have to pay back if the investment goes belly up) then they are going to take bigger risk as they only need to have say 1 or 5 pay off to make a profit.

This is just going to delay the problem and put the burden on tax-payers.

What is this a huge problem that no one can understand, or what! Its like the blind leading the blind get real..

CHANGE is something people can believe in.

Lets get real! The change we are seeing is like the changing socks at the end of the day. They stink either way.

Recessions have a rhythm to them: the stock markets will crash first, which scares people, who stop spending money. Because they're spending less, businesses make less money. After a few months of that, they have to lay people off. So, it tends to be: stocks fall – consumer spending dries up – unemployment goes up. The whole process can take many months. You'll notice that the big unemployment numbers did NOT happen in December 2007, when this recession started; they only happened at the very end of 2008 and beginning of 2009. Unemployment always lags behind the other indicators.

Recovery has a rhythm, too. The stock market will start to go back up, if slowly and not in a perfectly straight line. People will start to breathe a sigh of relief, and slowly but surely, they'll start to spend more money. Business gets better and after a few months of that, businesses will feel comfortable to start hiring – first temp workers, then more and more full-time employees.

We're at the beginning of that recovery cycle now. It will take a while; it's not an overnight thing. But by all historical standards, and barring any unforeseen tragedies, this looks like the beginnings of the end.

John Thomas....a 50% tax on new construction home building is a horrible idea!!!!! Let me explain why.

First, new home building did not cause the housing crisis. Market conditions set the market prices, and those conditions were inflated by speculation and now they are deflating to everyone's dismay. These "toxic assets" were caused by unregulated lending practices and irresponsible home buyer purchases. In other words, the loans should not have been made by banks nor should they have been signed by borrowers.

By heavily taxing new construction, you are forcing more speculation by investors, since they will be the only buyers in the market with enough capital for down payments to obtain loans now that 100% financing and interest only loans are a thing of the past. And if you heavily tax new construction you run the risk of people buying truly "toxic" older homes that are infested with mold, are energy "inefficient", and financially unattainable if the home prices go up like you are saying. Remember, incomes are also going down in this economy. In fact the only group your theory helps is the current homeowner who irresponsibly signed up for a risky loan in the first place. You want to inflate prices so they don't lose on their gamble. However, in the process, you are now removing jobs from electricians, plumbers, carpenters, roofers, landscapers, and on and on, because home builders will not build homes at that tax rate.

Although I do not agree with all of President Obama's politics, on housing he seems to be on the right track. Our housing recovery will be based on stronger regulations and verifications of applicants ability to pay back loans. It will also come from emerging groups of new buyers such as 1st time buyers. I only wish the President would not exclude investors from his recovery platform as they can keep a tradesman working until new construction comes back. Most investors also increase the condition of the home so they can re-sell or rent the property. This is free enterprise and IS a good thing.

We, as a country and even as a world economy, need to learn from this lesson of price inflation, and never repeat it again. Out of The Great Depression came the current ability to escape a similiar economic fatality for our country. That was a hard lesson learned. Over-indulgence is now our lesson to learn from.

This is the way I see things.

It's always darkest just before it goes completely black.

"What if we wake up one day and find that a private firm, enticed by the government, has made hundreds of millions of dollars from these toxic assets? Do you think they should be able to keep it?"

Are you serious? Let's reverse the question, if private investors take that gamble, and lose, do you think we as taxpayers, or the government should have to pay them back?

This is ridiculous, if they're willing to take the risk, then they are certainly deserved the reward! Bear in mind, these "private investors" could be you and I if we're willing to stake our cash there.

Housing debt in 1994 was about $4 trillion. Based on inflation and population growth, assuming the same percent of people "should" own houses, and with mortgages at the same percent of the house's value, that would imply total mortgage debt of somewhere just under $8 trillion. Mortgage debt in the 4th quarter of 2008 was about $14 trillion.

Housing has come down drastically, to more realistic levels. So, in effect, we need to pay back about $6 trillion (my estimate of the final stimulus package). So, whether it goes to banks, people owning houses, extra government spending, it doesn't really matter. We still owe a lot of money.

With housing seeming to get close to the bottom, we may be okay, but we're not going up for a while. At an extra $1 trillion a year from the gov't, that still takes us 6 years to get out of this mess...

I think it is real. There is something to be said about speculation, good and bad. Look what happened last year when oil prices spiked on speculation and then went down when demand dropped. We didn't have to drill a single well to accomplish that. I also believe that people are changing the way the live and companies as well in the last few months at least. Another ticker headline on CNN talks about upscale restaurants offering deals, more news is that unemployed people are starting their own businesses, and there have been reports of companies bringing back people who were laid off after receiving stimulus money and being able to retool. There are many other stories like these and after a while the cumulative effect will be a better recovery because we will have created new avenues of wealth. I think the bigger picture is Obama's far reaching agenda that is fueling this uptick. As far as toxic assets, I think that news has to be coupled with the other news that the treasury secretary is calling for regulation over nonbank entities. With new regulatory oversight, it should help eliminate some of the problems we have been subjected to recently. Even the Repubs' plan offers incentives to mortgage lenders, so while I agree with bloggers who say let them keep their profits, I think that a fairer profit-sharing plan could be a better fit for the taxpayers.

