If Obama lets Geithner go ahead and present this piece of bailout, warmed-over TARP crap as a way out of this crisis, he is putting his whole agenda at risk. After AIG, this thing will get no support from anyone.

It's so bad that it makes me yearn for the days of Hank Paulson.

Just put these sick institutions under U.S. govt receivership. It's the right thing to do, the most effective, and get broad support. Then Obama can go on and pursue the progressive agenda that we need.

honest, i hate to be on the other side from these worthies (and i'm not sure i am).

but let's consider the alternative that the worthies think is so much better is receivership. under receivership, we take the banks under federal control, identify and segregate the bad assets, and hand the banks a big stack of cash to recapitalize them and send them back on their merry way.

and the reason this is so much better than overpaying the banks for their bad assets is....?

"The Prognosis- We are so screwed."

Bingo. We are stuck between a very big rock and a very hard place.

a) Prop the system up with trillions and hope that it stays afloat long enough to implement a better fix at some point in the future.

B) Let the current economic system collapse and deal with a massive worldwide depression.

Howard,

I guess I have to spell it out why receivership is better.

This is called capitalism, not charity. I give you some money, I expect something in return. I would like equity. So when the bank goes back on its merry way, I can earn profits on it's reprivatization, it will have new management, and there is less of risk of looting (in the form of unjust bonuses and dividends).

Also, we punish the investors who made mad decisions, a core principle of capitalism.

Otherwise, you get lemon socialism, which the Soviets tried. It didn't work.

Lots of other reason.

Find some outside economists who think Geithner is right, Not many I bet.

go read Galbraith's essay at FDL
http://firedoglake.com/2009/03/21/james-k-galbraith-reponds-to-geithners-toxic-asset-plan/

but let's consider the alternative that the worthies think is so much better is receivership. under receivership, we take the banks under federal control, identify and segregate the bad assets, and hand the banks a big stack of cash to recapitalize them and send them back on their merry way.

FAIL. That is NOT the alternative. The correct alternative is to BREAK THEM UP after taking them into receivership. Privatize the healthy parts in pieces. And NEVER let any financial institution get remotely as big, ever again. That way, the huge pile of money that the taxpayers are going to take no matter what will at least buy an actual solution to the problem rather than just being set on fire.

The disaster of the Paulson / Geithner approach is the propping up of governemnt-subsidized zombies whose continued existence damages the business of smaller, better-run banks that are actually capable of lending- banks whose decline was already set in motion by the mania for creating these dysfunctional Goliaths.

Propping up the zombies and making good on 100% of the shadow market debt is not possible with taxpayer debt. It will break our country.

I an no expert, but it would seem to me that Chapter 11 bankruptcy is the proper way to go. The bank remains "functional" and is allowed to restructure it's debt. Obviously the way to do that is to wipe out bond holders and shareholders, sell the CDOs and CDSs for everything they are worth and break up out and sell the healthy operations to new companies.

Obviously, the "too big to fails" need to be broken up into much more regulated and managed units.

Bottom line is that we're running out of time here. Ben and Tim has been flying under the radar doing some outright shocking things over at the Fed/Treasury. They have outright given away about $2 trillion and obligated us to back up another 6.6 trillion in loans. Ben started quantitative easing (QE, or printing money like crazy to the tune of $150 billion a month) this week. We are getting into shocking territory that results in hyperinflation or defaulting on national debt.

If you think you've personally taken it hard so far, wait until a loaf of bread cost a couple hundred bucks, and we've had to give up economic stimulus programs, Social Security, Medicare, Medicaid, and every other stimulus/social program we have to cover Wall St's debt.

We have to get these "too big to fail" companies and banks into a "failed" mode where it is patently obvious to everyone concerned that we have decided as a nation that these companies will be sacrificed to keep our country whole. The only way to do that is to attack the heart of the problem - the shadow market securities and contracts are not worth the paper they are written on.

Others argue that we have to honor these debts to maintain the flow of foreign money into our country. First off, we are no longer be a country that requires $3 billion a day from China to finance our country - those days are already over, and we now have to figure out which of Wall St's debt we MUST honor and which are WORTHLESS. The Fed cannot possibly continue to try and raise money to cover all the Wall St debts especially while we have a deflating economy. Other nations (specifically Russia and China) are already discussing moving away from the dollar to a new standard.

The ONLY THING that will truly reinvigorate the US bond market is massive stimulus and opening new companies and technologies which foreign investors can plainly see are legitimate and profitable. The days of Wall St snake oil hustling are OVER. Your cannot re-inflate Wall St with unsustainable debt, you have to re-inflate Wall St with a revitalized American economy.

under receivership, we take the banks under federal control, identify and segregate the bad assets, and hand the banks a big stack of cash to recapitalize them and send them back on their merry way.

and the reason this is so much better than overpaying the banks for their bad assets is....?

In addition to all the points that g. powell lists in his/her 12:49 comment, there's also the not-so-minor point that the government can & should break any receivership zombies into a cluster of smaller entities, none of which could ever be regarded as "too big to fail." Then they go off on their merry ways, and we don't have to worry about this happening again. At least with the likes of Citi (and perhaps B of A).

Apologies. I see where I'm simply repeating Steve LaBonne & Glen.

Obama better wake up quick. It appears it's not just the republicans who can't handle the truth. Krugman has been screaming 'Fire' for quite a while now and even the blogs have been ignoring him. I haven't had the heart to read the columns, the headlines are bad enough.

If We fuck this up, the fascists(law&order keepers) are coming to power big time.

This is really just another application of "trickle down" economics. Flood the banks with money, and maybe some of it will trickle down in the form of credit.

Junebug, no apologies necessary. I'm so mad I'm spitting blood as I type so if you can clearly state your views as opposed to my ranting, then it's a good thing.

Let's throw up some relevant numbers so that people can understand the scale of the problem:

US GDP --- $12- 14 trillion
Last Estimate Shadow Market Debt Related To US Real Estate --- $55 trillion
Last Estimate Shadow Market Total Value --- $550 Trillion
Last Estimate What The Earth Is Worth If We Sell It --- Maybe $200 - 250 trillion

These were the last estimates I saw kicking around concerning unregulated CDOs and CDSs and assorted securities/contracts. Do you think the US taxpayers should try and cover all the shadow market debt related to US real estate? Including the naked shorts, and outright gambling? It will break us.

Propping up the zombies and making good on 100% of the shadow market debt is not possible with taxpayer debt. It will break our country.

