Will This Plan Save the Banks?

That was what I wanted to know before Treasury secretary Tim Geithner disclosed revamped plans to save the financial system this morning. Unfortunately, I'm left with more questions than answers. 

Thanks for nothing
Neither the secretary's speech nor the official fact sheet released by the Treasury disclosed anything significant that we didn't know yesterday. Geithner laid out an outline of how he'd like to bring banks back to stability, but the complete lack of specifics leads me to believe the ideas only work in theory, and once they're actually attempted, Treasury will hit a brick wall of reality.

As expected, the grand plan is to entice private capital into an aggregator bank designed to buy toxic assets. Sadly, this was the most detailed information Geithner revealed: "We are exploring a range of different structures for this program, and will seek input from market participants and the public as we design it."

Uncertainty? Check. Confusion? Mm-hmm. Investors losing faith? Quickly. And so are bank stocks -- as I write, Bank of America  (NYSE: BAC  ) , Citigroup  (NYSE: C  ) , and Wells Fargo  (NYSE: WFC  ) were all down well into double digits. The only true nugget of clarity Geithner gave was that, "I want to be candid: this strategy will cost money, involve risk, and take time." Gee, thanks.

Still waiting ...
I, along with the rest of the market, am obviously losing patience with how vague these plans are. Especially after the near fallouts of Citigroup and B of A over the past few months, many were hoping Geithner would come out swinging for the fences with a massive plan to clean things up in one fell swoop. Instead, we're left with talking points and ambiguity.

Nevertheless, that Geithner is taking his time is probably for the better. Just as Congress should focus on quality over speed, I'd rather have a slow but effective bank bailout over the "throw money at the problem and hope it sticks" plan we've relied on since last October. As Geithner said this morning, "We're not going to put out details until we're confident that we've got the right structure."

Besides, outside of the specifics the market was looking for, there were indeed a few morsels of relevant news:

  • All bank bailout information will now be disclosed on FinancialStability.gov, which will also include previously hush-hush information such as what individual banks are doing with taxpayer money.
  • The Federal Reserve's Term Asset-Backed Loan Facility (TALF), a program designed to unclog the secondary loan market, will quintuple in size to $1 trillion. This should do a lot to get consumer-based credit flowing again.
  • Treasury will provide "contingent equity" to large banks that fail what it's calling a "stress test." All banks with more than $100 billion in assets -- which includes everyone from JPMorgan Chase (NYSE: JPM  ) to Goldman Sachs (NYSE: GS  ) to American Express (NYSE: AXP  ) -- will be required to undergo the test. The new equity would take the form of convertible preferred shares, rather than just the preferred stock with warrants Hank Paulson relied on last fall.

Still, the longer the crafting of a plan to remove toxic assets from banks' books drags on, the more we're reminded why Paulson scrapped the idea in the first place: Doing so in a way that helps banks and protects taxpayers is as close to impossible as it gets.

The utopian idea that banks can be restored to health while largely protecting taxpayers simply isn't consistent with the abysmal state of the banking industry. Someone will bear an enormous cost, and banks simply don't have the capital to besustainar losses anymore. Ultimately, taxpayers will end up on the hook for however much of the amount exceeds what the market is willing to pay for these assets, which is currently a big fat zero.

Hang in there, Fools
Alas, we're still waiting. And waiting. And waiting. Until specific plans are unveiled, bank stocks and credit markets are bound to wallow in fear, as they are today. Be patient. Cross your fingers. Don't panic. We'll make it through this -- when is the trillion-dollar question.

For related Foolishness:

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. JPMorgan Chase is a current and Bank of America is a former Motley Fool Income Investor selection. American Express is a Motley Fool Inside Value pick. The Fool owns shares of American Express and has a disclosure policy.


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  • Report this Comment On February 10, 2009, at 4:18 PM, kartha1 wrote:

    For those who cheered the utopian returns of the mortgage industry, no plan will be a satisfactory answer. I think we should be living in a fools paradise.

  • Report this Comment On February 10, 2009, at 4:22 PM, jsc173 wrote:

    Geithner's speech included enough "in a few weeks" comments and was sufficiently broad-brushed to cause the stock markets to run to the vomitorium.

    There is no urgency here, guys. If you think Paulson and Co. didn't know what to do and when to do it and Geithner and Co. were going to save the day, don't hold your breath.

    If they ever happen, some of the things he described couldn't happen in any time frame less than 4-6 months.