I really don't understand much about economics but understand simple questions like:
Is there food on my table now? barely.
Have I lost my job? No, still holding on.
Am I hopeful that the President's policies will help me in the long run? Yes, in the long run.
Am I scard about the economic situation? Absolutely.
Have I become more tight with my money since all this started? Yes.
Have I cut down on my needs? Obviously.

What ever happened to risk/reward. If the govt is going to limit the loss, then they should also limit the gains.

I just love how people who have no clue how economics work are saying everything is a bad idea.

Can we at least give these people who studied this all their lives a chance to make it work???

Most of the advances we have today were from people who were told "it's not going to work" but did it anyway.

Just let them have their shot at this.

I think if they are willing to risk their money, they should reap the benefits – if there are benefits. Sure the government may mitigate the risks, but the risks are not totally removable. This is exactly what free market and free enterprise is all about.

You have no money to spend but want to buy a lottery ticket and ask me for a few bucks. I loan you $10 and say you need to split 50-50 if you win. You say sure, of course. You buy a few tickets and one of them hits big with a prize in the millions.

What is your obligation to me? Do you simply return my $10 investment with maybe a few bucks thrown in (say $25)? Do you split 50-50? Do you give me most of your winnings (because I am most in need) and keep a small portion for yourself? Or do you say, too bad, winners keepers, losers weepers?

We know from human experience that most will keep all the winnings, some will give up some token amount, few will split evenly and hardly anyone would give most of it away.

The private investors want an ironclad guarantee that no one will take their winnings from them. This is the only sticking point that may cause them to hesitate for a nanosecond or two. Their buddy Geithner will make that guarantee come true for them.

Is it fair? Of course not.

Barack Obama does not seem so interested in fairness choosing to believe instead in the Reagan fairy tale of "trickle down economics". So while those poor, poor private investors continue to gain riches at taxpayer expense, the rest of us peons will need to pray that one of them has a hole in his pocket so we can scramble madly after the loose pennies, nickels and dimes that we might get...

Disclaimer: I used to be a core Obama supporter. Not any more.

The question of Public perception of profits by partnership with the government is really the issue. It is the question, and the private partners might find themselves in an AIG situation should they make out handsomely under the umbrella of government protection.

What is really simple is this reality that lays beneith the question:

'Will the Public Stand for this?'

I think we should not, for many investors holding the allegedly toxic asset have already been paid by THE PEOPLE, through AIG Credit Default swaps.

How many times must people be paid 100 cents on the dollar by the American people before they will stop throwing our Countrymen-women-and-Children into the streets?

This is the root of the unerlying question of the commentary, and when the masses figure out that the Banks and Investors have been paid some percentage of the debt already, paid 100% by a credit default swap, paid 100% in a bailout, paid something by claiming the loss on a tax return, they will demand that any note that has ever had a CDS attached to it and paid, even when in a bundled security, is legally extinguished. They will no longer countence this game of government backed raping and pillaging of the American People and future generations.

Since the same is true of CDS on Credit Card Bonds, the people need to realize the Cards and houses might be paid off already.

How long will THE PEOPLE just take this load of garbage while the property and money is given to the friends of COngress just like Robert Mugabe gave everything to his friends?

If nothing else, this recession has pointed out how much the world depends on US consumers spending to fuel the world's economy.

The "recession" may very well be at the bottom and is rebounding. There is much to be said for the "Theory of Expectation"; if people think the recession is ending, it may lossen up their wallets and they may start to spend, thus companies will have to start producing products again, their suppliers will have to start supplying their customers, etc...starting a chain event of prosperity.

Problem is, I view this less as a recession, more like a “correction”. As more and more jobs are sent offshore, from manufacturing to high tech, as pay scales for every job are now measured against foreign competition (even on shore with H1B's, illegal's, etc) the US standard of living will decrease. I feel that this recession is a precursor for a type of deflation, or revaluation of housing, labor, etc that will take some time to level out. I do not think we will ever return to our 2007 levels of employment and the US's role as lead consumer in the world is soon ending. Sorry to sound so dark, but I think we need to look beyond next quarter or next year and whether to fund "toxic assets" to what our reality is. It is that short sightedness that has gotten us into this mess we may not be able to get out of.

One issue that hasn't been brought up much deals with credit cards and the amount of debt that Americans have built up. There should be laws placed on credit card companies that no high school aged children can receive cards and all people ages 19-24 should only be allowed 1 card with a $500 limit. All other non-business owners should be allowed 2 cards with a $500 limit on each card. Business owners could have 2 cards with a $5,000 limit on each.

There are too many people in this country that do not understand the dangers of credit cards or have the will power to use them properly. Having lower limits and fewer cards would teach the average person financial responsibility and a PAY AS YOU GO mentality that the government has mentioned, but failed to follow themselves. If these laws were enacted I feel that in five years the average citizen would be in better financial shape, fewer companies would be taken advantage of and we would possibly see a rise in the middle class due to having saved more money and not charging items they cannot afford or have the intention of paying off.

Set a deadline for these laws and warn citizens that anyone caught charging thousands of dollars before the laws take place that they will be prosecuted to the full extent of the law. Even with all of the packages that the President has and will enact, Americans must deal with their own "credit crunch."

Some people may see this as too drastic, but drastic times calls for drastic measures.

So, I've got a little cash in my 401K. I'd like it to earn a reasonable return. I'm willing to take some risks. Where can I go to buy some of these toxic assets?