Well, presumably if their toxic assets are removed, they'll no longer be zombie banks (provided they get enough money in return to shore up their capital). And also, presumably, many of the toxic assets themselves -- in time -- will prove to have value. So basically the choice is between having the taxpayers make good on the debts of banks right now in return for shares, or allowing the private sector to do so and limit the taxpayer exposure to an amount equal to the government guarantee less the eventual return on the (un)toxic assets. Obama and Geithner are basically opting for an approach that is less decisive, but potentially less costly to the treasury in terms of upfront costs.

I've been a fan of the nationalization idea, because it sounds more decisive. But I have to echo Howard's 12:40pm sentiments -- especially in light of the AIG mess. The critics of nationalization, in other words, may be correct: perhaps we really are politically and culturally incapable of satisfactorily pulling off a large scale receivership.

Also, in theory this Geithner plan could potentially be a lot cheaper to taxpayers -- if it's moderately successful -- than ponying up another trillion or so of taxpayer money to buy Citi, BOA et al, because much of the heavy lifting of bank recapitalization will be done by private investors.

Never let it be forgotten that Geithner's chief of staff, Mark Patterson, is a former (I assume former) lobbyist for Goldman Sachs. I suppose he had something to do with this grand plan.

Geithner is Obama's biggest mistake. He should fix that.

Well, presumably if their toxic assets are removed, they'll no longer be zombie banks (provided they get enough money in return to shore up their capital)

The toxic assets are not "being removed", we're buying them at vastly inflated values with taxpayer dollars. Some say if we don't do this the bond market will collapse. I say it's much better to make the shadow market understand that they're playing with funny money rather than have US taxpayer buy up these instruments and then default on US bonds. I think it's a choice - who do you want to be trashed, some Wall St companies or the whole country?

I'm not sure anyone said this...

The concern about overpaying for toxic assets.
When a bank is taken over... you can value them at a nickel and find out later what they're worth. I'm exaggerating, but one could pay a conservative price, couldn't we? Or pay a larger one with contingencies on how much ownership the taxpayer gets if the toxic assets can't be unloaded for the price of the payment/loan combo?

Is low-balling not an option? I know Timmy wasn't fond of the idea since it wouldn't add much capital into the system, but wouldn't a cash payment for the minimum value and a loan for a more generous estimate help with that?

If I'm missing too much here, I'm new at macroeconomics here at WMU.

It’s not Whoville, it’s Geithnerville, and arguably the largest bailout of rich speculators and financiers in our nation’s history since Alexander Hamilton’s debt assumption.

Secretary Geithner, I never met Alexander Hamilton, but I still know you’re no Alexander Hamilton.

Oh, Howard? A number of "worthies" besides the ones linked here have already made the argument to let AIG fail. So, you ARE on the wrong AND uninformed side.

In this tangled web of financial relations, what would keep the bidders from colluding with the bankers to bid up the prices much higher than any reasonable market value? We don't trust any of them now, including the Treasury secretary who is so woven into the fabric. How in the hell could any of us trust what would come of this deal?

Fixing this whole damnable mess is going to be like trying to thread a needle with an anchor-chain---but I'm starting to see a wee bit of light at the end of Geithner's tunnel.

For what it's worth, I think he's trying to get all the bad assets under one tent, and then find some serious people to run the tent. The biggest part of the problem right now is that you've got a bunch of overpaid, underqualified, notoriously-devious hacks controlling the entire financial picture. The illness cannot be cured by allowing the same "profit-thumping money-fundies" to keep going with their "write-down exorcisms"---all that does is continually devalue the good assets, while retaining the same bad assets.

Look, this is simple math. Let's say I've got this great big residential complex somewhere in AZ. Hundreds of units, bought by some greed-addict who knew he wasn't going to be able to make good on the mortgage, so he takes the money and runs. The bank's left holding the bag, and we're looking at foreclosure that puts hundreds of families out in the street.

Now, I move that defaulted mortgage into the "bad" bank, where it becomes the collaterized property of these United States. The bank that was left holding the note in the first place gets some cash out of the deal, and the taxpayers inherit this great big apartment complex. If and when the other note-holders show up (since almost all of these "stinks-like-a-skunk" assets have been repackaged to the Nth degree), they're simply told to "take it up with the original bank; they've got your money."

Once the physical plant is in the "bad bank," it's put through the mill via HUD, and maybe an offshoot of USDA rural development funding. The "bad bank" becomes, in effect, the receiver/creditor/debtor for a new mortgage, at a lower rate, and puts a new management/maintenance team in at the complex. People pay their rent, the place gets looked after, and every cent in profit from those rent-checks goes against the mortgage note.

Ten---maybe fifteen---years down the road, the mortgage is paid in full, the costs of bailing out the complex have been recouped, and the "bad bank" can spin the entire complex out at a fire-sale price to a new owner who's got the cash and experiential credibility to manage the damned thing the way it should be managed. The original bank gets the bad asset of their books, the people don't wind up homeless, the "bad bank" gets our money back (and then some), and a reliable residential property company gets a nice asset for pennies on the dollar.

While all of this is happening, we get the proper oversight and regulation back online, and effectively deal with the fools who created this mess in the first place. If fraud is uncovered, there's no amount of bankruptcy on the planet that'll protect someone from jail time.

The point is, it's not going to go away overnight, it's not going to be fixed in a year or two, and we just can't go back to sweeping it all under the rug. THAT was a Bushylvanian tactic, and THAT's what got us all into trouble in the first place....

Ohh, why do so many ppl here keep blaming Geithner under the apparent belief, or delusion, that's he a "free agent" in making all these decisions?

He's not.

Behind him is the un-Senate vetted Larry Summers. The two have a connection to Goldman Sachs (Obama's No. 1 campaign contributor most of the election cycle) as long as my arm.

Geithner has a boss named Obama.

It's his fault. It's his DLC/neolib decision to keep sucking up to the financiers.

Start blaming him.

Lou, you can't. There's no trust involved.

G. Sachs very likely will get named one of the "four or five" investment management firms under the second leg of Geithner's TALF stool.

Let's finish waking up, folks.

I saw this interview last night on Bill Moyers' Journal with Professor Mike Davis of UC Riverside, who basically says exactly what I've thought all along: There is no precedence for what is happening.

BILL MOYERS: "You wrote an essay on one of my favorite websites, TomDispatch.com, in which you asked this question. "Can Obama see the Grand Canyon?" Now, help us understand the use of that metaphor.

MIKE DAVIS: Well, the first explorers to visit the Grand Canyon, simply were overwhelmed. They couldn't visualize the Grand Canyon because they had no concept for it. That is, there was no analogue in their cultural experience, no comparable landscape that would allow them to make sense of what they were seeing. It actually took ten years of heroic scientific effort by John Wesley Powell and these great geologists, Clarence Sutton, before he was truly able to see the Grand Canyon in the sense that we see it now as a deep slice in Earth history. Before you just had confused images and, you know, feelings of vertigo.