    Too many politicians, attorneys and bureaucrats involved.

    So much for "change."

    Enjoy.

  • Report this Comment On February 10, 2009, at 4:45 PM, rjhubs wrote:

    "Ultimately, taxpayers will end up on the hook for however much of the amount exceeds what the market is willing to pay for these assets, which is currently a big fat zero."

    The problem currently is not that the market is unwilling to pay anything for these assets. I am sure you could find plenty of buyers if they were being offered at pennies on the dollar. The issue is that banks are asking way more than anyone is willing to pay for these assets. But this isn't the full problem.. buyers and sellers negotiate to a price they can both agree on all the time. The issue here is that no one is willing to sell at low prices when there is a good chance the government is going to come in and offer a better price. If I am desperate for money I may be willing to sell my $10,000 car for $3,000. But if I hear the government talking about buying any cars, regardless of condition, for $6,000. I am going to wait as long as I can afford to see if they go through with the plan, before I absolutely need to sell it.

    The prospect of government intervention is the only reason why a market for these assests doesn't exist. Which means the government either has to give a definative 'yes' or 'no' on whether it plans to buy these assets.

  • Report this Comment On February 10, 2009, at 4:50 PM, toddsnotafool wrote:

    Well, I've said from the beginning that until the government takes their hand out of the entire equation, the market will never properly correct itself. It's foolish to even think that the cause of the problem will be the fix of the problem. In theory it will ultimately make things worse.

    Until we let some of these financial failures occur, let the assets get divvied up by other (and successful companies) and then managed properly, the banking industry will continue to be messed up. Not to mention the message that it sends to them all that "it is ok to partake in bad business practices". The worst part of the quote equation is that there is only one source for this bailout money - the working class tax payer, who is being punished. And the general feeling, that I'm hearing at least , is that the tax payers are becoming less happy with this everyday.

    I will still contend that this policy is not going to work the way everyone wants it to in theory. And the whole economy will not get better until a proper demand shift happens. But in the meantime a lot of undeserving top brass will make a lot of money off the tax payers.

    I guess we'll see what happens though. It will at least be exciting to watch!

  • Report this Comment On February 10, 2009, at 4:56 PM, CathrynMataga wrote:

    They are thrashing. It's sad. Absolutely zero leadership. I'm guessing Obama just doesn't know who to believe. He's surrounded himself with bankers, but then he has populist punitive instincts which makes him pull back from implementing what the financial dinosaurs would naturally advise -- that is to give them 'all the money.'

    Here's a clue. Just go back and check out all the free advice the USA gave to Tokyo back in the 90's. Write off the junk, shut down the dead and soon to be zombie corporations before their corpses start smelling too bad.

  • Report this Comment On February 10, 2009, at 5:02 PM, CathrynMataga wrote:

    "The issue is that banks are asking way more than anyone is willing to pay for these assets. "

    Yeah, I mean is this bad bank intended to be a means to recapitalize banks also? Two problems are getting mixed up here, 1. finding a true value for the bad assets, 2. recapitalizing the banks. It's a shell game from the start, and that's why it never gets off the ground.

  • Report this Comment On February 10, 2009, at 5:05 PM, CoastalTrader wrote:

    As the would be rescuer says to the drowning man, "Here, hold this anchor for me if you would please."

  • Report this Comment On February 10, 2009, at 5:53 PM, colleran wrote:

    Remember that we are in uncharted territory here. In the past we have simply let the banks fail, which appears to be a very bad option. I am not sure that it is possible to come up with a plan that anyone is sure will work. I would rather the government take it's time and come up with options that will work rather than just throw more money at the problem. It may be that a number of different options need to be tried before we find one that actually works.

  • Report this Comment On February 10, 2009, at 6:07 PM, omt68 wrote:

    Some times we just seem to loose our mind. It happened after nine eleven when tax payer money was forked over to the airlines with an absolutely disastrous result. Now, because some banks have got themselves into trouble through hubris and bad judgement we seem to think tax payer money is able to solve that problem too.

    We as tax payers have to call and email our congress representatives vigorously to let them know our position on the bank bail out issue.

    I for one, think the bail out is wrong for many reasons, and I think it will do more harm than good to pursue that avenue, short term as well as long term.

  • Report this Comment On February 10, 2009, at 6:10 PM, CoastalTrader wrote:

    colleran: I have little doubt that you are correct. However, Geithner's speech was so unsatisfying that it was only marginally better than saying, "We're FUBAR'ed and cluless."