The government is so concerned about the paper trading and risk taking Insurance firms and Banks having deep pockets but what they are just flat missing is who cares if banks can lend? Toxic Assets or not. 70% of the economy is consumption and consumers are tapped out. Done. With the purging of their retirement from an entirely corrupt Securities Market, to not only the loss of equity in their home value but likely the draining of their checking account to try to hang on to their piece of the American dream to 40% Credit Card rates on over $11,000 in outstanding revolving credit, to higher Energy, Food, etc. etc. costs – the list goes on and on. And what happened just this week? a continued drop in wages. The US consumer is tapped out. Over borrowed and under capitalized.

The Cheerleaders of the economy and stock market are only biased for keeping the drunken stupor of the last decade going. Wake up and smell the coffee, the exportation of our jobs and bingeing on credit has come home to roost. 2009, 2010 and 2011 will be a continued implosion of the backbone of the US economy – the consumer. slowly drowning in debt and unable to come up for air that one last time. No matter how many corporate bailouts there are.

I've read a lot of these comments and like many of them. The investors should be allowed to keep the profits but only after the tax payers contributions have been made whole. Since these profits will be taxed I'd consider that the tax payers profit or cut.

I also think there should be a way for ordinary people to invest in these if possible with the same risk levels wealthy investment firms are being given. This is an equal opportunity country after all. You can't give a sweatheart deal the the rich using tax payers dollars without offering the same to the taxpayers themselves. I suppose we could invest in the firms that invest in these products too.

My only concern is- doesn't this somehow perpetuate the problem since the real value of these assets is tied to mortgages? The interest paid on mortgages is what fuels the profitibility and worth of these assets correct? What happens if the housing market continues to falter. Doesn't that pull the rug out from under this plan??

It's over. Get a gun and start buying canned foods.

A 50% tax on new construction sounds like a way to get 50% unemployment rates to me. That should help the economy, John Thomas!

A 20% move in the S&P looks like more than a "glimmer". I think historians will call it the "I HOPE HE FAILS Rally". It will be one of many things from the 1Q 2009, that historians will be able to look back and laugh at.

It's an economy beginning to succeed in spite of the acrimony from the "No Party".

It's funny, looking back to the Reagan Admin. After 2 years in office, they were still saying: "give us a chance, these things take time, we inherited a big mess". . .

Every investor knows the government can and will change its position whenever it thinks it will make more money. So as an investor, in todays climate, I want as little to do with the fed as humanly possible.

Until the Obama admin shifts away from penalizing innovation and profit motive there will be no real recovery or help from investors. Penalizing Companies with higher taxes for profits or bonus after the fact do nothing to build confidence in the private sector.

The perceived glimmers of hope are just that Hopes. There is nothing solid in any of the numbers. Geithner does not have a clue and is not the treasury leader we need at this critical time. He is an amateur at best. The President is killing the future recovery with excessive spending and building huge deficits. All will stall the recovery at some point when the money runs out and private industry is unwilling to accept the baton.

IBM is shipping 4000 American jobs to India. Mr. Gergen, have you actually gone to IBM's career website and looked at all the IBM job openings in India? Most no one qualify for. In fact, they state they don't discriminate age or race, but the job requires a "he" or requires an "age".

When Obama and the Administration creates executive orders that private companies cannot do this. They have to stop job openings posted by managers where they state they have no intentions to hire anyone, so all the openings require 15 years experience in 30 different three letter acronyms, certifications, or other that anyone can learn in 15 minutes, but really no one qualifies for where the process to get the job takes a year, or the requirement is for a Ph.D candidate.

You should know Dr. Gergen, the job opening is for you, while you go on CNN doing the job required for a GED.

Thanks.

The underlying emotions of the economy are fear and greed.

As housing numbers start to improve and mortgage interest rates improve, more people are seeing that this is a great opportunity to buy a new home. (remember 10% unemployment, means that 90% are employed and can buy).

I see the fear gradually subsiding soon (6 to 12 months) to be replaced by greed as housing prices first stabilize and then start to increase.

The same will be true of the stock market.

I am so tired of the sense of entitlement combined with a persecution complex that everyone seems to have today. Why can't we just let people be successful and be happy for them. The government has always helped people in the US; poor, rich, and middle class. Only recently have we decided to envy the success of each other. We need to get a life and chill out.

I always appreciate your thoughtful comments. Here's mine.

I don't think we have a choice. If you want private investors to play, they must be able to keep the profits for risking their capital. However, I think the problem goes much deeper. Our country is motivated by greed. Our form of capitalism promotes it. We seem to have no sense of the common good and I find most people are out for themselves regardless of their economic standing.

You might argue that we are also a nation of givers, however we usually make sure we have our share first. And a good share it is when you consider the resources of the rest of the world.

I believe we need some better balance to our capitalist system. Mr. Bush ran on the promise in 2004 of giving everyone a piece of the American Dream –he meant home ownership. The American Dream should not be of amassing vast amounts of "treasures on earth" but rather "how do we make this world a better place for everyone". Some folks in our country–the richest in the world–live like 3rd and 4th world refugees.

Somehow I think all this economic "mumbo jumbo" still misses the root cause. I'd like someone to address that!!

Very very little of the fraud, corruption, recklessness, and abuse of power that got us into this mess – both on the part of the government and on the part of Wall Street – has been addressed.