And so the reason I raised this is that do we really have an analogy? Do we have the concepts to understand the nature of the current crisis other than to step back shaking from the brink and say this is profound? Because, you know, we're in this situation where not only do we seem to be having a second depression, but this is occurring in the context of epochal climate change. It's occurring at a time when the two major benchmarks that survived for global social progress, the United Nations millennial goals for relieving poverty and child mortality, on one hand, and the Kyoto goals for reducing greenhouse admissions, both of those sets of goals are clearly not going to be achieved. They slowly failed. This would be a time of fierce urgency in any sense. And now we face a meltdown of a world economy in a way that no one anticipated, truly anticipated the possibility of another recession, even a financial crisis, but no one counted on the ability of this to happen in such a synchronized, almost simultaneous way across the world.

The toxic assets are not "being removed", we're buying them at vastly inflated values with taxpayer dollars.

I don't follow you. The government could nationalize some banks and (as the new owner) remove distressed assets from balance sheets. If it takes this action the government will own the equity, and will use taxpayer money to shore up capital and pay the banks' creditors. The cost of such an action will be way over $1 trillion less the eventual proceeds from selling the shares back after recovery is under way. Geithner's method is apparently going to be to take several hundred billion (a lot less than the aforementioned option) and use it to subsidize private capital to come in and directly buy the distressed assets -- said assets will now be under new ownership, and will no longer be owned by the troubled banks. Either way the toxic waste is removed from the banks' balance sheets.

Jasper, read Galbraith's analysis of the Treasury plan:

http://firedoglake.com/2009/03/21/james-k-galbraith-reponds-to-geithners-toxic-asset-plan/

Geithner's method is apparently going to be to take several hundred billion (a lot less than the aforementioned option) and use it to subsidize private capital to come in and directly buy the distressed assets -- said assets will now be under new ownership, and will no longer be owned by the troubled banks. Either way the toxic waste is removed from the banks' balance sheets.

Re read the Krugman excerpt included in the original post (particularly the second & third paragraphs). The point is that the "private capital" to which you refer has precious little skin in the game, yet stands to reap significant benefits by gambling with, largely, taxpayer money. This is a big, fat, wet kiss on the mouth of Wall Street. Furthermore, this does absolutely nothing to address the "too big to fail" problem at the root of this catastrophe.

I'm ashamed of having given so much time and money to Obama.

The problem with Chapter 11, which a few folks have suggested, is that the reason companies can go into chapter 11 bankruptcy and keep operating is "debtor in possession financing." Because of the frozen state of the credit markets, especially for a bank with an uncertain future, it will be nearly impossible to find DIP financing for, say, a Citi in chapter 11. The only option - unprecedented as far as i know - would be for the US Govt to be the provider of DIP financing. If we are going to do that, however, we may as well just use a govt receivership or nationalization -- the taxpayer money involved would be the same, but we would have much more control over the outcome (and it would be more flexible), whereas in chapter 11 that would be in the hands of the judge subject to specific rules. But it is likely not realistic to assume a large multinational bank could go through a "normal" chapter 11 right now and keep operating through it. Among other things the filing itself would cause the mother of all bank runs. Nationalization, on the other hand, improves short-term confidence as you have the federal government now backing the deposits.

I'm ashamed of having given so much time and money to Obama.

You'd prefer the McCain approach?

Grinning cat, trolling pay much these days? You gave not one thin dime to the campaign and while in concert with SocraticGadfart, you have bashed and blamed Obama for everything but plate tectonics.

Septic assholes.

Chutzpah watch: WaMu suing FDIC.

Note to Junebug: No, I'd prefer the Green approach. I did last November. Stop enabling the two-party duopoly.

"Stablefool," see my note to Junebug. I'm not part of the problem; you are. If you consider it "trolling" to point out that we have a two-party duopoly, you're more a part of the problem.

The point is that the "private capital" to which you refer has precious little skin in the game, yet stands to reap significant benefits by gambling with, largely, taxpayer money. This is a big, fat, wet kiss on the mouth of Wall Street.

You're right about that wet kiss. What you may not realize is that nationalization would also be a big fat wet kiss -- to owners of bank bonds. Geitner's plan simply adds shareholders to the list of people getting a wet kiss, for probably not much more money. Sure, nationalization would allow the government to get partial repayment via future equity sales. Just like the Geithner approach will allow the government to get partial repayment via loan repayments and sales of no-longer-quite-so-toxic assets. Maybe the former approach will be a lot cheaper for taxpayers. But I doubt it.

Furthermore, this does absolutely nothing to address the "too big to fail" problem at the root of this catastrophe.

Nationalization wouldn't necessarily accomplish this either, unless the government decided to break up these firms. AFAIK there's no reason legislation couldn't be enacted to accomplish the same goal in the fullness of time. It's possible, in other words, to break up firms that are not owned by the government.

Look -- I worship the ground Paul Krugman walks on. And I admit I've fervently been hoping for an aggressive, decisive nationalization plan. But the more I think about it, the more I suspect the administration's approach will get us to the same goal -- probably with a lot less red-baiting from the right wing. And that, in turn, may make it easier to enact cap-and-trade and universal health care. Choose your battles, and all that.

Nationalization, on the other hand, improves short-term confidence as you have the federal government now backing the deposits.

Obvious government is the DIP, certainly at least for AIG since we own it. Choice of "names" is to provide political leeway required, and to ensure us and world that we are trying our best to maintain normal process rather than nationalize our banking system for an indeterminate period.

I am not inclined to "socialize" or "nationalize" the Wall St debts, I want to stay within the existing system as much as possible and bust up the problem. The mega banks are too large to be effectively regulated and cannot be rewarded or propped up. We need to feed the broken but sound pieces of the mega banks and companies to those established banks and companies that did not indulge in the Wall St greed fest. This maintains the strengths of capitalism - you screw up, you pay - you do right, you are rewarded.

The vast amount of people working on Wall St were not responsible for this mess. Only the people at the top end. If we break up these mega monsters, we will preserve the jobs and good work of the vast majority of these companies and eliminate those who did the damage. Every bailout we have done so far does not do enough to remove those who caused this mess.

God forbid someone disagree with Summers and Geithner. Obama's picks to chart the course out of this mess. IF you'd like to see my bank statements I'll show them to you. I gave the max and volunteered about 40 hours knocking on doors in a swing state. But it's better to lash out when someone expresses real disappointment I guess.

