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March 23rd, 2009
11:46 AM ET

Will the Geithner plan work?

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/images/03/23/art.geithner.jpg]

David Gergen | Bio
AC360° Contributor
CNN Senior Political Analyst

In a famous exchange in Shakespeare’s play, Henry IV, Part 1, two characters by the name of Glendower and Hotspur are jesting over how to persuade others to follow them. Glendower says, “I can call spirits from the vasty deep,” to which Hotspur responds, “why yes, so can I and so can any man, but when you call them, will they come?”

Treasury Secretary Tim Geithner today summoned spirits from the vasty deep with his ambitious plan to persuade private investors to buy up the toxic assets of troubled banks. All of us have an interest in the plan succeeding – we need our banks to be healthy and able to lend again to consumers and small businesses; the stock market rallied sharply in the opening hours. But the real test will come over time: will the private investors actually come up and buy enough of the toxic assets? We may have to wait a number of weeks to know for sure.

What we do know is that the Obama administration is offering extremely favorable terms to the potential investors. The government, as The New York Times reported this morning, would lend private investors nearly 95 percent of the money for an investment. (Here’s an irony: at the very moment we are trying to deleverage the economy, the government is now using the principle of leverage to revive it). Moreover, if the investment goes bad, the private investor is only on the hook for the small portion it put in originally – not for the full amount of the purchase. Yes, the government will share in profits, but if the toxic assets go up sharply in value – as the government hopes – the private investor could make piles and piles of money.

Two questions immediately arise. The first is that raised by Paul Krugman, the Nobel-prize winning economist who has been slamming this plan unmercifully because he believes that Geithner has way too rosy a view of the underlying value of the assets. He thinks that investors, realizing that these assets aren’t really worth very much, won’t want to invest at the prices that the banks will insist on and the whole plan will ultimately fail. Instead, argues Krugman, the nation will waste incredibly valuable time on a flawed plan, allowing the economy to deteriorate still further, while instead we should be moving swiftly toward a government takeover of the banks, which he believes would stabilize the economy. We shall see who is right – Geithner or Krugman.

But there is a second question lurking that really only the President and Congress can answer: that is, whether private investors can have confidence that if they do invest, the lynch mob mentality we saw last week in Washington won’t come and plague them in the future. As the managing director of a major hedge fund told me recently, if this plan is good enough, our firm stands to make money. But then why should we invest if Washington is then going to get mad, take 90% of our profits from us retroactively and if I may be hauled up before Congress and vilified? Good question.

What this means is that the President and the Congress this week need to restore calm to the Capitol over the AIG bonuses, work out a solution that does not leave a threatening cloud over the financial industry, and provide more concrete assurances that the Geithner plan will work as advertised. Until they do that, it may be extremely hard for the Secretary – try as he might – to summon spirits from the vasty deep. Again, we all have a stake in his success.,


Filed under: 360° Radar • David Gergen • Economy • Finance • Treasury Secretary
soundoff (131 Responses)
  1. hi david gergen

    Is Obama right that the gov can’t go after the bank execs cause they didn’t break any laws?

    What about making shady risky investments that investors couldn’t afford to risk their life savings on?

    Is Madoff the only one going to jail?

    March 23, 2009 at 8:32 pm |
  2. Jerry Lyons

    Gosh, couldn't Geithner come up with a plan in which the people with the money would just do it for love of country and not for the money? Isn't that what capitalism is all about?

    Paul Krugman has forgotten some of his civics lesson. He seems to think that Obama can just nationalize the banks regardless of whether Congress will go along. A person can get that way when he spends too much time at college, or at the typewriter.

    I think the plans proposed above by those who think the Geithner plan is not good should be tried. Oh, I'm sorry, no one of them proposed an alternative.

    March 23, 2009 at 8:27 pm |
  3. Lucas McClure

    Voodoo economics create zombie banks. A trillion dollar Band-Aid is very expensive health care for the Fat Cat Syndicate. Wall street likes the plan and that seems to be all that matters to Washington. When will they realize that "free market capitalism" has failed and a new "blended" economy needs to be designed by all those smart folks running the Fed?

    March 23, 2009 at 8:14 pm |
  4. Pete in Winfield

    What happens if after the banks are able to shed these "toxic assets from their books, they wise up and decide buying said assets is not a very smart business decision and they stop participating in this new shadow market? It sounds like a big old game of Mortgage Backed Hot Potato and the question I have is, what happens when the potato winds up in the taxpayers lap?