Some indicators may have paused in their downward spirals, and indeed may even show some recovery for many months, but I remain skeptical this isn't anything more than the eye of a hurricane. Despite steep declines, housing remains unaffordable in many places. America no longer produces very much – and most of whatever is produced has been moved overseas. Any recovery based on shuffling financial paper around or printing money is a false recovery.

We are going to follow the Venezuelan Model with Co-Presidents Obama & Chavez; better habla espagnol real soon.

I hope President Obama uses his excellent communication skills and political capital to sell his plan for getting rid of the toxic assets. The toxic assets have to go for the financial markets to recover. If the plan is to entice investors to take risk and buy the toxic assets, we all need to be supportive (beyond our tax dollars) and pray for success. Some investors will lose money. We can't be resentful of those who make money. Fairness left the barn a long time ago. We need to look forward.

I have no problem with private investors making a lot of money out of a crisis, so long as they shoulder a reasonable amount of the risk. Otherwise I'd rather have the government make the money. I'm tired of socializing all the risks and privatizing the profits. Maybe the private investors can be offered various deals – bigger payoffs for the assumption of risk, smaller payoffs where the government assumes all the risk.

I hate to hop into a thread twice, but I wanted to simplify my observations about gas prices. Some may blow it off, but I still peg it as the straw that broke the camel's back and it isn't gone.

Lets say all of these financial games and tricks everyone is talking about actually works (of which I still believe the most important is consumer confidence – not dishing out money and wondering who we give it to and who or what to regulate).

What happens when a foreign country or investors drive up fuel prices again? We are going to be right back in the recession. I think people are overlooking the cause and jumping ahead to the immediate results. Do you think anything will change when those who can barely afford their mortgages (good or bad) allocate more of their income to gas? Their will just be more bank failures regardless of policy. Has everyone forgotten what it was like 18 months ago and we did not know what we would do if gas prices stayed high or went any higher?

The whole problem is that we are human, and we all make mistakes. The current situation is mainly related to mistakes made by: bankers, builders, government and irresponsible consumers who took out more than they could pay back. It will only be corrected by working hard, something that is probably good for all of us. This 'correction' in debt levels was needed, but I certaintly feel sorry for the thousands let go by their companies because of things out of their control.

Don't be fooled, the world is not about to end, they are certain people who always have and always will profit from these 'recessions'. I have already started buying.

Isn't it possible to find a balance? Make the deal enticing enough to make companies want to invest, but If companies make an obscene profit, then tax it at a higher rate.

Which debt is better: public or private? If it's public it's just moved. If you keep it private, it will be reduced by bankruptcy. The primary goal is to reduce debt not transfer it.
There are enough sound banks to keep the financial system afloat and it will be stronger.
Note: if is public, there is a chance of it being inflated away.

Dear Banks,

PLEASE negotiate more and help people who are struggling by lowering monthly payments and adding time to the end of mortgages. The fire sales you've been having end up only recovering a small fraction of the value from each property anyway, so why not keep the property and maintain your cash flow at the same time?

Stop using tax payer dollars to cover general operating expenses and bad loans. Use it to generate income with new loans – this should help offset any cash flow you lost from reducing monthly payments to keep people in their homes.

Finally, take time to convince the American public that sending money your way is the smart thing to do. Because, right now, it really seems like we'd be a lot better of doing something with the money ourselves.

I for one am playing the market. i try to sell before the closing bell if i can but there are days where i don't get that chance. I have good days and bad but the bad days are of my own making. I sell and the stock bounces upward in a vertical plane not a slope but straight up. While i regret selling to soon i still make money on those trades I just don't maximize my profits. The people who sell short are the ones that can have the biggest negative impact for now. I don't know what will happen in the next few years and nobody else does either no matter who they are. for now we have a market that is climbing and the funds that President Obama has released still haven't hit the market. I believe the next 12 to 24 months will be up and down after that it depends on the support President Obama gets from congress. The moral of the story is for now take advantage of the ups and downs the market will have and wait and see what the congress does in 2010. The Republicans want to give the top 5% a big tax break if that happens we all know how that trickled down for the last 8 years. If you want to complete the sellout of the middle class then elect more Republicans.

America should be focusing on health care, education, and on becoming the world leading provider of energy. Creating buildings, bridges, and general infrastructure is the wrong choice at this point, because it just creates something that we'll have to spend even more money maintaining. Create industries that are successful and they'll cover the cost for new infrastructure if it makes sense from a profitability stand point.

Mr Gergen – my 2 questions to your comments would be: if the investors hold 7% (as I recall) & the government holds 7% – #1) doesn't the public that owns the 86% share also benefit, and #2) would not the government that owns the 7% also make $100's of millions?

The money we are "giving" to private investors to buy up the "toxic assets" is actually a loan. What I do not know is if the government will see any gains in its returns if private investors make a ton of money off the loans, or if the government will merely break even.

If the plan doesn't work and the economy tanks further, then obviously these loans will all be money lost...

As a final note: unemployment is a lagging indicator, so it will be a while before it gets much better even if all else goes according to plan.

I fail to see why this disposal process for these toxic assets should reward the private investor with ALL the profit and very little of the loss. It just seems like another cozy wall st./whitehouse agreement where the values are being controlled by the investors.

The proposed auction is wide open to manipulation so that the banks/investors once again control the whole thing. For instance, what is to stop them bidding up the price of theses "assets" thru proxies to almost full value (sic) so that the taxpayer pays thru the nose for them and the banks are happy because they got their money. When the housing market comes back the investors rake in all the profit and kiss off the taxpayer.