I'm not sorry Obama won, just sorry I actually had faith in him as something more than a hand picked puppet placeholder.

There's still time but his endorsement on Jay Leno of what a great guy Tim Geithner is had me with my head in my hands.

My frustration largely stems from the fear of what 2012 will bring if this disaster gives rise to an electable far right candidate.

This plan is just what I thought they would come up with. Geithner is a very smart fox hired to watch the hen-house. It's a rehash of what they've already been doing.

I'm still hoping that this toxic asset purchase plan is only meant for institutions that survive the stress test, and that Obama will eventually go all Sweden on the top 4 banks, plus maybe a few more in the top 19.

Now if Geithner comes out and says 'yeah everyone survived the stress test' - THEN I'll be pissed.

we are in a bearish bubble. The dire the forecast the more serious it looks.
wake up!! with mark to market going away for banks things will start to repair...but we need time.
yes the economy is in bad shape but the obama plan is pushing, imperfectly, in the right direction.

Note to Junebug: No, I'd prefer the Green approach. I did last November.

Note to Gaddork: bully for you, but unless you double as grinning cat & are ashamed of your efforts for Obama, the comment wasn't addressed to you.

Jasper,

I think we agree that neither Geithner's apparent plan nor receivership is desirable. It's just a question of the least bad option, which, in my decidedly nonexpert opinion is the latter, since it a) likely offers the government (taxpayers) a greater stake in the returns, and b) provides less of an opportunity for Wall Street bad hats to continue gambling with government (taxpayer) money. Is this foolproof? Absolutely not. Does it guarantee a prevention of "too big to fail" in the future? No, as you point out. But receivership offers that possibility, whereas Geithner's current plan doesn't.

How can we have gotten this far in the comments and no one has noted... oh, no, it's the Zombie Apocalypse!

> The biggest part of the problem right now
> is that you've got a bunch of overpaid,
> underqualified, notoriously-devious hacks
> controlling the entire financial picture.

You seem to be missing a key point: under this zombie plan, **those are the people who would end up running the "good" portion of the financial system**. The taxpayers would be on the hook for $3 trillion of toxic waste, there would be no structural changes or fraud investigations, and it would be million-dollar bonuses as far as the eye can see for Timmuh's former neighbors on Wall Street.

Cranky

Following on from MissMudd with her global perspective, I think there is a way of seeing this meltdown as Nature's correction strategy. This, of course, takes us into strange territory. This is the domain of Gaia, some might say 'God', or some kind of built-in cosmic servo-mechanism, which we tend be either unaware of or disparaging of. We have been living blindly and recklessly on borrowed time and synthetic resources, to the point where reversal is inevitable.

All the warning signs have been around and spoken of for a while: global warming, melting icecaps, rising CO2, growing human population, shrinking forests, polluted oceans, and extincting species. But still we've gone on blindly as if none of it were true. Now, it would seem we are beginning to pay the price. It will not be nice.

It may be that there is no escape and calamity will surely and inexorably befall us. I'm not an end-timer or apocalypse-monger, but I do feel a radical re-adjustment in our psychology - similar to first viewing the Grand Canyon - is necessary. America has not known poverty for quite a long time. The thought for many is terrifying, and for others at minimum daunting.

There are ways to deal with poverty on a personal level. It's not as bad as one might imagine. Indeed, one might even regard it as salutary. And, of course, nothing lasts for ever - neither wealth nor poverty. Many people in America are already being forced to reconcile themselves to a drastically reduced standard of living. The good days are gone. But maybe they weren't so good, in all respects, as we believed them to be.

Now the issue of money. Money is a contract. It's like language: we grow up in it, we learn it, and we use it. But, like language, it is abstract. It is a convention that serves an extraordinarily useful purpose, but it is not the real thing. It merely points to its object, but it is not the object itself. The word 'Moon', for example, engenders a very clear and commonly shared image in the mind, but the Moon itself is something entirely different.

The same is true of money. We accord money inordinate importance, but when we look at it dispassionately we see it is only a symbol. It is not the real thing. Because of the highly evolved social convention upon which the effectiveness of money depends, it has acquired immense, almost hypnotic power. The relevant question here is: Do we own the money, or does the money own us? The way we behave suggests the latter. And I think that is the root of our problem.

The mess the American financial system has got itself into is largely one of perception and perspective. We perceive certain aspects of its nature as more concrete than they actually are. To a very large extent, the jargon disguises the reality. All the talk about assets, debt, credit, capital, etc., while valid within the lexical domain to which they belong, are not real entities in themselves. They are conventions to which we collectively agree to subscribe. In essence, however, they are hollow. It is our perspective on them that should be adjusted as much as, or more than, the phenomena we imagine they refer to.

This is where it gets difficult. All these things, these scary financial instruments and accounting terminologies, could just as easily not exist, and we would still have a functioning economy. In days gone past, I mean for thousands of years, human beings have survived and maintained sophisticated cultures and societies without all this financial complexity. Why don't we just blow it all away and start again? God knows, we might even be happier.

SocraticGadfly

"... I'd prefer the Green approach. I did last November."

Fine, hopefully you didn't do the same in November 2000,
cause that would make the appeal to 'finish waking up' a really bitter joke.

Krugman, isn't he the guy who was so for Hillary Clinton all last year?

Methinks I hear a touch of bitterness in his doomsaying, or maybe it is wishful thinking.

He offers no details, yet the devil is in the details.

You seem to be missing a key point: under this zombie plan, **those are the people who would end up running the "good" portion of the financial system**. The taxpayers would be on the hook for $3 trillion of toxic waste, there would be no structural changes or fraud investigations, and it would be million-dollar bonuses as far as the eye can see for Timmuh's former neighbors on Wall Street.

Crank---next time, try reading the entire post, instead of stopping at Paragraph 2-out-of-8. The hacks that caused this mess are going to be regulated out of the banking industry and back into the night-shift parking lot sweepers at their local Wally-World-Marts. A lot of the fool-brigade that caused this are the 20/30-somethings who got their under-the-table business degrees during the Bush years. As the "Mighty Ship of Moolah" begins to right itself in a couiple of years (the worst of this mess, IMHO, won't clear out until 2011, and the only saving grace for Dems in going to be that the deregulation allowing it all to happened occurred on the GOPers' watch), those twits won't have anywhere left to go---and as the bad debts are wound down and unraveled, the fraud will finally be exposed.

