Geitner's plan still includes a "bad bank". The monster that won't die!

[JohnWxy]

http://www.marketwatch.com/news/story/treasurys-bank-bailout-plan-could/story.aspx?guid=%7B631940E0-DBD4-479C-B202-DE411A86535A%7D

To get credit flowing again, Geithner's plan has six parts, including the creation of a public-private partnership to buy illiquid assets from banks to help them recapitalize.

In partnership with the Fed and the Federal Deposit Insurance Corp., the Treasury will take a portion of the remaining money from the $700 billion Troubled Asset Relief Program and leverage it 10 to 1 with private-sector funds to create a $500 billion investment fund to buy toxic assets.

Geithner added that the fund, which could grow to as much as $1 trillion, will allow the private sector to "determine the prices for current troubled and previously illiquid assets." It is expected to encourage private investors to acquire illiquid mortgage securities from troubled financial institutions, Geithner said.
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What I want to know is there any legislative limit on this 10 to 1 ratio (I'm assuming he means 10 private dollars to one public dollar goes into this fund). But there should be protection that keeps the public part of this fund locked in at one tenth of the total.

This is still not as good as just starting a public bank and start lending to people and businesses who want loans.

this fund is just to get the banks mistakes off their books.

to to www.congress.org to register your distrust of this approach.

[Fresh_Start]

1. There must be a lot of money to be made in the bad bank assets

if they are so determined to make a 'bad bank' entity.

[truedelphi]

5. Those of us who remember the BCCI crisis

Also remember that every single time, there was a designated group of monies to restore some part of the banking system that BCCI ahd devastated, there were payments of at least $ 50K for the person hired to do oversight.

And that was oversight done just for a few months. Given inflation, and the fact that this crisis will demand oversight for half a decade at least, the monies to be made are tremendous.

So don't feel too bad if the things you did destroyed the economy and ruined your investment firm. Polish up that resume, and put your experience to use!

[w4rma]

2. Let these banks FAIL. You can't allow bad business practices to just be swept under the rug. (nt)

[notesdev]

3. The only reason these assets are illiquid

is the stupid Fed and Treasury mucking with the system! If they didn't hold out the promise of paying far more than these things are actually worth, sellers would have to settle for prices that buyers want to offer.

Absent government intervention there is NO illiquid asset problem. Sometimes the right thing to do is get out of the way and let nature take its course.

[JohnWxy]

7. That's the KEY to the "Bad Bank" idea. The Government buys the bad assets at rediculous prices and

take the banks LOSSes.

[regnaD kciN]

4. A "bad bank?" How does that differ...

...from Citibank, Chase, Bank of America, etc., etc.? :sarcasm:

[truedelphi]

6. Ep! Now you are thinking like Kucinich

And you now what headway that guy makes.

[notesdev]

9. It differs in that

in the "bad bank" plan, YOU pay for the losses, instead of the people who incurred them.

[marketcrazy1]

8. I think the leverage goes the other way

the government will allow private investors buy ten dollars worth of "assets" for every dollar they invest. under this plan the bulk of risk would be transferred to taxpayers as these leveraged "loans" by the government would be "non recourse" so investors would only be risking one dollar of their money for every ten dollars of "assets" they buy........

[JohnWxy]

10. Set up a public bank which would start lending to all credit worthy individuals and

businesses. It could be a public-private partnership. Anyone who wants to invest in it can. Let Wall Street dig itself out of the mess it created. The Free market at work. (they could always go ask Phil Gramm and his wife to help them out).


http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=114&topic_id=48569