As for adding a 50% tax to the value of a new house has got to be the most regressive action possible. Just when people are buying you want to reduce the number of potential buyers. Doesn't make sense to me.

Proverbs 17:18
A man lacking in judgment strikes hands in pledge
and puts up security for his neighbor.
NIV
A credit default swap is insurance one entity buys from another as security against default on a debt.

I do not believe we can have it both ways. If we want private investors to get off the sidelines and buy these toxic assets for the good of the entire economy, then they should be allowed to enjoy whatever profits (or losses) they reap. Otherwise, I believe they will remain on the sidelines and the malaise will continue more or less as it did in Japan in the 1990's.

Hooray for the private investors! If they want to accept the risk of the toxic assets – bring it on! Let's hope those Wall St. folks have some money left to invest – helping to right to boat that they've driven off keel. Investments are all about risk – let them take it.

Operating under the presumption that everything must forever rocket upward and when gravity kicks in, we must prevent things from hitting the ground by throwing them back upward, neglects the very simple and fundamental concept of gravity – that it does exist and it pulls things downward, whethr we like it or not. At some point, some place, somewhere, we have to allow things to come down – simply because the upward trajectory is not the only outcome possible. The proposed actions are a proposal to extrapolate a trajectory that puts things on an upward course and maintain them there – because we have come to believe that the upward trajectory is the only acceptable trajectory for us, and we must make it the only possible trajectory, whatever the cost – even if it means we wipe out our future and that of future generations. We only like it when things are ballooning but refuse to consider the reality of a deflation. This is what began the housing crisis and set things in motion. How unrealistic have we become? I'm horrified to think of what we could be setting in motion next. ONLY AND ONLY, THE UPWARD TRAJECTORY. FOREVER THE UPWARD TRAJECTORY. Are we listening to ourselves?

How will the average American react to private investors making large amounts of money with governament assurance removing risk.

I suspect much of that depends on how the media spins it in their reporting. Perhaps you should ask your bosses what story line will generate better ratings for CNN!!

The Debt is the problem people should be talking about now. The US is broke the world is not going to keep buying debt for very much longer. Then all these issues mine nothing. The dollar will crash and the economy with collapse.

I have a question does anybody think Ruben Navarrette Jr. makes any sense? He now has labeled the Obama Presidency as a failure on the economic side of his administration. The President has been in office for 2 months and he is already a failure? Ruben you need to hold off for awhile his changes haven't taken effect yet. The current bounce is just because Bush is gone. President Bush did the same thing for the country that he did for every company he ran. His track record is terrible and now you want to label President Obama a failure? where was your labels for the previous administration? every time i try to read your articles i have to quit after just a few sentences. am i alone or are there others that believe the way i do?

In response to the efforts to protect existing homes in order to stabilize the market prices (advocated by John Thomas), I think the concern there is that those prices were inflationary at best, and based upon an informal Ponzi Scheme at worst.

The idea was that the prices would always continue to go up, and the only way you get your money back is to get someone else next to pay more, and they would do the same. The idea of a Ponzi scheme is that the next investor pays back the prior investors. Often the ideas of how much those houses were worth was ... well crazy.

If we get into a protectionistic view on this of the existing house prices, then we are also rewarding those people who spent foolishly on the homes (obviously not everyone did but that drove a lot of the bubble), and penalizing the late comers who have to pay a tax of sorts to get a home, as opposed to buying a newly built house that does not have the inflated prices built into the current market rate.

While I understand the need to not let the entire market for houses fail, I don't think we need to prevent proper corrections in the market rates. Some of the home investors were also as big a part of the problem as the banks and financial institutions lending them the money. Again, a generalization, but one that must be recognized at some point by the market.

The most foolish think on housing that I think is a problem is the solidifying the mortgages into bundles and into then CDO's on the bundles. In regular market activities, if a ton of houses were being foreclosed on, the market price would fail, and the bank (as the historical owner of the mortgage paper) could decide whether to foreclose, renegotiate, or do nothing – based upon their ability to sell the house on a market. If they did nothing or temporarily renegotiated the monthly payment, they could maintain a borrower in the home, who was paying insurance (which often requires a person to live in the home), taking care of the home, paying taxes, etc. When the market returned, the lender could always reassess its legal rights, but was not required to do anything.

In contract, there is no legal flexibility in these devises since the "owner" of the home is not an entity – but a number of entities that might not have a "thought process." The right to service the mortgage is owned by one entity, and the paper itself was stredded – and divided up. The only way to renegotiate is to refinance the mortgage and a new entity is not likely to refi a loan already in default, and since it likely is not the "Same" entity, they have no incentive to clean up the mess for now.

For John Thomas, I have to ask if you are stuck in home you can't sell and under water? If so, I can empathize, but I have to ask if you are asking to be bailed out on your bad choice? If so, you might state that bias. Just curious.

Any private investors who put their money up to purchase these worthless 'assets' should be allowed to keep every cent that they earn. In fact I would argue that the profits (if any) should be tax-free. They are doing the country, and our financial institutions specifically, a huge service by risking their money on this plan. If successful, they will have helped the government to save our economy. and should be rewarded accordingly.

Reducing the wealth gap is a noble gesture, but we should not begrudge people their wealth. Especially when they take risks that could benefit the country as a whole.