  • Report this Comment On February 10, 2009, at 6:13 PM, sentinelbrit wrote:

    I was surprised by how much the market fell - particularly bank stocks. Do people really think the government can wave a magic wand and everything will be put right overnight?! The government has been in place for about 3 weeks and they are supposed to come up with a plan in that space of time. It's a joke!

    Things are bad but there are signs of improvement:

    the fixed income markets are not as bad as they were last fall. LIBOR has declined - so banks are lending to each other; companies are able to access the bond market (CISCO, and even Chesepeake), even the yield on short term loans for highly leveraged companies has also come down.

    I expect a rally after today's sharp fall.

  • Report this Comment On February 10, 2009, at 6:16 PM, Varchild2008 wrote:

    I'm thinking of buying Bank of America tomorrow if and only if there is a pre-market bounce away from the 52-week low. B o A is B h O's report card. I figure if I lose my money in B o A, then B h O loses his re-election chances in 2012. Think B h O will allow that?

  • Report this Comment On February 10, 2009, at 6:35 PM, craftmacaroni wrote:

    I think a key concept in assessing Geithner's discussion is understanding the import of his term "stress test." It's a medical term of art. It might be critical to his concept of the basis of valuing "toxic assets" and evaluating his program for backstopping the leveraging private capital. The medical definition of stress test is:

    " A level of exercise appropriate for a patient.

    A person taking the test

    is hooked up to equipment to monitor the heart.

    walks slowly in place on a treadmill. Then the speed is increased for a faster pace and the treadmill is tilted to produce the effect of going up a small hill.

    may be asked to breathe into a tube for a couple of minutes. The can stop the test at any time if needed. afterwards will sit or lie down to have their heart and blood pressure checked."

    I'm not sure I understand what Geithner meant either. My guess is, in this context, it's neither marking the toxic assets to market on the one hand, or suspending mark to market. I think he's proposing a different option involving evaluating each bank and their "toxic" or unclear assets on a case by case basis according to a range of possible and probable economic scenarios mathematically. In so doing, one could determine a range of likely future values. In other words, we don't want to mark them to market now but provide a range of values given various hypothetical markets each with different varying assumptions. The parameters of the model might include , a. the real estate market future scenarios, b. credit market liquidity (future scenarios.) etc. Given a range of values, private investors might become interested in purchasing them, particularly if given access to govt. capital.

    In other words, having read some in medical risk modeling, I'm thinking he has a specific mathematical concept in mind to value "toxic" or unclear assets in order to backstop the private sector investments in them. It seems to be a creative solution that is generally missed in the reception to this idea. Am I off?

    Any thoughts are appreciated.

  • Report this Comment On February 10, 2009, at 6:36 PM, libertarianlib wrote:

    I for one don't have a problem with the government injecting huge $$ into the economy to . Neocons, with the acquiescence of, I'm sure, many of the critics commenting here, have already mortgaged our children's and our grandchildren's future with eight years of profligate deficit spending, including doubling the defense budget and wasting what is approaching $1T taxpayer dollars on adventurous nation building with no return on the investment (I don't feel any safer). Might as well see if we can mortgage our great grandchildren's future as well.

    I vehemently disagree with the view that "until the government takes their hand out of the entire equation, the market will never properly correct itself," as if "the market" is some benevolent god that will make all things right. The removal of regulatory constraints on the free market over the last quarter century, to the benefit of unbridled avarice, e.g., usurious credit card interest rates, speculative financial gambling without a modicum of sanity on rules for capital reserves, credit default swaps (an end run on the time tested regulations for insurance) is the real cause for the current situation.

  • Report this Comment On February 10, 2009, at 6:49 PM, jimd103 wrote:

    Give me a break. The banks are racking in the profits. Lend money at high fees that they got for no cost? The bankers are just waiting for the politicos to blink.

  • Report this Comment On February 10, 2009, at 7:02 PM, Natador54 wrote:

    You and your kind had no difficulty selling those toxic assets to investors like us that trusted your advice, so why now should I listen to your comments on the governments attempts to correct the situation? I'm betting that Obama, Geithner and colleagues have this right, and you and the Wall St crowd may have to wait more than a New York minute for him to fix what you broke. I say bring on the regulation - you guys have gotten away with robbery.