    March 23, 2009 at 7:59 pm |
  5. Betty Montgomery

    I watch AC/360 every night and look forward to what David's analysis will be of each day's events. His opinions are down to earth commom sense – what everyone needs more of.

    March 23, 2009 at 7:50 pm |
  6. farhorizons

    What in the world ever gave these geniuses the idea that smart investors would ever buy worthless (toxic, to use their word) assets? And if investors agree to do this, doesn't this mean we taxpayers have allowed our representatives to give away our store while telling us this is good for us?

    March 23, 2009 at 7:35 pm |
  7. Chance

    Naysayers? It is called balanced approach. Absolute power corrupts. Why do you think Republicans fear nationalization? Gov't cannot do as efficient as a job as private industry. WE learned this a long time ago. Also, to Celeste, did you just say that everyone would just get out of Obama's way so that he can work....his magic??? Do you really think he is a financial master? What planet are you from??? Typical mindset of a liberal though.....usually know nothing of politics or business and place your false hopes in a person. People are not magic idiot.

    March 23, 2009 at 7:32 pm |
  8. AZJimmie

    The stock market rallied today because once again, the taxpayer will take the brunt of the downside risk, and the Wall Street executives that got us into this mess are off the hook...AND they get to keep their jobs! The Treasury is overly optimistic on the potential value of these assets. If there were any real perceived value, there would be an active market to buy and sell them on a global basis...maybe even on Craigslist!!!

    The executives of these financial firms complain about the potential cap on their salaries, and the risk of losing talented employees, but they don't appear to be smart enough to resolve the situation they created. It appears to be one of the few occupations were your performance can have a devastating impact on the global economy, completely destroy shareholder value, require taxpayer bailouts to stay in business, and yet receive a stellar evaluation in terms of compensation. It might just be possible that real talent from other industries might do a better job of running these businesses.

    March 23, 2009 at 7:27 pm |
  9. Glenn

    Flawed from the start. As pointed out in the article, no private money is going to take the risk of buying the assets and then Dodd and Frank have an epiphany and haul them before Congress and pass narrow, targeted taxes on a few. So much for liberty and the Constitution. The libs love to whine about how GWB trampled on the Constitution. Does 1600 Pennsylvania even know about the Constitution at this point? Don't even start talking about how property rights and privacy are being trampled...apparently decades of case law mean nothing so long as you want to cram a liberal agenda thru...

    Others in this thread have said "we're paying for the greed of others" (paraphrased a bit). Anyone with credit card debt, house debt, school debt, auto debt and it exceeds your gross income by some factor (2x maybe 3x?), guess what? You are the problem too. Why are we in this mess? Certainly poor business practices, faulty regulation have their shares at the table of blame. Consumers do too. As consumers, we've sacrificed the future for today's consumption (i.e. used cc and home equity lines to live WAY above our means). See the Asian financial crisis for how this ends...

    The press and libs whine about AIG bonuses, yet Raines (of Fannie Mae fame) walked away last summer with something like $20mm and Fannie/Freddie paid bonuses this year??? But, then again, Raines is one of Obamanations advisors so, just like all of the wealthy cabinet people who cheat on their taxes, that's ok...do what I say, not what I do...

    Nationalizing the banks? Are you out of your mind? Look at how well the public school system and Medicare/Medicaid are run. That's enough track record for me to know that our gov't is completely inept at running a business. Then again, with so many "professional" bureaucrats and politicians who've never had to make payroll, compete for business, etc., we shouldn't be surprised. I love how libs love to point at socialized medicine as their poster child. Really? Read some actual academic research on the matter, not blogs from stoopid websites...I would hope that you'd see the fallacy in your beliefs...

    Wake up, people. Your liberty is leaving you...Once it's gone, it's tough to get back...

    March 23, 2009 at 7:15 pm |
  10. Dean

    Krugman is relentless in his attacks. For someone who's opinion is wide reaching and highly touted, he telegraphs his message with all the suave and sophistication of a drunken boxer. Krugman probably has good points to make, but it is difficult imagining that he is anything other than angry.

    Geithner's plan isn't a miracle cure-all. It is basically a continuation of generations of practice that has made our economy so 'resilient'. We have collectively decided that we are willing to trade in boom and bust cycles created by the most unregulated market on earth. To accomodate these fluctuations, which I perceive to imitate feast and famine cycles observed in nature, we socialize losses during times of famine, and we individualize gains in times of gluttony.