To clarify, I support our president and dare to hope our tax dollar investments end up increasing our revenues and things eventually balance out. I’m cautiously optimistic...

Mr. Gergen, I respectfully disagree with notion of the "Obama Effect". This recession has been so long, deep and saturated with media coverage (not a bad thing, just technology marching on) the public has now become desensitized to constant bad news. Maybe we should call it the "Constant Bad News Desensitization Effect". What is occurring now is an event or announcement judged to be in a positive direction is over-amplified because we are hungry, almost desperate, for good news.

Concerning the economy, we hear bad news constantly, but lately, it's not as bad as some invisible statistician expected, so that's positive, right? It’s what I heard on the .coms, and if you read it on the internet or see it on TV, it’s got to be true. (Blatant sarcastic editorializing)

The truth may be that we could be setting ourselves up with a, NOT SO BAD NEWS bubble that may pop fairly easily with a very loud thud. It's not the "Obama Effect,” It’s the "Constant Bad News Desensitization Effect".

My opinion of the “Toxic Assets”: (great name for a band) I think the 6%-loss to 50%-gain ROI is too sweet. However, an investor with huge amounts of money sitting on the sidelines waiting for the market to stabilize may respond to this incentive with no greater than a 6% share of the risk. If the results of this plan get cash flowing because banks are willing to make loan risks again, that’s great. Hopefully, the taxpayer realizes a 50% profit rather than getting stuck with 94% of investment loss. Again, I’m cautiously optimistic.

David, never thought I would be saying this about you, but you are about as big a baffoon as that Jack Cafferty or Anderson Cooper wannabes on CNN. I cannot believe that you act, react and judge trends on a day to day basis. It is simply pathetic. An no, Obama deserves nothing of the sorts (praise) which you allude to in your piece – at least non this early in the game. I didn't vote for him and will not vote for him in 2012 (still praying the Republicans get their act together and put up a challenger who can steam roll over Obama), but the economy is simply not going to turn on a dime. When are you so called "journalists" going to realize that. So Obama neither deserves criticism nor praise for what has happened over the past few weeks. It is NOT his policies – no, too early. It is not his words – no, too early on that too. Remember how he was using the word "crisis" about 20-30 times on each speech trying to get the public riled up so we could support his ill-conceived plans? Well, the eloquence in which he speaks, even the negative words, are not going to be sufficient to turn this ship around.

Let's hope that CNN has left the airwaves and we elect a new president in 2012.

I think in short we're between a rock and a hard place. We have to get the toxic assets off the books of the banks and we need private investor help to do it – no one likes the current level of deficits much less the one's we'd have if the government alone intervened. To entice the investors to play – no better way than capitalism. Unlimited upside is why people are willing to take the risk – that's what runs silicon valley.

David,

I appreciate the manner in which you critique policy and the ability of politicians as opposed to the sliming so often done by contemporary "journalists".

May I respond by posing a question to you. Both high inflation and deflation of any measure are detrimental to any economy. Very mild inflation is the ideal to most economists. Leaving imaginary "toxic debt" (these esoteric derivatives which no one seems able to accurately define) aside, many homeowners see the very real (as in "real property") toxic negative equity in their homes. Individual families are trapped, literally and figuratively, in their mortgaged houses. They cannot sell their homes due to depressed house values, and they cannot maneuver within their personal debt boundaries due to skyrocketing credit card interest rates allowed by the fine print in their agreements.

Several years ago, Chairman Greenspan lowered the rate that the Fed charges on overnight loans to banks to almost zero in order to avoid having the economy begin slipping into deflation, the economic death spiral of the Great Depression. The current stimulus debt is being sold via bonds to foreign governments and to private investors. With housing values so deflated is there not the possibility of raising them through engineered inflation? I understand that prices of all goods and services would go up, but the price of all "real" property would as well. Rather than selling debt, the Fed could simply, yet also radically, increase the M1 money supply. Though consumer prices would go up for all (a shared burden), most homeowners would see an increase in the value of their homes, such that they would no longer be what is referred to as "upside down", i.e. they would have positive equity rather than negative. This might hurt the lenders who financed the current loans as the payback in real dollars would be less due to a devalued dollar. This, nevertheless, might be better for everyone than massive foreclosures. It would also free the majority of these homeowners from their debt traps, allowing them to sell current houses, move to new job locations, and have greater ability to pay down personal debt. Another seeming upside would be that it would not be debt which would have to be repaid by the government to lenders. Again, the obvious downside is a weakened dollar coupled to higher prices for all goods and services.

I know this medicine is roughly equivalent to chemotherapy in terms of its side effects, however chemo, coupled with disciplined hard work, did bring Lance Armstrong from near death to the pinnacle position in his field. I would like to hear the thoughts of your panel, who are more well economically educated than I, regarding such a course of action.

Why is it that the Government on behalf of the tax payers (our money) can't put a cap on the amount of profit these private investors make? Allow them to potentially make a very nice profit, but not a god damned killing or they'll be raping the system all over again! Either that or you need to change the corporate and private tax laws for the wealthiest Americans so they pay their share in taxes. No more paying 17% on your income because you structure most of your income to be taxed at Capital Gains rates! If tax equality is not reached this country is doomed! We can't keep allowing all of the wealth to go to the top 1 to 3% of this population and having them pay half the percentage in taxes! Is it any wonder that we can't fix our infrastructure, schools, etc when the top 1 to 3% of the population have as much wealth as the bottom 175 million people but pay only half the amount in taxes?