If you look at this whole sordid mess from outside the box, you'll start to realize that the core issue that triggered it---the huge uptick in sub-primes over the past seven years, coupled with the multiple repackagings to camouflage the toxicity of the debt---have been nothing but a Ponzi scheme that makes Bernie Madoff look like a two-bit amateur. The investment banks probably knew something about it, the financial carrion-fowl on the Street and at CNBC probably knew all about it, and the Bushylvanians clearly knew about it---because all of the answers from those groups for the past year-and-a-half have been canned and prepped well in advance....

I don't pretend to understand anything but the most basic details of this whole thing, but from what I can grok, most people--experts--seem to think this Geithner plan is bad.

You'd have to assume Obama knows this--its not like Krugman's column is hard to find.

So, if Obama knows this is a bad plan, then that means he knows that it A)won't work, B)keep him from being re-elected, and C)probably insure Republican rule forever and ever

...which means Obama is either A)hopelessly, horribly corrupt, B)stupid, C)both.

If that is true, then he is the single best salesman ever in the history of politics.

I'm not saying it isn't true--I voted and volunteered for him, so I'd be crushed if true--but it seems like an amazing leap of lack of faith to have in the man.

I'd say that our assets have become

vaporized by computer-speed-of-light bundling

of chronically toxic bush-tax cuts-housing bubble-

Iraqistanic warfare-oil spike derivatives.

To fix this mess will require a complete and total

shift in our human paradigm.

Wealth will become friendship and sharing.

Poverty will be greed and bonus-fide financial Ponzifiers.

The people will revolt.

Debts will go unpaid.

The road ahead is a long one.

Choose your friends wisely.

Invest in sustainable enterprises.

It would be nice if Geithner could go out there and throw strikes down the middle for the entire game. Now it looks like he gonna spend the season nibbling at the corners. Here's to a long summer of hot dogs and cold beer.

Enriching the investor class with a 33 to 1 lever...

Krugman: This plan will produce big gains for banks that didn't actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized.

True but not true enough.

What Krugman misses is that you and I won't be given a shot at a piece of this action. The ability to leverage dollars on the taxpayers dime (think 33 to 1) won't be an option for us. Only the investor class will be given access to this lever.

Geithner is taking care of his friends. He has made no pledge of allegiance to me or my country...

Some poster said, maybe 6 months ago, that all the banking countries, en masse, need to outlaw and declare all CDOs and CDSs null and void. Plugs up the black hole nicely.

Look, I'm not giving up on Obama or Geithner, but we need to scream bloody murder that this IS NOT a LONG TERM fix for a BROKEN SYSTEM. This is merely moving us back in time to 2006 and pretending that we wont fall off a cliff again and all along assuming that the taxpayers can bare the burden of debt (which is the part that scares me the worst.)

There has been no proposed regulatory reform. Nobodies even talking about the unregulated shadow market that really caused this mess. Nobody has established any means to review all the banks books (i.e. the FDR "bank holiday") in order to assure us that the bad players have been fully weeded out. There is still a host of companies "too big to fail", and there is no means established to grow the responsible banks (feeding the the good bits of the mega companies is the logical thing to do.) Plus, worst of all, this plan would actually encourage more bank consolidation into mega banks which is what caused this problem to be so massive and difficult.

I'm hoping they will do more, have to do more. Obama like FDR is responsive to our input:

FDR was, of course, a consummate political leader. In one situation, a group came to him urging specific actions in support of a cause in which they deeply believed. He replied: "I agree with you, I want to do it, now make me do it."

He understood that a President does not rule by fiat and unilateral commands to a nation. He must build the political support that makes his decisions acceptable to our countrymen. He read the public opinion polls not to define who he was but to determine where the country was – and then to strategize how he could move the country to the objectives he thought had to be carried out.

There has been no proposed regulatory reform. Nobodies even talking about the unregulated shadow market that really caused this mess.

Oh, c'mon. I'd say plenty of people -- Volcker's one of them -- are at least talking about the need for significant reregulation. Geithner himself spoke at length on the subject last week on Charlie Rose. Heck, the president himself touched upon the subject on Jay Leno. Everybody is aware we need to overhaul our financial regulatory regime. If I'm not mistaken this discussion is the principal agenda for the G20 summit next month. Not much sense in introducing legislation without at least talking to our major trade partners, first. I'm as impatient as the next person, but there's no way the administration won't introduce a bill(s) dealing with these issues in the near future.

> While all of this is happening, we get the
> proper oversight and regulation back online, and
> effectively deal with the fools who created this
> mess in the first place. If fraud is uncovered,
> there's no amount of bankruptcy on the planet
> that'll protect someone from jail time.

Uh yeah, sure. The infamous "Phase 2" of clean-up after a self-inflicted disaster. Funny thing is that "Phase 2" never happens even in the most strong-willed and clear-sighted organizations, and with the Senate now in the control of 40 hard-right Republicans and Reid too weak to break the fillibuster it won't ever happen in this situation.

Cranky

I would normally offer to bet you a month's salary on this, but due to the economic situation I have been reduced to week-to-week extensions of my status as "Not Laid Off - Yet" and it would not be fair to offer next month's salary as a bet.

So Geithner offers a plan worse than TARP. At least under TARP the Treasury would earn any profits on the toxic assets, under Geithner's TARP v.2, a special group of investor middlemen gets the potential profits and the Treasury gets stuck with the probable losses.

And the plan is so complicated and opaque, there are huge opportunities to cheat and to game the system.

But does this plan really have any chance of getting approved? I don't think so. Is Obama already that tone deaf?

The correct alternative is to BREAK THEM UP after taking them into receivership. Privatize the healthy parts in pieces. And NEVER let any financial institution get remotely as big, ever again.

Posted by: Steve LaBonne

Amen. And it is the moral, social, and cultural thing to do.

I think Steve W. (1:56) comes the closest here. The gov't and private equity investors join to buy defaulted properties. They hire management firms to rent, renovate or sell in order to maximize value and income. The more properties are kept or renovated, the more property values are stabilized, because there is no longer a glut of cheap homes. Nor is there rat infestation, etc. driving neighboring home values down. Part of the plan hopes for, plans on or requires? moderate inflation, so that these properties eventually will sell for a reasonable profit, both to the equity investors and to the gov't.

Moderate inflation would also allow people to earn more, while lowering the relative pain of their personal debt. The corporate bondholders will be hurt to some degree, depending on how their interest rates compare to inflation, but that wouldn't be as bad as the "haircut" scenario.

Dean Baker's concern about natural property value trends sounds reasonable, but if houses are artificially removed from the market, and if inflation does occur, it may well not be as bad as he predicts. Either way much of that risk is owned by the equity firms, and the consequences are at least put off some years.

