Program Note: For more from Ali Velshi on Geithner's plan, tune in tonight for AC360° at 10 p.m. ET.
CNN Chief Business Correspondent
...Timothy Geithner shows his hand. Coming out with MOST of the rest of the banking plan (final details will come at the end of April, when the results of the "stress tests" on the bank come in).
So far Wall St. likes the deal, putting the Dow above 7,500 before noon. The plan basically allows private companies to partner with the government to buy some of these so-called "toxic assets" at a good price, with government backing.
It's sort of like the government telling you it'll set aside the best, undiscovered antiques at every garage sale – the stuff that's taking up space for homeowners but the experts know are hidden gems, once they get cleaned-up and displayed properly. Not only that, but the government will come up with half the money if you want it (although when you polish-up and sell the antique, you split the winnings with the government). And if you don't have enough money to take part in this plan, the government will lend it to you.
It might look as if the government's giving up the ranch but, fact is, no one really knows how much the ratty old dresser is worth until someone actually buys it, and that could take time. Same thing with these toxic assets – they'll be worth something but the government needs to provide some incentive to get investors to buy them from the banks, so the banks can use the money to lend it to consumers and businesses.
Oh, by the way, there was a surge in the sales of existing (used) homes (as opposed to "newly-built" homes) and the market seemed to like that, too.
Filed under: Ali Velshi • Economy • Finance • Treasury Secretary
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Steady as she blows...
Have a great evening Ali always enjoy your advice and explaining, you do an amazing job of it.
I'll bet this is why the Dow went up 500. Traders have been waiting for the details.
I hope the rest of the plan is better than the first of the plan. Geither is an idiot, and he is telling Obama what to do. Boy are we in a mess, We need somebody that can run the government, but that's what we get when we elect a president, that needs to be a community organizer.
The more the Gov. gets involved the worse it gets. Too much gov. is causing the problem. Let the companies sink or swim, if it were their money they would find a way.
Who says AIG is too big to fail. Why did regulators let a company get that big. Sounds like a bunch of idiots to me.
You are going to have a difficult time convincing the American taxpayer that "cash for trash" is the best investment.
Hey Ali, I hear new mark to market accounting rules are coming from the SEC too! These toxies may increase in value along with other depressed paying assets that will shut this whole thing down. Banks may want to just hold on to them if they get tons of cash on their balance sheets through asset revaluations. I also heard that these new rules will be in place for banks for calculating 1st quarter profits! Can you imagine? Then we'll see a lending frenzy for sure. Now that will create a market. (And inflation)
We sure do have a lot of balls in the air. Maybe too many. Watching the balls being juggled sure does get our minds off other things though. Kinda like being hypnotized.
There may have been a surge in pre-existing homes, but the selling prices were dramatically LOWER! So, homeowners are still losing!
The plan seems similar to what was done in the '80s with the assets of the failed S&Ls, with the twist that the government isn't waiting until the banks collapse, taking down the rest of the economy with it, to resolve their assets.
I don't trust the Government solution to bailout the Main Street via Wall Street. It'll prove too costly and ineffective. It just doesn't make sense why government is rushing with big bets using public money. One must understand that Banks will change their lending behavior now and they will not lend money to public as they used to. Hardly 10% of US population has good credit. That means banks will look for other markets to lend money. Bottom-line is that bailout money will not trickle down to average Joe. It'll be a distant dream and the fact will haunt the government sometime sooner.
Good news?...sounds like buying a brown paper suprize bag.
Finally a plan that doesn't put everything on the tax payers backs. I have high hopes for this plan. I just hope that the House and Senate don't botch it up.
The problem with this whole deal is that the government does not have the money to buy up these assets. They are stealing from Peter to pay Paul so to speak. So in essence they are just creating more problems because the money just isn't there. They are just trading out IOU's you could say with these banks for these bad assets.
Glad there was a surge in the sale of existing (used) homes – that seems to be a good sign. On the toxic assets – the government is truly getting deep into our financial markets – do they have plans for getting out and when to do it? Looks like we are going from having too little government and regulation of the markets to too much – surely there is a happy medium in there someplace.