    March 23, 2009 at 7:08 pm |
  11. Joyce Weir

    Thank you Cathie, for stating one of the recoveries biggest problems – "The media should be ashamed of themselves. They focus on the most pointless things."

    Please stop emphasizing the negative, stop trying to be being cute and interrupting anyone who has a constructive comment and help move the country forward with the power you have by also reporting the possible and the positive.

    March 23, 2009 at 7:06 pm |
  12. RGR28

    Who will buy this assets, who wants to be subject to the stupidity of the congress and the WH, Will they question later how much you make and you should give it to the state, will they tax you more; will they publish your name so you could be investigated by liberals and to look to destroy your life "Joe the plummer" see how much the investigate him. Obama unleash on him everything he could FBI, Secret Service,liberal press, etc. who in his right mine will deal with the government will future federal contracts will have clauses so you will need to report everything you make and how you make it. Who is John Galt.

    March 23, 2009 at 7:05 pm |
  13. maristi

    There is so much private money sitting on the sidelines. Trillions. They want to invest it but won't until there is clarity in what they are getting.

    There is also less and less will to spend taxpayer money. Forget about another 700 billion from us!.

    And yet banks still need a trillion or more to fix their damaged balance sheets. Unless you nationalize and let them default on their obligations to OUR pension plans, insurance companies, companies in our 401K, etc.

    So why not use 100 billion of taxpayer money to guarantee 900 billion of private investment, for a total of 1 trillion? Now that's leverage we can believe in.

    I think it's a brilliant solution considering what we have to work with.

    March 23, 2009 at 7:03 pm |
  14. Joyce Weir

    Thank you Cathie, for the stating one of the recoveries biggest problems – "The media should be ashamed of themselves. They focus on the most pointless things."

    Please stop emphasizing the negative, stop trying to be being cute and interrupting anyone who has a constructive comment and help move the country forward with the power you have by also reporting the possible and the positive.

    March 23, 2009 at 7:02 pm |
  15. Lisa in CA

    Heck, at this point we have probably given the banks enough money that they could have paid off every one's credit card debt. The result would be money available to the banks to lend and money in our pockets (remember us - the ones ultimately footing the bill) that we could afford our toxic mortgages.

    At this point, I want to know when the feds are going to write ME a check to balance my books.

    March 23, 2009 at 6:58 pm |
  16. fred gill

    There'll be thunder on the Left and Right over this plan. It would have been better to propose it before the AIG bonus mess. It's true that the upside for the investors is great. If the assets detoxify and appreciate then many people will get rich. But keep in mind that the downside for the govt is correspondingly low. And if the assets do take off then it should help the economy. Also, the Trotskyite-Lite posters should remember that at least the people who profit on this will have those profits taxed at a higher rate than under Bush.

    Celeste, since when has it been the role of citizens to "just get out of a president's way" and stop criticizing him? And how do you know Obama can work magic? He's never managed anything in his life. All any of us know at this point is that he is charismatic and gives a great set speech. If that's all the "magic' he has we're in deep trouble.

    March 23, 2009 at 6:55 pm |
  17. Earl Giller

    Seems like folks have lost sight of the fact that the AIG outrage is because the bonus bunnies lost an incredible amount of money, and got rewarded for that. If someone makes an investment that does well, Americans will be happy to see that rewarded.

    March 23, 2009 at 6:51 pm |
  18. Kevin Caballeros

    Qouting Jefferson; " I've never failed once. It just happened to be a 2,000 step process." What happened to our optimism? I agree , just another scheme to make the few wealthy even wealthier , but what's the altnerative? I hear many complaints but no alternatives.... Just a thought.

    March 23, 2009 at 6:38 pm |
  19. Kevin Sinclair

    The taxpayer is once again providing welfare to the rich. This is a travesty. Alchemists tried to turn base metal to gold. You can't do it. Nor can you make these toxic assets worth anything. We're going to lose our shirts.

    March 23, 2009 at 6:37 pm |
  20. joe b

    Obama apologist aside as a democrat if some things don't change quickly we will be looking at another one term Jimmy Carter like President. Printing more money and spending money we don't have at shot in the dark programs that benefit only the shysters who caused the problems is a sure way to cause a change we can believe in. Not only is the dollar going to be worth nothing in four years but worse we are on the same path as Japan in the 90s when they had a lost decade of no growth. Its better to take our lumps in the short term and reset instead of assuring a long bleak future of no growth for ourselves and our children.

