Re: Geithner Plan

Of course Wall Street likes it. It's a textbook example of privatizing profits and socializing risk.

I keep asking the same question and it goes or Krugman as well:
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If the Geithner plan won't work is it because the banks benefit too much or is it because following his plan will make the financial system fail?
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Let's at least separate ideology from the policy because I'm having trouble understanding the criticisms because they lack transparency about the winners and losers as well as what are the criteria for determining the winners and losers. Tell me what is your priority for the plan. Should the goal be to fix the old system or create a new financial system? And if the choice is a new system then what are the goals for the new system, is it reducing the income gap or preventing future meltdowns?
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How are you judging success?

Dee beat me to it. I don't see Krugman or anybody else telling me exactly why it will fail, only insisting emphantically that it will.
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Far from the expert in this field, maybe somebody can help me. The main difference here, that I can see, is with the Geithner plan the Gov. is going to subsidize the purchasing of these bad assests. Is that decision so much worse than the Gov. just paying for these assets themselves? It seems that would necessitate more up front capital and risk on the Gov. part.
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Also, is Krugman and others concerned that we are not talking enough control of these banks in question? That, to me, seems to be the greater issue.
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And PD, I can't seem to get away from that sentiment myself lately and it's infuriating. But who could take private losses of this size? When you're playing with other peoples money, you can't afford to take the risks yourself. Maybe that's what they mean by changing the fincancial system itself?

Ha, "emphatically".
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I don't need no stinking preview!

If Krugman is the great wizard of oz-why is he just writing about it & not running the show?
It is so much easier to sit back in your lazyboy & give the thumbs up or down.
Krugman is sooooo liberal-that all he wants to see happen is the banks nationalized-anything less is wrong in his eyes. So like the rest, he comes with his own agenda...with all this whining-someone call a wambulance!

Wall Street likes it now. At this moment in time.

This is precisely the reason I ask the question. I don't want to assume that Krugman is on the left so he must be advocating nationalization. I'm on the left and I don't know enough about the subject to know whether nationalization is a good idea. What I do know is that nearly half my country would sooner gnaw off their right hand than have it trapped in a nationalization trap.
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What I want to know is exactly what these folks are advocating or against and why. If Krugman or anyone else for that matter supports nationalization, tell me what are the benefits to this approach?

Paul Dirks
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Actually while I agree that it does socialize the risk, the tax payers will also participate in the profits.

Complicated problem. Wall Street liking it may not mean it is the best plan on dealing with the substance of the financial rot problems, but it creates an optic that the msm will broadcast as "Wall Street Soars on News" which helps creates public confidence that is really a big part of what is needed to turn things around. The converse of course is a plan which Wall Street doesn't like that spawns "We're All Gonna Die" headlines and chatter and endless Repugs and ConservaDems on our Teevee. Lotsa moving parts, all of them matter. Yglesias has a nice post on this: Kinds of Confidence and a good explanatory piece: The Market in Toxic Cars. I don't envy the people who have to try to solve this and, despite all of the doomsaying by Krugman and atrios, I will continue to give them my nervous support
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Related topic - I do not want the Obama administration to become an Orwellian Clear Skies clone. Enough with the "legacy loans and securities" already.

They write that "the government will provide the overwhelming bulk of the money — possibly more than 95 percent..."--that is true, but they don't say that the government gets 80% of the equity profits and what it is owed the FDIC on the debt tranche. That what Andrews, Dash, and Bowley say sounds different is a big problem: they did not explain the plan very well.

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Brad DeLong

wvng nails it. The optics matter. Increased home sales and a positive market response to the Geithner plan make doomsayers in the media and among the GOP appear short-sighted.
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Obama's Tonight Show appearance may have been ridiculed by some, but his calm approach to a severe problem is just what is needed. A large audience was reached. The 60 Minutes interview addressing Cheney's stupidity was also important. A stable hand at the helm is paramount.
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The United States will slowly come out of this economic crisis. (Yeah, I know that statement is based on no data).

If Krugman is the great wizard of oz-why is he just writing about it & not running the show?
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YEAH! SCREW THAT GUY! HE'S NOT ON OUR SIDE!

Regarding the 60 Minutes interview, Cole is must reading this morning: Mission Accomplished. Highlights the very simple truth that we really need to deal with the rot in the msm that makes solving real problems immeasurably more difficult.

The United States will slowly come out of this economic crisis. (Yeah, I know that statement is based on no data).
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Actually, that statement is based on data.

The question from the 60 Minutes interview that the MSM is missing is, Did President Obama Accuse Dick Cheney of Torture?. I asked that question over at Greg Sargent's blog right before I decided to do a post on it and Greg ended up posting on it too.
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http://theplumline.whorunsgov.com/probes-of-bush-administration/did-obama-accuse-dick-cheney-of-torture/#comment-6740

wvng
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I think the problem is that MSM is out of it's depth on many issues. They don't understand economics, for example, and thus fall back on stenography or movie script style coverage. The overall information imparted is identical to that of sports analysts predicting which team(s) could acquire the disgruntled Denver Broncos QB.
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Thus they are left to focus on a bowling joke and a laugh. Fortunately most people ignore the MSM stupidity. Unfortunately, as more newspapers falter, we will be left with political reporters giving us more Morning Joe style "News we can't use".
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stuart, thanks for the link.

Cutler should stay put! Bring back Shanahan!!
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Sorry, that's a subject I'm much more informed about.

bonddad at Dailykos was pretty positive about the plan.

Here comes the false equivalence.
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Note the "criticism from the left and from the right" language.
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Sound familiar?

"Here comes the false equivalence."
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Ha! That idiot actually thinks that both of these sound equally crazy:
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"As economic historian Brad DeLong noted over the weekend, the world is divided into "people who are strongly opposed to the Geithner plan because Tim Geithner is a socialist who wants to destroy American finance" and "people who are strongly opposed to the Geithner plan because Tim Geithner is a corrupt plutocrat who wants to give Americans' money to the princes of Wall Street."

is it reducing the income gap or preventing future meltdowns?
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You ask that like it's an either/or propostion. I'm beginning to think that if you think of wealth like you think of heat in thermodynamics, all sorts of insight comes tumbling out.

Jerome at DailyKos gets a huge part of this that's missing from what little coverage can be spared from bonus clawback right.

Jerome at DailyKos gets a huge part of this that's missing from what little coverage can be spared from bonus clawback right.

Ignore the first non-link, folks. Click the second post. Sorry.