1. This is not bail out money for new private investors.
2. The government is asking private investorsI to participate.
3. The profit will be splited with the government since both sides contribute equal equity.
4. if you take risk then you need to have the right to get the reward. No GUT no Glory.

Our government should not insure the toxic assets and definitely should not bail out another AIG.

The Mortgage Meltdown was triggered when the ‘real’ U.S. Job Market contracted. Under-employment and unemployment put us in the position that mortgages which were once only s reasonable portion of our incomes suddenly became the bulk of our ‘reduced’ incomes. The pursuant ‘lack of purchasing power’ has sent the rest of the economy into this tailspin from which we will never recover.

It all comes down to Jobs. Jobs go to the lowest bidder. Those low bidders do not live in the U.S. We will never again have jobs that can sustain any real semblance to the U.S. we’ve know for the past 50 years. A 'green job' that pays well assumes that people have purchasing power–that's not going to happen again in this country.

The GOP cheerleading for the USA to fail makes me wonder when they joined the Taliban. After the job the GOP did on us for eight years recovery will take a while. You can't fix an eight year old problem with a snap of the fingers. The whole has been dug for eight years I would give us at least three years to fill it back in to a good starting point. I am getting vested at bargain prices and I know it may take a while but I have seen the boom bust cycle before.

If we are a democratic society, based upon free enterprise, then anyone willing to invest in 'toxic assets' has earned the right to a fair profit. It is important to note that we must all 'band together' at this time. If this will help the overall economy, and get our people back to work, then by all means, I'm for it!

Can anyone say or spell Mirage. You think you see it but you don't, you think it's there, but it's not. We have yet to hear the fat lady sing, she is not even in the dressing room yet, however when she sings it will be the blues.

If I only had a nickle for every time I have heard, this may be the sign we have been looking for, the turn around point, but we all know what happens when we get to that last house on the left. The only question is, will the story turn out the same as it does in Hollywood, or will it be so real to each of us that no one wants to see what is coming toward us like a frieght train loaded with toxic waste, no brakes, no conductor, and the rails lead into a brick wall at grand central station.

Since a sad event has taken place at a place i was very comfortable at –which was CNN –You have now begun to sound a lot like Fox That terrible nut station –Is it because they are getting more eyeballs watching them ??Why has CNN taken away the true beauty that was always fair changed to Anderson a former I follow the bad weather or where their is a storm their is Anderson -So bad to change him purely for eyeballs -get Wolfe back in place to counter this terrible change Be ashamed CNN

Why are we the only G20 nation without Universal Health Care?
Why are we the only Nation where CEOs make 450 times the average employee while the rest of the G20 Nations average someplace between 10 to 20 times?
Why are the tax rates for the richest Americans at half the rate (17%) vs. for the rest of us (30%) ? If the top 300,000 Americans have as much wealth as the bottom 150 million and pay half the rate in taxes what do you expect?
When are we going to realize it is the gross inequity in pay and taxes between the Uber rich and the rest of us that is destroying this country?
What business can remain solvent with such a business model? is it any wonder that Corporate America and Wall Street have gone BUST?

I suggest that the government sell Mortgage Recovery Bonds to create a fund that could act as a party to these transactions. Split the investment with private investors 50/50 so that if there are decent profits, the purchasers of these Mortgage Bonds would share in the profits. It also would be a good way to get those of us with money to invest that are wary of the stockmarket something to invest in that might also help the economy and would feel patriotic as well.

First Issue: Is it just me or is the glimmer dimmer today?

Second Issue: If they are gamblers, let them gamble on their own. If the lose, they lose and write it off. If they win, we tax.

Those investors should absoutely make and keep the profits if they take the risk. The American people have got to understand the importance of free enterprise and how it has made this country great and benefits all of us. Free enterprise with prudent regulation which ensures that investors who risk, risk with their own money, and don't jeopardize our entire financial system. Finding balance between free enterprise and regulation is our challenge now but I am confident that is exactly what will make us a financially strong and stable nation once again. We are where we are because we, the American people, were anaesthesized by comfort while we let Wall Street and politicians run amuck with our financial system. It's time to take it back people! Pay attention and do your homework!! Listen to opposing viewpoints and get a well rounded view of things before getting emotionally wrapped on the headlines. CNN's Money Summit is a great start!

If private investors choose to invest in the toxic assets they should get any profit that accrues – they were the ones that took the risk after all. Why risk your own money if you aren't going to get anything out of it?

Job losses – we hadn't heard much of them in our area so far until yesterday when it was announced that the county's largest employer – the University of Alabama at Birmingham (school and hospital) were announcing "massive" layoffs. Any hope I had before that announcement was pretty well shattered with that one.

One item I wish your panel would discuss and put the limelight on. According to a story on the CNN site IBM is asking for a bailout while at the same time they are planning on laying off thousands of US workers and shifting the jobs to India. So the bailout money would go to pay teh salaries of people in another country – That might help IBM but it certainly doesn't help Americans and I know that I for one am totally against a company being able to do this. The bailout and stimulus money is suppose to make things better for Americans – not for foreign citizens of other countries. To me this is as bad as the AIG bonuses.