    March 23, 2009 at 6:35 pm |
  21. Henry

    By the way David, you are the most intelligent, informed, and gentlemanly person on television. I am a passionate moderate.

    March 23, 2009 at 6:34 pm |
  22. Dan Cofran, Kansas City

    Krugman is spot on, as usual.

    The FDIC (and RTC) have been successfully closing, reopening, and rehablitating banks and savings and loans for many years (Continental Illinois, Penn Square, etc.), including right now. They take the bad loans and loser assets off the bank's hands and books, cover the depositors, let the shareholders take the hit, sell the bad assets the over time to the to the risk takers, and sell the cleaned up banks to new owners who hopefully will run them responsibly.

    We know what to do, it's just on a much larger scale this time. Yes, the devil is in the details, but the basic approach works and we should stop accomodating the Wall Streeters who created this mess in the first place. Greed, arrogance, and incompetence should not be rewarded. "As you sow, shall you reap," not rape.

    March 23, 2009 at 6:31 pm |
  23. Henry

    Krugman is willing to let the stock market absolutely crash in order to build a better system. To me that sounds inhumane. This country has suffered enough and it doesn't need anymore radical ideas that put us further at risk. I understand that his plan may work in the long run, but how many American lives would be ruined in the market chaos that follows a government takeover of the banks.
    Geithner is walking accross a tight rope with a fiery hell below him. On one side is the wrath of the markets, and on the other is this newly resurected populist rage. What is interesting about all this is how quiet Geithner has been. He's waited so long to get his plan out. Now with the market responding like it has, I wonder if his lack of leadership was actually a good strategy. It makes me think that he is very confident in this plan. Which makes me confident.

    March 23, 2009 at 6:30 pm |
  24. Amy

    I can't believe this is the plan the world's been holding its breath for...it reads to me like Paulson's previous plan dusted off...I agree with Krugman on the point that these toxic or bad assets are just that...bad. How much more time and $$ is the U.S. going to throw at these banks before we realize they are busted/broke and the path to recovery is through the BR courts, not the halls of Congress. The 3-ring circus we witnessed last week over the AIG bonuses should give us all pause as to the govt's ability to oversee any of these bannking/investment activities with any professionalism or competence.

    March 23, 2009 at 6:27 pm |
  25. Bill Bolduc

    This plan has been widely panned by Krugman, Huffinton and others on the left who seem more interested in promoting their own economic theory. This leaves me to wonder if they actually want it to fail much as Limbaugh and others on the right, who have outwardly called for the Obama administration to fail. Call it a betrayal on the left or a collusion with the right but whatever it is, it has the effect of instilling fear instead of hope.

    Maybe, just maybe, Geithner's experience and intelligence is being greatly undervalued because he is a poor messenger who lacks Obama's natural charisma. Maybe the market reponded with a huge surge because investors realize that just as the market was ridiculously overvalued at 14,000, it may be significantly undervalued at 7,500. But whatever the reason, can we please all take a deep breath and at least give it a chance. It may just work. Imagine that.

    March 23, 2009 at 6:27 pm |
  26. oeg

    With a 5% equity stake, a buyer of these assets will make 500% on his investment if the toxic asset rises 25% in value. $1 million invested to buy $20,000,000 of toxi asset pays the buyer $5 million upon the sale. The taxpayers get the same $19,000,000 they put in, plus the "low interest" that the loan earned. Maybe 1%, or a total of $1,190,000. Wow. the people make 1%; the buyer makes 500%.

    However, if the $20,000,000 of toxic asset goes totally bust, the buyer is out $1 milliion and we're out $19,000,000.

    But wait, if the $20,000,000 in toxic assets is going to be worth $25,000,000, the bank that is selling has little incentive to sell.

    So the likely order of events is that banks sell very little of what's on their books to "see what happens." When the first buyer pockets $5million on a $1million investment and the taxpayers get $190,000 for their trouble, Congress will have a fit. And the rest of the toxic assets will remain on the banks' balance sheets and lending will not increase.

    This is a government bail out of the bankers with a fig leaf of "private equity".

    Since the Obama-ites are taking credit for the 497 point Dow gain, they now "own" the stock market. No more blaming Bush if it goes down again.

