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TARP 2: SON OF TARP.
I want to understand the plan a bit better before I weigh in. The problem is, the fact sheet, as written, isn't clear to me. Worse, no one else seems to understand the plan either. Some expert reactions:
It’s really not clear what the plan means; there’s an interpretation that makes it not too bad, but it’s not clear if that’s the right interpretation. The plan deserves praise for what isn’t in it, at least as far as I can tell. There doesn’t seem to be provision for mass purchases of toxic waste at premium prices; there also doesn’t seem to be a massive “ring-fencing” guarantee against private losses on bad assets. In that sense the plan is better than what the last few weeks of leaks led us to expect.
The expectation was that [Geithner] was going to introduce a detailed, comprehensive plan for dealing with the toxic assets on bank balance sheets. Instead, he offered up what felt more like the outline of a strategy—with the government providing private investors with financing so they can buy the toxic assets—without much explanation of how it was going to work. The most dismaying line in the speech came when he said that Treasury was “exploring a range of different structures for this program.” Whatever the merits (or lack thereof) of the bigger idea, what people wanted to hear was that the structures to implement that idea were in place, not that Treasury is still trying to figure out what to do.
There are two cures for financial panic: dramatic action and the passage of time. Geithner seems to be of the opinion that, with the panic substantially abated since last fall but a lot of expensive problems remaining, the moment for dramatic action has passed. He reportedly fought off efforts by others in the Administration to come up with something more crowd-pleasing today. A long slog it is, then.
The speech was surprising only in its vagueness. It's been over 11 weeks since Obama's announcement, and this is the best that Geithner can come up with?
Geithner was vague about all this, this morning. That's understandable. But the vagueness works against him in terms of both objectives. The public wants specificity in terms of where the second tranche of TARP's $350 billion is going. More to the point, investors (whoever they are) need lots of specificity before they're going to put up a single dollar.
Geithner is a living, breathing example of cognitive regulatory capture.
Maybe you can do better. The fact sheet is available for download here. The New York Times summary is here.
COMMENTS (11)
Good lord, if the best Krugman can say about this is it might be a Trojan horse, I'm worried. I'm presuming we're the Trojans, right?
For some reason I find myself listening to Dylan's "John Wesley Harding" album. Especially the title song.
If these market force worshippers don't get around to nationalizing the mutts who got us into this mess, I suspect you'll start seeing "men of action" like the guy Dylan wrote about.
Posted by: bob k | February 10, 2009 3:03 PM
I can't do better just this second, but I did want to bring in the pithy quote from Martin Meyer that Yves Smith calls up, since it speaks to a thread that Ezra cranked up a few weeks ago (and which others have also cranked up at other blogs), on the "if you need to update your regulatory structure, can you ever be sure that you can guard effectively against future risks and behaviors?" question.
from Yves Smith: Author and market observer Martin Mayer warned "a lot of what is called innovative is simply a way to find new technology to do that which was forbidden with the old technology."
Posted by: bdbd | February 10, 2009 3:06 PM
The trustworhines of a politcal appointee is inversely proportional to the number of flags that his handlers place behind him on stage. By this measure, we are screwed...
Posted by: CJ_n_PA | February 10, 2009 3:30 PM
bob k,
I know quite a few folks who have been living "Dear Landlord" for the past couple of months.
Posted by: Hairy Reed | February 10, 2009 4:07 PM
I'm beginning to wonder if the incomprehensible nature of the new bailout is a feature, not a bug. The point is to somehow get taxpayers to pay the banks more than their toxic assets are worth, while making it appear that they aren't doing what they are doing. The idea here may be to keep us from pulling out the pitchforks and torches.
Posted by: zyxw | February 10, 2009 4:35 PM
Dean Baker cares for it Not
http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=02&year=2009&base_name=dealing_with_bankrupt_banks_na
Posted by: bdbd | February 10, 2009 4:36 PM
tarposaurus 2,
son of tarposaurus rex
Posted by: jacqueline | February 10, 2009 4:38 PM
You know this sort of financial collapse being a result of free market thinking, could not happen in a more leftist country, like Sweden or Japan or Iceland. In those countries regulation is not scorned, there is not knee jerk resistance to regulation. That is where we need to get.
Posted by: Anonymous | February 10, 2009 5:19 PM
In the world I live in Anonymous, at least Iceland scorned their regulation starting in the 1990s
Also, i'm more partial to Woody Guthrie's "Pretty Boy Floyd"
Yes, as through this world I've wandered
I've seen lots of funny men;
Some will rob you with a six-gun,
And some with a fountain pen.
Posted by: BillCinSD | February 10, 2009 9:14 PM
The symptoms suggest Geithner has come down with a severe case of politicalis barackitis, a condition that is more common during the election cycle, when the afflicted one feels he must be all things to all people, signifying nothing.
The Constant Weader at www.RealityChex.com
Posted by: Marie Burns | February 10, 2009 9:46 PM
here's the thing that amazes me: we have a problem pretty much unprecedented in nature, and we've got a bunch of folks who haven't actually offered a workable solution of their own but can't imagine why a workable solution isn't simply delivered fresh with the morning newspaper.
Posted by: howard | February 11, 2009 1:26 AM