  • Report this Comment On February 10, 2009, at 7:09 PM, Dart65GTConv wrote:

    They do not need the market with the legions of hopeless zombies they spent 100 yrs creating, the only job left is to crash the financial system game over.

  • Report this Comment On February 10, 2009, at 9:26 PM, opedbyme wrote:

    I'm not surprised the bank stock prices went down...for sure no matter how you paint this picture it looks depressing. And at 1st one pontificate, than you get idea the best ideas from all this bantering, then you start implementing the best ideas and if the ideas work you move forward tweaking what's working and if not try another idea. Sounds like a good plan to me to get private equity into the equation to keep in smelling like capitalism at work rather than having the government nationalize and take over rule. You got to have faith shut the F up, cross your fingers and hopefully these experts well get us out of this mess the American way and not the Japanese or European way. Come on....route for the home team. You got a better idea?

  • Report this Comment On February 10, 2009, at 9:35 PM, agaaga wrote:

    I have read so much critical of the Stimulus package, the bailouts, how to lossen up credit etc. Perhaps it would be best to just say no one has a clue as to the best way to go. Or, if you critisize explain yourself and suggest something better.

  • Report this Comment On February 10, 2009, at 9:43 PM, CathrynMataga wrote:

    "Will This Plan Save the Banks?"

    In the end, the banks will be saved. They have powerful friends. The rest of us, I'm not so sure of. No bailout for us.

  • Report this Comment On February 10, 2009, at 10:06 PM, toddsnotafool wrote:

    lib,

    Thanks for calling me on that line so I can define my stance better.

    Government set it up and screwed it up, and will screw it up more. However, I agree that we need the regulation. We need rules that protect the ethics of the whole economy. We also need to regulate the regulators. The SEC turned their back on so much is wasn't funny. And the Finance committee encouraged it in order to stimulate the housing market to a portion of society that had no ability to support it in the long run. (Why they really did that? well... I guess that's another topic for another day) It was good for a little while but it went way too far. I even spotted this trend in 1999 (little did I know how right I was... just my timing and extent was off). The whole policy encouraged some very poor decision making on both ends that couldn't ultimately support it.

    The biggest (yet simple) concept that has contributed to this quagmire is the use of 'supply side economics' (yet another Keynesian thing). And what the government wants to do now, is yet another brand of supply side economics (it wasn't just Reagan. How many decades have we been looking at this? I'm losing count). Well, they can offer incintives and tax breaks and money and goodies to certain sectors, and sure it can stimulate that sector in the microeconomic short run. But there is only so long that will last until the market becomes saturated and ultimately crashes. Well, now we're seeing it.

    The supply side can create demand in the short run; but the demand side will generate a supply in the long run. i.e. there's only so much crap we can use in a given period of time. I'm all for simulus tax cuts until taxes are gone, but pumping money into the hands of industries that have no demand anyway is just idiotic. We call that "working welfare", and it only prolongs the agony. Now is the time to drop the supply side theories and focus on the demand side of things.

    Since these legistlatures seem dead set on justifying their existence and creating bailouts and stimulus packages, etc, and we appearantly have little say, the best thing for them to do (for once) is to put the money back into the hands of the consumer. I've actually heard a few aguments from people that say that's not fair to "non tax payers"....whatever... they had little argument with this claim anyway. At this point, by putting the money back into the hands of the consumers, the consumers will spend it where it is necessary and create the demand; whether it be towards food, mortgage payments to a failing bank, electronics or cars (that we don't need). This is the only way the market will properly correct itself.

    And let's not fool ourselves here... the banks have the money... and a lot of it. This is about politics at this point.

  • Report this Comment On February 10, 2009, at 10:11 PM, trenton1ryan wrote:

    <In the end, the banks will be saved. They have powerful friends. The rest of us, I'm not so sure of. No bailout for us.>

    Definitely agree, but I would add one thing. I think we will see a casuality or two among the more well known (big) banks before this is all over. This is OUR depression-or whatever we end up calling it in hindsight.

    No matter what is decided, inflation will be a fire that we will not only have to face, but go through before this is all over.

  • Report this Comment On February 11, 2009, at 2:19 AM, dc46and2 wrote:

    Economic theory has become so ridiculous and complex that nobody seems to think about the basic facts anymore.

    Economics according to me:

    Men must consume to live. In order to consume, we must first produce. We must not merely produce, but we must produce valuable things, i.e. the things we need and want. A society will be considered wealthy or poor in accordance with the value of production per capita. Increased spending and consumption are the effects of wealth, not the cause.