    March 23, 2009 at 6:26 pm |
  27. Mike Syracuse, NY

    David, I can't get by the notion that no matter how good the Obama/Geitner plans turn out to be in the short term (and there's plenty of doubt as to their goodness), the deficit we are accumulating as a result will be a disaster for us in the long term.

    March 23, 2009 at 6:24 pm |
  28. caren gawlak

    I am an RN, I am held responsible for always providing safe care to patients. I (we RNs) am held to the highest standards when providing patient care. To do this I am required to continually update my skills and knowlege. Keeping up to date in ones practice helps to continually provide safe care to patients. There is not any crystal ball available in medicine.
    I agree that no one can predict the future of our economy, however, I believe those making decisions and "caring" for it need to step up to the plate and follow "best practice" during decision making. Nothing less is acceptable.

    March 23, 2009 at 6:23 pm |
  29. Omar

    I don't care who's pockets it lines, as long as someone begins to buy these assets. You guys who are complaining about who is going to get richer from this plan still don't get it. It's not about who gets rich off the plan, but to get the flow of capital moving again. Stop being so myopic and narcissistic. And for the record, I'm 26 and work for an ad agency making $30k a yr.

    March 23, 2009 at 6:19 pm |
  30. PM (Miami)

    What's a BILLION DOLLARS?

    A billion dollars is about $3.40 for every single person in the U.S
    a man and wife with 2 kids would be about $13.60 for every billion dollars.

    The Bonuses of $165,000,000 = 55 cents for every person in the U.S

    The $165 billion is $561.00 for every person in the U.S

    a Trillion is $3400.00 for every person in the U.S.

    something to think about

    March 23, 2009 at 6:13 pm |
  31. Dan

    Yes, the plan will work just fine...

    March 23, 2009 at 6:13 pm |
  32. Paul Cooper

    As a Nobel Prize winner and a respected economist, Mr. Krugman's absence from some place within President Obama's financial advisory team appears to create a question begging for an answer - why?

    I would like to see Anderson Cooper 360 or one of the CNN news segments have Mr. Geithner and Mr. Krugman on the air, and conduct a major discussion between them regarding their different perspectives - the pros and cons. I think it might facilitate increased public interest, and better public understanding, than is currently possible with the "he says" and "he writes" format. A dialogue between the two gentlemen, with clarifying questions interjected by the newsperson/moderator, I believe, would be a good, public service.

    March 23, 2009 at 6:07 pm |
  33. Mike from Canastota

    Geithner's plan makes sense.

    These assets are worthless, they are illiquid. Getting these assets off of banks books will allow them to lend mopre and will stimulate the economy.

    The deal he offers is a great one for hedge fund managers. What doesn't get mentioned is that the assest will be sold at auction. This auction will allow the market to properly value not only the "toxic assets" but also the government sweeteners. In other words the hedge fund managers won't be the biggest beneficiaries of the government guarantees, the banks will benefit the most by getting top dollar for the "toxic assets."

    The U.S. tax payer is the biggest shareholder of the banks. Getting these bad assets off their books at a good price will cause a windfall on our bank stock holdings.

    If the assets are undervalued the hedge funds will make their money and everyone wins. If the assets lose a small amount the hedge fund managers lose. If the assets are worth far less than their discounted price the hedge funds eat their investment and the taxpayers pick up the rest of the tab. This tab will be hugely offset by the gains already banked from the sale of the assets.

    March 23, 2009 at 6:06 pm |
  34. arron

    For all you Obama/Geihtner cynic/crybaby/haters...don't look now, but the recovery has begun. The DOW went up 500 points, home sales up 5.15%, consumer spending is up, and the major banks are posting profits this quarter. Because we, the taxpayers, now own a hefty percentages of a lot of these financial institutions, the tax payers will end up reeping a healthy profit off of all this when it is all said and done, that is if we don't cut our noses off inspite of our face. Why should we be surprised? Summers and Geihtner have done it before, they rescued the Latin American financial system from collapse in the 90's. Results talk b.s. walks. Maybe now we can have a few days of peace and quiet from the knee jerk chattering class because they have a mouthfull of crow to eat. In yo' face!

    OBAMA...YOU ARE DA MAN!

    March 23, 2009 at 6:05 pm |
  35. Black Saint

    The tax payers that have obeyed the laws, paid the taxes and fought the wars and built this Nation are getting screwed by Corrupt/Stupid/Worthless Politicians and Greedy crooks at every level!