Krugman, meanwhile seems to assume that these default properties are unlikely to grow in value, or that only the private investors would gain by that. Apparently he thinks we're better off if the gov't simply auctions them off as soon as possible, the way a bank normally does.

With the public already angered and 'mobilized' by the AIG bonus revelations, it is a decisively opportune time to take the next step and connect the AIG bonus scandal to Geithner's plan and then eventually, the larger financial system meltdown.

Using the AIG bonus scandal as the starting point, attack Geithner's plan. The public grudgingly trusted the Federal Reserve, Wall Street, the Bush Administration and Congress with TARP 1. The AIG bonuses are a very visible example that this trust was misplaced if not betrayed. Ask why the public should trust our current leadership on TALF? Its mostly the same individuals? Citing the risk of repeating the same mistakes (AIG bonuses) and flawed strategy, demand further consideration and wider investigations before this plan is implemented.

If the progressives do not seize this moment I believe the anti-democratic forces in this country probably will. The large financial institutions will still get bailed out by the taxpayers and instead of marching towards reform of the financial system, the GOP and entrenched Wall Street greed bags will lead a march on the White House and the Democratic controlled Congress. Their march will be rabidly cheered on by our equally over paid, out of touch but still influential establishment media.

Still the same old law - one for the rich and one for the poor.

The poor will bail out the rich so that they can do it again. Doesn't matter what country you are in!

Let's say I've got this great big residential complex somewhere in AZ. Hundreds of units, bought by some greed-addict who knew he wasn't going to be able to make good on the mortgage, so he takes the money and runs. The bank's left holding the bag...

The bank made the fucking loan!

Jasper, the only way we know if they are serious about reregulation is if Glass-Steagall is reinstated and any financial acts with the name Gramm in them as a sponsor are tossed into the trash bin. If they skirt on either of those things, we know what team they are really playing on.

Geithner and his mentor Summers have to go. They are far too close to the criminals who need prosecution, not rescue.

I cannot believe that "the smartest guy in the room" is letting these morons run loose. But when I look at the bad decisions being made by the Secretary of the Interior, and the idiotic decisions being floated by the Secretary of Veteran's Affairs, I am starting to wonder about the ability of the smartest guy in the room to choose subordinates who have a clue.

This is the kind of stupidity that makes the Republicans look intelligent - exactly what isn't needed.

Has Obama ever heard of a "tin ear"??

Obama had a choice: Wall Street or Main Street. Now, we know where he stands.

I listened to the Bill Moyers interview with Mike Davis on the ride home from work tonight. I can't recommend it highly enough. A true call to arms for the left. Davis has been one of my favorite writers for sometime and I' eager to get my hands on his latest collection of essays.

All incredible dialog...nothing to add.

I think the first lady is trying to show the rest of us (those that about to get katrina'd) our best option out of this. Take another look at that flower bed or public garden space.

And the F&*KING ICING ON THE CAKE:

The plan as structured "does not required Congressional approval". Treasury can just pull the trigger on their plan without anybody else's say so, just like the Fed has obligated us to trillions over the last couple of months without significant Congressional review.

This is about how I feel when my doctor is snapping on his ribber gloves and asking me to bend over.

Please call/write you Congressperson, Senators and President and let them know spending tens of trillions of taxpayer dollars to bail out failed banks/companies without significant oversight by another branch of government is INSANE.

Miss Mudd's contribution above was excellent--the Mike Davis interview with Bill Moyers in which he comments, "Well, the first explorers to visit the Grand Canyon, simply were overwhelmed. They couldn't visualize the Grand Canyon because they had no concept for it. That is, there was no analogue in their cultural experience, no comparable landscape that would allow them to make sense of what they were seeing. "

Me, I know exactly what those first explorers felt. I also feel like I am standing on the edge of a vast abyss. This image gives me hope because while I trust Krugman and Galbraith's judgment of the Geithner approach, I don't think the plan is bad because Geithner is in cahoots with Wall Street or incompetent. I think that he, like Obama, is careful, prudent, stuck in his cultural landscape. But I believe both Obama and Geithner are capable of learning and willing to adapt.

I haven't had such hope--that our leaders are basically principled, competent and willing to adapt--for eight years. So I feel we are better off than we were even while I believe that they are making a terrible--that is, costly--mistake.

Howard:
but let's consider the alternative that the worthies think is so much better is receivership. under receivership, we take the banks under federal control, identify and segregate the bad assets, and hand the banks a big stack of cash to recapitalize them and send them back on their merry way.
...
and the reason this is so much better than overpaying the banks for their bad assets is....?

Part of the answer is the size of the "big stack of cash". The government could buy the toxic assets at a fraction of their nominal value, and hold them for a while and sell them at auction. Nobody "wins", but the toxic assets are separated from everything else, and the maximum likely loss is identified at a known sum, both of which reduce the uncertainty of the market. A part of what is happening now is that the holders of the toxic assets are trying to hide their true exposures, hoping to sell the toxic assets or use them as collateral on yet more loans; since everyone knows that the holders of the toxic assets are trying to do this, no one is willing to buy or lend. The longer the toxic assets are hidden (which, I repeat, is happening because of active deceit by the holders of the toxic assets), the longer recovery is postponed.

Geithner, Summers, Paulson, Bernanke et al are all basically friends and associates of the operators who hold the toxic assets, and one way and another are trying to protect those friends from loss. From the point of view of a healthily functioning market, such loss prevention merely prevents the successful financial operators from "creatively destroying" the financial operators who screwed up.

PTate in MN: I don't think the plan is bad because Geithner is in cahoots with Wall Street ...

Yes. "In cahoots" conjures up the wrong images. It's more like the board of a large corporation that is persistently losing market share: they have common beliefs, common experiences, a shared working history. The real winners are somewhere else.

Being a strong liberal democrat I hope this isn't labeled as a troll post. Dems are fucking whiners. I voted for Obama and I am going to give him time to succeed or fail. I am sure he is not trying to fail. I could not imagine everything I do every second of the day being analyzed by bloggers and commenters. Every decision has a blogger somewhere saying how disappointed they are, how upset they are..... Every tv station giving 24 hour opinion usually expressed to create a story and usually factuallyu incorrect. And the Krugman factor, experts who go home every night to watch themselves bloviate but have no idea what it takes to get something done in the real world of government. God dam, Obama needs time and support. Shut the fuck up.

I am no expert in finance. I also have my trepidations about Geithner and Summers.

That said, I am still hanging with the O team.
Why?