    Production requires natural resources and capital. Natural resources being more or less fixed, the only way to increase production (per capita) is by increasing efficiency. Increases in efficiency almost always require the employment of capital. Capital is something we have produced, but have not yet consumed--i.e. savings.

    We use money as a tool to facilitate the exchange of labor, products, resources, and savings (capital.) But we must not confuse the money with that which is exchanged. Printing-press financing, creative banking schemes, manipulated interest rates, "stimulus" government spending, protectionism--these things do nothing to increase resources, efficiency, or savings (capital.)

    Because those things cannot possibly increase the value of production, it's a fool's dream to think they can do anything but make us poorer. They may benefit a few, but only at the expense of the unwitting masses. No wealth will be created, only plundered, looted, or borrowed. The more complex the "solution", the better, as fewer will comprehend its absurdity The side benefit of complexity is that more economists will support it. Nobody wants to be the only one who can't see the emperor's new clothes.

  • Report this Comment On February 11, 2009, at 3:04 AM, Rodman88 wrote:

    It was obvious from the get-go that Paulson was not the man for the job in as much as he was only intrested in throwing money at the problem, but all the money did was land at the feet of his Wall Street cronies and friends. After today, all of those who held hope on Gaither just as well fall back and watch their investments continue to drop, he is not the answer either. Until Congress just backs away, let the problems run their course and correct themselves, the matter will only continue to drag on, and on, and on etc. In the 60's there was a song entitled "Only The Strong Survive," and I truly feel that until the feds walk away, let the banking industry either correct their problems or fail, will a new group of Phoenix's rise from the ashes. The problem will never be corrected by either Congress, Washington, or Wall Street as they have already proven that many times over, and will only continue to drain the economy and the entire American population. Maybe if we choose to outsource our economy to the Chinese and the Japanese, the way many successful money making American corporations outsource their businesses, will we ever have any chance, albet slim, to ever get back on solid financial footing.

  • Report this Comment On February 11, 2009, at 5:25 AM, SnapDave wrote:

    Rjhubs,

    Excellent post.

    I still have to wonder if part of the problem is fear on the part of banks of being exposed as insolvent. I am not saying they definitely are because I do not really know.

  • Report this Comment On February 11, 2009, at 8:34 AM, homefries13 wrote:

    toddsnotafool,

    How can you say in one post that the government needs to take their hands out of the market and in another post say we need the regulation? It's this neo-con, Bush/McCain doubletalk indecisivness and lack of clear vision that is causing us to chase our tails. I agree with you earlier post, as I'm a free market guy. So, I would counter libertarianlib's accusation by standing by your notion that government intervention will not allow this economy to fail but then grow. By keeping us in the Japanese model of constantly trying to prop up the economy with government intervention, only to see us stay stuck in the mud of debt with our wheels spinning to move forward -- let's just have a depression, seriously, and then let things start back from the ground up. I'm willing to starv a little bit so our children can truely have a better future versus being saddled with debt.

  • Report this Comment On February 11, 2009, at 8:46 AM, homefries13 wrote:

    Just to clarify -- I'm advocating that that the government does nothing. Nothing. Let it fail -- we'll get out of it much quicker. Take the Grover Cleveland approach -- we got out of the Panic of 1893 much quicker than the Great Depression of the late 20s/early 30s. If one has a dollar to spare -- give it to a local food bank or charity. They do it better than the government!

  • Report this Comment On February 11, 2009, at 9:28 AM, ilong wrote:

    I need something to happen fast. I have customer after customer with the banks ripping away their lines of credit. Wachovia was on-site yesterday taking inventory as I was calling for payments. They are reassessing Receivables and inventories and significantly lowering the lines and causing my accounts to come up with cash. Now we can't get paid and we can't ship. We are talking about another round of layoffs here in Atlanta. We are in the mining industry, big accounts. This is an unbelievable environment.

  • Report this Comment On February 11, 2009, at 10:02 AM, Pilotalk wrote:

    OK Fools... Do you continue to support the "Bailout", or not?

  • Report this Comment On February 11, 2009, at 10:31 AM, omt68 wrote:

    db46and2.