    This is the same old scam, reward the Rich Bankers with billions in tax payers money and the invading horde of illegals Aliens with Jobs, Free medical, Free education, Welfare, Prison cells and make American Citizens pay for every Crook, Criminal, Peon, Welfare Leech and Marxist or Racist organization like ACORN or La Raza in the world!

    March 23, 2009 at 6:02 pm |
  36. J Hugo

    It would seem to me that a plan designed to allow investors the opportunity for vast sums of profits with little 'skin in the game' is the same reason we got into this mess in the first place. Over-leveraging got the banks into trouble in the first place so now the US government is going to try the same failed tactic. If the "toxic assets" were worth anything investors the world over would be jumping over themselves to purchase them without Treasury Secretary Tim Geithner's input.

    My question that I've posed for months now is: where are we getting the $1 Trillion + that may be necessary to achieve this plan? We do not have it. The Chinese do but they are smart enough not to purchase "toxic assets" when they can purchase relatively safe US Government treasuries. So, again, the US taxpayer is on the hook for more money than most can fathom while the people who will benefit from this plan earn amazing profits (if the plan works) or lose very little (if it doesnt, which, unfortunately it probably will not). I want to see our economy rebound as much as the next guy, but lets stop gambling with TRILLIONS of yours and mine and my children's children's money. Why? Because the last few TRILLION has got us nowhere but further into debt.

    March 23, 2009 at 5:55 pm |
  37. Rob

    just another example of obama's failed policies at work...

    geithner the tax cheat has no credibility...

    i am dumbfounded at all the obama liberal left wing supporters sitting around clapping themselves on the back as their idiotic policies are literally going to bankrupt the country.

    my kids and YOUR kids will be paying for this Obama debacle

    wake up you left wing whackos...you won't be able to blame this on Bush...although you will try...

    everyone knows that this is your baby now...god help us all

    March 23, 2009 at 5:50 pm |
  38. Greg Kraigher

    Obama and Geithner made the same announcement today that they've made the last month. There are absolutely no new details that came out today if you follow the markets closely. A lot of these details were already either announced or assumed. The same with the federal reserve buying of 30 year treasury bonds last Wednesday. They signaled for months that they were going to do this. Nothing has changed. Absolutely nothing. This is just another bear market rally that will uproot the publics desire to ever own a stock again. You should be selling on this, its silly. Yet we will probably go up another 10-20% before people get over the euphoria. Its maddening.

    March 23, 2009 at 5:48 pm |
  39. Milton Smith

    Perhaps AIG and companies like them should be eliminated to prevent economic pollution. They are like the parasites that killed your favorite pet and like those parasites they are a cancer to the country that will only result in death and destruction, war. Fight for power, fight for your life!

    March 23, 2009 at 5:46 pm |
  40. mike

    I would never want to invest in anything the government is involved with. They want people to invest their own money in extremely high risk investments while the government is using taxmoney aka our money . Still sounds like the government is full of it

    March 23, 2009 at 5:46 pm |
  41. donE

    Let's hear no more from conservative Republicans and Limbaughs, who pray for failure. Losers. Thanks for your efforts to save capitalism, Mr. Obama..

    March 23, 2009 at 5:42 pm |
  42. François

    With the possibility of making so much with so little risk the spirits will come from the vasty deep. In addition the secrecy the vasty deep loves so much will be more than tempting. Just look at the Dow Jones the spirit is positively stirring.

    March 23, 2009 at 5:36 pm |
  43. John K

    When was it never thus?

    "Now is the winter of our discontent
    made glorious summer by this son of Pork."

    John

    March 23, 2009 at 5:30 pm |
  44. Verne

    All of this speculation, but no one truly has the answer to the economic mess we are in,. but they are sure quick to judge. Shame on us as Americans. People around the world must be saying if that is what a Democracy is we do not want it. Look at the countries around the world that are loyal to their country and we throw our leaders under the bus at the drop of hat. Sad....... Just 2months and we all have the answer that our President has failed. At least Ex-President Bush had the decency to not commit on the sitting President.