I don't think that Obama is cut off from the reality of public opinion or that he has a "tin ear" or worse, a naif unable to do anything but be led around by Wall Stree insider advocates (presumably Geithner and Summers).

He knows and they know that they are completely on the hook for this. Some of you think that somehow they are advocating for a blatantly wrong thing (or mainly you don't actually fully KNOW what they are advocating, but you think based on some of their actions, or implied actions)that they must be either stupid or unable to do anything but take care of their friends.

I was particularly taken aback upstring where there was a reference to an interview on Bill Moyers about some early Americans who could not appreciate the reality of the Grand Canyon, somehow implying that the Obama team just can't see it (though magically, the rest of us, particulary Krugman can)WoW!

Hell, I have no idea how to do what they are trying to do and unless everyone has completely lost it in progressive blogdom, we have to think that Obama would like to do the right thing to bring us to some sort of stability or safety. He wants to be successful and I imagine so does the reviled Geithner. I understand that though characterized as weasily, Geithner has above average intellingence and Lord knows, I am sure that he could find a better job than getting his ass kicked 24/7 in front of his wife and kids.
I also understand that though he is the apparent "boot licker" to Wall Street that he has only worked for the public -- he is not a revolving door type and again, think what you may, that is highly unusual and certainly not typical -- despite the withering epithets he had received that associate him with all things foul and capitalist.

It has been now about 2 months - 60 days since O took office with his team. The shit started back in September but he has had to really carry the load of shit since the Bush team really did nothing much except bring this on. Roosevelt entered the scene after 3 years of National suffering -- 3 years after which the foes to change became attenuated and most of their BS had time to show itself as just that.

O enters the scene with these folks still thinking everything is the same. The poop is still warm and therefore the politics of this are quite different.

I think that it is appropriate to push, to question -- but I wonder about those who actually take it to regret for voting for Obama or who actually think that he does not want to have this work out somehow. I just donot understand how that works in your brain...

I am no expert in finance.

But there are things your ARE an expert in, and if you see your President doing the wrong thing, it is YOUR DUTY to speak up and GET YOUR VOICE HEARD. And if he hears enough people, he listens and changes his actions. That's all I voted for, and all I expect. That is how our democracy MUST WORK - or it is no longer a democracy.

Last year under the corrupt, conservative Bush administration and the conservative Republican/Blue Dog Democrat coalition running Congress, it was retroactive immunity being given to complicit telecom companies for any crimes they may have committed in implementing BushCo's illegal warrantless wiretapping of U.S. citizens, which began long before the 9/11 attacks in 2001.

A similar retroactive immunity mentality apparently is being applied to the ongoing financial crisis, a catastrophe caused by runaway greed, deregulation and many of the very same people in the conservative Republican/Blue Dog Democrat coalition responsible for destroying Depression Era safeguards meant to provide oversight and accountability for the money changers in the temples of commerce.

But then, the temple money changers do control Washington D.C. through their lobbyists and campaign contributions to both major political parties. So, just like in the case of the criminally complicit telecom companies, both Paulson's bailout plan last year and Geitner's "new, improved" bailout plan, with their emphasis on a top-down solution, are meant to provide retroactive financial immunity for the corporate executives and their crackerjack corporate investment managers who caused this financial meltdown in the first place.

Which is in keeping with the perverse mentality of these fools. White collar criminals get off, while everyone else pays. Where is a corporate "one strike and your out" rule when our nation needs one?

The idea behind this buying is to help banks get rid of toxic assets so they can start lending again. Great idea. I love it! Well Mr. Geithner, why stop with toxic assets on bank balance sheets? Many of us in the heartland have toxic assets in our 401(k) plans and our homes are underwater because of an illiquid and irrational market that tentatively "mispriced" my house. Please extend the same courtesy to us taxpayers -- after all it is our money. Buy back our toxic assets at premium prices as you plan to do with the asses on bank balance sheets.

With toxic assets gone from my portfolio I will be able to spend more and help the economy. What better way to stimulate the economy than give taxpayer money directly to taxpayers through a buyout of individual toxic assets at premium prices?

Replies to earlier comments:

Given the nature of the "loyal opposition" in the Senate, the best thing for the administration is to go with a Geithner plan that doesn't need Congressional approval If it's "outta their jurisdiction," so to speak, then they can't obstruct it with their oh-so-precious 40+ voting bloc.

Oh, and the mentality here of using the corruption of the Bush administration and the Blue Dogs as the means to attack Geithner? Folks with that mentality should be oh-so-willing to volunteer themselves right into long prison terms for the thievery; the war-profiteering; the crimes against the environment, humanity, other governments, individual citizens, and unabashed war crimes committed by them as well---right? After all, you did pay their salaries as they were doing all of those things.

Children (and given that a lot of the whining here sounds like my four-year-old when she's working herself up into a rousing rendition of "tantrum-time", you are most worthy of the label), you need to understand that your world of immediate gratification has gone away, it is not coming back, and the sooner you accept this new reality, the better you will be able to cope with the pure harshness of that reality.

Krugman is awfully bright, and if he forsees disaster this scares me. A lot.

Is it true FDIC is going to buy toxic assets?

If it spends it's money on that, then how will it possibly cover taxpayers accounts in banks if there's a problem?

Wouldn't this cause a bank run-- the last thing we need?

Being a strong liberal democrat I hope this isn't labeled as a troll post. Dems are fucking whiners. I voted for Obama and I am going to give him time to succeed or fail. I am sure he is not trying to fail. I could not imagine everything I do every second of the day being analyzed by bloggers and commenters. Every decision has a blogger somewhere saying how disappointed they are, how upset they are..... Every tv station giving 24 hour opinion usually expressed to create a story and usually factuallyu incorrect. And the Krugman factor, experts who go home every night to watch themselves bloviate but have no idea what it takes to get something done in the real world of government. God dam, Obama needs time and support. Shut the fuck up.

And don't forget to stick your fingers in your ears and hum "la la la" as loud as you can.

I would like you to tell me what your contribution to this crisis is except whining like a baby from in front of your computer listening to all the other whiners and offering nothing.

How about Brad Delong's column this morning?

"Note to Junebug: No, I'd prefer the Green approach. I did last November."

If it weren't for all the "greens" failing to vote for Gore in '00 we might not be in this mess. We certainly wouldn't have spent trillions on an unnecessary war AND had massive tax cuts for the rich at the same time.

You "greens" can pound salt.

"Note to Junebug: No, I'd prefer the Green approach. I did last November."

If it weren't for all the "greens" failing to vote for Gore in '00 we might not be in this mess. We certainly wouldn't have spent trillions on an unnecessary war AND had massive tax cuts for the rich at the same time.