There's not a thing wrong with Anderson. I watch Fox AND CNN, and you have to decide for yourself what you think. This is a democracy, and supposedly we should be smart enough to form our own conclusions. I believe you need to take in any information you get in order to arrive at a conclusion which you consider to be the "truth." There are going to be plenty more ups and downs in the market and in our country, but that doesn't mean we either have to give up or that we need instant gratification. Chill and keep trying. I'm getting about 2/3 the pay I was last year, and, yes, it's hard; but there are lots of folks worse off than I am, and I'm thankful to have a job. Life is what you do with the situations you're given. I pray every day that more people will see that. Don't give up. We, the people, are STILL the greatest country in the world. If you don't agree with something, vote, call, write, do something to change it. We are not impotent here, and we can't afford to just sit around and pass judgement. "You must be the change you want to see in the world." We can do this. We wouldn't have gotten this far as a country if we couldn't. We have to circle the wagons when there's trouble and then press on, together as a nation.

Mr. Gergen,

I do admire your journalism. It's great to see a level head during these choppy times.

Actually, I think that the government shouldn't partner with private on these assets if they don't want to partner with us. These guys have an attitude problem. The old culture is shifting and a new culture is developing.

Honestly, I would have the government sell those assets in a way that they would profit. At the market. Get the fire started and going. No one is going to be able to resist some of these prices for too long and I'm sure a feeding frenzy will begin. Then prices will settle at some point which we need to have happen.

I think that some of those assets, like foreclosed homes, should be given in a lottery to some of the people who really need them.

But I think that the vast majority of the profits from selling the assets should be set into a rainy day fund, that we desperately need to have in this country, and should be grown until we can run our government off the investments and thus lower our taxes.

I think we've reached the point where taxes are getting too high and people are out of touch with that in many ways. There's no room to raise taxes to pay for all of the things that we need to in the budget. We have to get more savings going from replacing our oil and power in the government to cheaper alternative sources.

I think that we should be selling bonds to pay for switching over our power sources to other than oil. The American public is so fed up with oil. Enough to give you driving and be really disgusted with the lot of it. This of course affects the car industry deeply. No one saw it coming. Public sentiment is get me out of here, I don't need to see $150.00 oil ever again. Don't need it.

I think we stand to make so much money potentially from switching out of oil that we could get the injection we need to re-shape our economy. Enough is enough. The people have spoken. They want fewer bankers and certainly regulation in the financial industry. Reasonably priced housing. Accountability and transparency.

But what's happening in banking also has to happen in healthcare. It's the same synrome. Premiums are going into the executives pockets. The bankers aren't the only problem, though they certainly need to get the message.

Look at New York. We can't afford to see the public transportation get any more expensive. It's outrageous, and it's choking the local economy at the worst possible time.

Sell bonds to re-tool the public transportation system.

I think that the Feds should put out bids to back these types of projects if they are taken up my municipalities. The ones who don't take the money, they are probably the insensitive, boorish, out of touch types who only see their patriotic duties extend to themselves. They are destined to become more and more isolated and there's little we can do to change them really.

But those who have eyes to see and ears to hear, they know we need some good ideas and forward thinking.

I really would like us to start setting aside monies to run the government on its own, the way those great little machines do that keep running once you get them started. Other countries have done that. It would sure stop the argument that government is too big or too small one day, which I'm sick of hearing already.

I'm sure it's got to be some particular size and we spend more time squabbling over its size than doing something about it, a complete waste of time in my view.

The meltdown and this recession are all about jobs. The Toxic Assets weren't toxic when we took them on. Most of us earned enough and were prudent when we took out the loans. Now we are under-employed or unemployed. When your income is reduced your ability to pay is reduced.

Our jobs have been sent overseas or given to visa holders who help to send them overseas.

Even though the U.S. is not legally required to issue a single H-1B Visa (Yes, that's right not a single one), we will give away another 65,000+ US high-tech jobs via next Wednesday's U.S. CIS H-1B Non-Immigrant lottery. U.S. workers and U.S. taxpayers will be the April Fools.

Outsourcing and the High-Tech/Skilled Worker Visa giveaway have decimated our economy, our tax base, and our nation's future.

Having a college degree and not being able to find a job is an intellectual asset gone toxic.

Psychology of the market is very important and that is what we are seeing. Remember when Bill Clinton said "we are going to focus on the economy like a laser"? or soetehing like that. The economy took off. Well not that in hindsight it was all good . The fact that we are acting and doing something and that we as a country are having serious discussion followed by thoughtful decisions with supporting rationale represents the very essence of what has historically helped make our country strong. America's strong point has been the capacity for self correction. However that capacity has been severely disengaged by political and influence peddling such as the "K street project" and the general empowerment of lobbying arms and their connected interests over the interest of the general public. One important item that has been more or less dismantled is our "free press". Conglomeration of media and business interests has resulted in mini monopolies of information control and flow. A company that owns 2000 radio stations has 1900 too many under the same banner. We need to disempower this information power concentration or the necessary economic and financial corrections we make can be quickly eroded through this type of influence.

The United States must conduct military operations in Mexico to stop those terrorist from killing and bringing drugs into the US. Hunt those terrorist just as we are doing in Iraq and Afghanistan and kill those terrorist. The cartels are taking no prisoners. We must do the same. Do not entertain the thought of legalizing drugs. Take a zero tolerance approach. Find the bad guys and kill the bad guys.