    Good post dc, but you should be sleeping at 2.19 am

  • Report this Comment On February 11, 2009, at 11:03 AM, ilong wrote:

    I support it. There is $600 billion in Option ARM mortgages that have payment resets coming with a 65% increase. This starts August this year. The list of banks with these mortgages is the same ones you already see day after day. This situation will affect all of us. I will sit home unemployed for a year or more waiting for all this "rising from the ashes" new employment referenced above - no thanks.

  • Report this Comment On February 11, 2009, at 11:27 AM, homefries13 wrote:

    ilong,

    I responsibly took out a mortgage in 2005. My home value has gone down, but what's more imporant is my payments will remain affordable and I plan to stay in my home for the long term. Why should money from the pool of money my taxes go towards help those that were irresponsible in their mortgage decision? Why should we rescue banks that gave these banks out? Why should we continue to support a government policy that allows for mortgages to be given to people that can't pay them?

    Help me understand what I am missing here? Much appreciated.

  • Report this Comment On February 11, 2009, at 12:14 PM, billdick6 wrote:

    Why not have FHA buy (and then usually rent back) ALL homes going to foreclosure instead of trying to sell "toxic assets" to investors? This makes these assets non-toxic as ALL mortgages in the tranches will be paid in full. ( A perfect and cheaper antidote) “Cheaper” as most mortgages in the tranches are being paid. – No need to buy ALL in the mortgages in the tranches. It also avoids needing to set any value on the toxic assets. Also keeps these houses off the "for sale" market for a few years. (Stems the slide down of home prices.) Tax payers get real, rentable assets for their dollars with probable capital gains in a few years, not “toxic trash.”

    More details and other social benefits at:

    http://www.sciforums.com/showpost.ph...40&postcount=1

    Which is a post that explained why TARP would fail PRIOR to Congress voting even the first time on Paulson's plan.

    Geithner’s just announced plan for selling toxic assets will fail too because

    (1) Private investors are not investing. Not even the banks know what toxic assets are worth; yet need to set some value on the toxic assets.

    (2) Deep discounts needed to attract investors the banks cannot accept and tax payers should not as they will then need to give the banks more funds. The toxic assets need to be, and can be, made non-toxic as explained above.

    (3) Does not address the fundamental cause of the crisis. – Too many bought, via “creative mortgages” homes they cannot afford. They need to become renters of their houses or downsize to house (or even a trailer, if need be) that they can afford.

  • Report this Comment On February 11, 2009, at 12:17 PM, homefries13 wrote:

    Why should I, as a taxpayer, become the defacto owner of foreclosed homes? I prefer to do my own investing -- not have the government do it for me.

  • Report this Comment On February 11, 2009, at 12:34 PM, billdick6 wrote:

    Because itis better than being the owner of toxic trash is short answer. Also when many are losing homes and jobs if you do your on investing you are goint to need to be very luck not to lose as US and EU sink into depression.

    FHA getting homes for the price of unpaid mortgage balance is probably a good deal for the tax payer if by keeping them off the "for sale" market a few years stops the current downward slide in home prices. If you are typical home owner, that is probably your biggest investment. Don't you want to stop losing on it?

  • Report this Comment On February 11, 2009, at 12:39 PM, homefries13 wrote:

    Why should I become the owner of toxic trash? Sure, I want to stop losing on my home -- but I plan to live in it for the long run and was wise not to take out a mortgage I couldn't afford. Unless I'm very unlucky, my home value will move with the rest of the market and its value will be relative to other owners with similar properties in similar markets. All the prices were artificially inflated by government intervention -- why keep them inflated by more government intervention.

  • Report this Comment On February 11, 2009, at 12:48 PM, billdick6 wrote:

    homesfries asked:

    "Why should I become the owner of toxic trash?"

    You should not, but probably will as that is what Congress / Paluloin & now Geithner have in store for you. Support a realistic alternative that does not require setting any values on the "toxic assets" - Too low and bans still go under (with more cost to you, as tax payer) Too high and tax payers never get even their funds back, not to mention lost interest on the funds and "oportunity cost."

    We do not live in a perfect world - take the best you can get, not the worst that has already failed as there is not "correct" value to set on the toxic trash.

  • Report this Comment On February 11, 2009, at 12:55 PM, toddsnotafool wrote:

    homefries,

    I'll try to clarify what I meant. There is my ideal world of no government intervention, but then there is the reality of what we have to live with. And until we actually have that revolution that we keep talking about, then we're stuck with government.