    March 23, 2009 at 5:20 pm |
  45. Peter B

    Financial engineering cannot turn a toad into a prince. The underlying assets are illiquid and potentially not only worthless but also could drive negative worth as expenses providing no economic value are generation in an attempt to collect the debts. The housing stock now just under 10 months supply needs real buyers as does any inventory to clear. Moving a bevy of financial instruments guaranteed by the gov't into a bad asset bucket not does not create real consumer demand for housing. In fact it just mortgages the future in terms of having to cough up the losses. Nice try Treasury, but it won't work until jobs recover and income grows to allow real consumer and housing demand to grow. The lipstick on this pig will smear off quickly.

    March 23, 2009 at 5:18 pm |
  46. Tony Fisch

    Krugman wants to nationalize banks. I think it is clear that nationalization has been considered, but think about the reality that to some extent we already have partially nationalized the system, and will continue to infuse the system If need be.

    David is so right, Geitner and team need to make it clear that investors that stand to profit should know they will not be punished by profiting. Treasury did make a statement to this, this AM. We NEED TO HEAR MORE.

    This plan needs time to work. Krugman is an opportunist and most of you posters that are negative just don't get how serious our problems are. The Fed is the ONLY source that can be the bank here and frankly we need a balance between social engineering and much better regulation.

    Cathie Holden is so right, and I will go a step farther.

    Stand behind your President and his team. If you do not you are somewhat a traitor to this country, and that goes for those in both Houses that are partisans. Your day to get voted out of office is coming. Your poloitics are dead.

    Obama has been in office about 64 days and I think he deserves thumbs up so far, and deserves our support. G.W. Bush left him with the biggest mess since 1929.

    Stop pointing so many fingers, we are all suffering and it just does not help. Be a better student and be a patriotic American.

    Look at it this way, you could be living in Darfur.

    How would your days and nights look there.???

    March 23, 2009 at 5:17 pm |
  47. Gerrard M

    Everyone should do their part in investing. This could save all of us and at the very same time probably make some very good money. Do not over invest out of Greed as this was the very reason why we all got into this mess.

    lets really give it our best shot.

    March 23, 2009 at 5:12 pm |
  48. Diana B.

    Cathie Holden: You said about exactly what I would have. SICK & TIRED of everyone coming out of everywhere and beating up on Obama and the Administration. They inherited one HUGE mess, and are TRYING to clean it up. This Administration has worked harder to help our country in the past 2 months than the past one did for eight years! Give me a break! Give the plan a chance! Rome wasn't built in a day!

    March 23, 2009 at 5:12 pm |
  49. Larry MacPhee

    It is interesting that we seem to find ourselves poised between the two options of bank nationalization versus a Gov funded program to underwrite the movement of bank assets, thereby saving banks. Extremes to say the least and the later option designed to help banks generate more profit coming from a newly elected Democratic administration. Go figure.

    Despite this Geithner’s plan remains an uncanny example of the fact that this seems to be amateur hour on Pennsylvania Ave. None of the players in our little (not actually little) drama seem be have a handle on what result might actually take place if one plan or another would be put in place. It would have seemed to me prudent for Geithner to have pre-negotiated at least one asset transfer, so that as soon as it was announced someone would have jumped up and said “I’m in”. But nope, nail biting as a planning tool is now in vogue.

    Oh and poor Barack, blocked and criticized at every turn. In case you’ve missed it, he has been working his magic; the only magic he knows, campaigning unceasingly for plans that have nothing to do with the real time ills of our country. In past there was another Gov leader that was popular with his people and who spent lots of money on projects he thought would have a huge impact on its development. Trouble was he really didn’t know what he was doing either. He did enjoy partying a lot, so running the Gov was only a part-time activity. Kind of like campaigning without end. Perhaps you’ve heard of him. His name was Claudius Caesar Augustus Germanicus, but everyone knows him by his nick-name; Nero.

    March 23, 2009 at 5:11 pm |
  50. brcrazy

    I, too, see more common sense in Krugman's view. Far too much capital is being placed outside of oversight and control already. I agree Geithner's view of the potential value of the assets is far to rosy, considering recent events. What is needed is immediate action, which the plan fails to address. Banks may balk at complete takeover, and it would be a hard sell to the public because, right now, the public distrusts the government as much as large corporations and banks. Perhaps something in between, like emergency regulation and review. The government and the public get the information they need and the banks get the stability they need. It could be immediate and short term, very fluid and very transparent. It could restore the confidence needed from the private sector and from the international community as well. It could give us TIME we need to stop these knee jerk reactions to crisis potential.

    March 23, 2009 at 5:09 pm |
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