    I'm saying that we need regulation. Regulation is not the same as government policy. We do need to protect the system from the manipulators, the crooks, the Medoffs of the world; and find them and prosocute them when they commit a crime. The SEC is not the government. A quazi-government agency, yes, but they are supposed to enforce the laws. They do not legistlate the laws. I contend that they also need a private watchdog group to audit them too (i.e. police the police).

    My next stance is that no matter how much I want to government to take their hands out of the economy, the reality is that they're not going to (until we have that revolution). But their policies are our biggest problems. They need to stop concentrating on the supply side and concentrate on the demand side. Which means - "gimme my money back!" But it seems that the working class tax payers don't have a lobbyist in Congress.

    So don't get me wrong. I still stand behind the idea that the government should stop trying manipulate the market.

  • Report this Comment On February 11, 2009, at 1:01 PM, homefries13 wrote:

    What is so unrealistic about having the government doing nothing except prevent against fraud, which it seems uncapable of --see Bernie Nadoff.

    I respectfully disagree when people say this notion is unrealistic. It's very realistic and was done before -- see the panics of 1893 and 1921. Politically, doing nothing is unpopular, ask Grover Cleveland as his popularity was so low at the end of his second term his own party wanted someone else on the ticket. Realistically this notion has helped us get out of economic downturns quicker.

    Many accuse folks that think like me of being idealists and not helping the situation. Well, why not strive for one's utopia versus doing short-cut quick fixes settling on the lesser evil? Pragmists in government like to pick and choose the methods they think that are best, instead of leaving it in the hands of their citizens-- allowing them the freedom some of our solders have fought for.

  • Report this Comment On February 11, 2009, at 1:10 PM, billdick6 wrote:

    Homefries you obviously have another axe to grind. I do not want to argue the merits of big vs.small government as both can work if done well (Scandinavian countries a case for big, with low crime, high average education level, cheaper health care cost and about 4 years longer life exp[ectancy than Americans - get value for thier high taxes.)

    All I am trying to show in my first post is that there is a much better plan for stoping the slide down into depression in the US and EU than stupidly throwing money at the probelm as Paulson and now Geithner want to do. Neither's plan is funcional as there is no way to price the toxic assets without either screwing tax payers (pay too much) or collapsing the Banks (pay too little) so my plan which avoids setting any price on them, by making them non-toxic is much better. If you can drop your axe for a minute, support it.

  • Report this Comment On February 11, 2009, at 1:16 PM, homefries13 wrote:

    I will never support an idea of government intervention into our free markets -- sorry. Your idea may be a lesser evil -- that's the best I can do.

    Our form of government is a new idea -- let's make it work versus copying other governments that support socilism, communism, facism, and tyranny. These forms of government have been around since the beginning of time and they take freedom out of the hands of our people.

  • Report this Comment On February 11, 2009, at 1:25 PM, toddsnotafool wrote:

    Unrealistic? No. Probable? Well, you'll have to call Bernanke and Geithner and them... and I think you already know their answer.

    Good call on Scandinavia. I think you hit on the one answer to their success - education.

    This is some good banter. I like it.

  • Report this Comment On February 11, 2009, at 1:27 PM, homefries13 wrote:

    Woodrow WIlson messed up our country...he said so himself. Todd -- your heart is in the right place -- but you need some conviction. Grow some. :)

  • Report this Comment On February 11, 2009, at 1:42 PM, toddsnotafool wrote:

    lol

  • Report this Comment On February 11, 2009, at 2:55 PM, CathrynMataga wrote:

    ”Too low and bans still go under (with more cost to you, as tax payer) ””

    This is such a phony duality. The USG should buy these assets as cheaply as possible. Anything more is just another rip off.

    If the banks need capitalization, that's a separate issue. If we want to hand bankers more billions, err, trillions then let's cut a check and just do it. But don't try to obfuscate it behind this smokescreen.

    We deserve to see, at least, an honest dollar number for the actual cost of this disaster. If our future income is taken away for this purpose we are owed at least this much.

  • Report this Comment On February 15, 2009, at 2:01 PM, justwonderwhy wrote:

    I haven't heard this suggestion. Put the least in debt banks in order from best to worst ( 1, best) . Enlarge the number so that each state has some of these banks. Subsidise these banks and if they loan out the money wisely tell those banks more money will follow for enlarging their bank as well as making more loans. I feel that this WILL get more loan money out to deserving businesses and borrowers. This method rewards good banking and has Some past American ideals in it.

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