You "greens" can pound salt.

Sorry for the double post. Don't know how it happened.

I would like you to tell me what your contribution to this crisis is except whining like a baby from in front of your computer listening to all the other whiners and offering nothing.

Us baby whinners have been offering an alternative: U.S. receivership, recapitalization with public money, and reprivatization after break up.

The Geithner plan won't fly. It is unworkable.

"The Geithner plan won't fly. It is unworkable."

Lots of family room experts. In a situation where no one really knows the outcome I find it hard to believe you can say with 100% assuredness that Obamas plan will fail. I have no clue if it will work but I do know that it will take time and we haven't given that to Obama. Unlike you and the Republicans his plan is long term. Early on he was to negative, then he expresses a more positve tone and he becomes naive, he is not doing enough but he is working with people bent on convincing the American people he is doing too much and spending too much. Walk in his shoes and know that if his poll numbers start dropping because of all of the negative whiners then we are really screwed. Keep it up.

@tiredofgreed:

I want Obama to succeed, but that doesn't mean I want him to give more of my money to bankers. The treasury and fed have already given trillions of dollars to banks in bailouts and loans. Where did all that money go? If that hasn't helped, why will more giveaway of my money help now?

Give me back my tax money. I will spend it. If they believe that buying assets at higher-than-market prices will help the economy, why are they focusing only on assets held by banks. We all have assets "tentatively mispriced" by the market. Buy my assets at higher-than-market prices and I will be happy to spend that cash infusion to prop up the economy.

There is a strong correlation between jobs and consumer confidence. Between consumer confidence and economy. Help the masses with jobs and wages and that will help the economy. Instead Obama and Geithner insist that giving trillions more to the same idiots who brought us to this juncture will somehow magically bring back prosperity.

We may not understand fancy derivatives, but we have common sense. We know that giving more money to reckless gamblers won't help anyone. There are many regional banks that are relatively healthy and that focus on simple banking. Give them the funds and they can lend money. Start new banks and they can lend money.

Here is a Rolling Stones article that captures what these bankers did. I can't believe people are still arguing that we should give more money, even after learning how they screwed us. Article: http://www.rollingstone.com/politics/story/26793903/the_big_takeover/1

rational

This crisis is big and complicated. Worldwide. The bank bailout happened in the previous administration. While Obama has only been in office two months he has had to establish his administraition and deal with huge issues. No other president has had to deal with the issues and the scrutiny that Obama has had to endure. Some things will be missed and some mistakes will be made but his plan is for a long term solution. Keyboard quarterbacks are not helping but making his job more difficult. I can not imagine the pressure, the endless advice and options, the complexity of what he has to deal with. I voted for him and I will give him my support and most importantly I will give him time. It is what I can contribute.

@tiredofgreed:

I contributed to Obama's campaign, canvassed for him, and voted for him. I want him to succeed, but he is heading down the wrong path.

Do you think the average American isn't stressed out? I was prudent with my investments and real estate purchases all along. Now I'm stressed out because each day Geithner and Bernanke come out and do whatever they can to make it hard for prudent investors and savers to plan their financial future. They are constantly throwing money at speculators to help them while punishing prudent savers by lowering rates and pushing them into risky investments (0% interest rate for cash and low interest rates for bonds).

Why is the collective stress of the American taxpayer not in the equation? Obama, Geithner, and Bernanke are playing with OUR money. They have less stress because their financial future isn't on the line. It is MY financial future they are playing with, using my tax money. That's the root of the problem -- giving my money, however responsible and prudent I was all along, to reckless speculators who brought us into this mess.

This is a very simple issue. Don't throw good money after bad. Don't let the same bad players get hold of trillions of dollars of new money. Why is that so hard to understand? Unless Geithner and Bernanke are making convoluted arguments to hide the simple fact that they are more interested in saving bankers than in helping the taxpayer.

Obama was elected to represent us. He promised change but is doing nothing different from what Bush did in bailing out the same bad actors that took enormous risks. Read the Rolling Stones article I posted. If that doesn't explain why the bankers should NOT be receiving more money, I don't know what will.

Can't Obama tell the basic difference between responsible and irresponsible people? Why is he continuing to push the same policies that reward the bad actors at the expense of the innocent, prudent bystanders?

Gordon Gecko had a son. People told the kid that driving his Maserati at 150 down winding country roads was insanely risky, but he didn't listen, and all his friends thought he was so smart and cool. He, predictably, wrapped the car around a tree. Now he owns a once-very-high-priced asset which has an indeterminate value. What's the real value of a Maserati that's wrapped around a tree?

Geithner proposes to give Gecko's nephew a loan so that the nephew can buy the Maserati from the son at close-to-showroom price. Gecko's son can take the money and live happily ever after, lessons unlearned.(Maybe the nephew thinks he can fix it up, just pound out the dents, and go driving it himself at breakneck speeds. Perhaps he can, but it's unlikely to be fixable, or worth that much if it is.)

But the real problem is that we have Gordon Gecko's offspring loose on our highways, recklessly endangering us. The question isn't how to get these guys back on the road. It's how we back away from a world where the Gecko's are allowed to screw the rest of us.

rational

It is my money as well and maybe what Obama is doing is what has to be done taking all variables into account and not being able to do what Krugman wants to do. The "just do as I say and it will all work out" crowd that Krugman belongs to have no idea what it would actually be like to be the person responsible for getting things done. It is incredibly easy to say "do this". It is incredibly difficult to get everyone to do it. I have a feeling we really know very little about waht is actually happening with negotiations and deals and threats behind the scenes. It took us seven years to put a bike trail in town here becasue of all the bickering. Can you imagine the complexity of this situation, the legal obstacles, the politics? Obama has my support and if he does fail I would shake his hand if I had the chance and say thank you for trying and for putting up with an American population that is increasingly showing itself to have no courage, no patience but plenty of whine.

"Lots of family room experts. In a situation where no one really knows the outcome I find it hard to believe you can say with 100% assuredness that Obamas plan will fail."

That's the whole point, we don't know if this TARP v.2 will work. Then why not use the receivership and reprivatization model that was used both here in the 1930s and in Sweden in the 1990s?

The economy can't recover unless we have a functioning financial system that won't burn up capital like the one that just failed. I realize this problem takes time to solve, but the economy is still sinking, and I want to go with a proven method.

TARP v.1 failed, I don't think making it more complicated makes the new version better. We can't afford to wait a year to see if this one works. Why would anyone want to experiment right now?

Here's another family room expert. He also is a world famous Nobel prize winning economics professor, and he was a VP and chief economist at the World Bank.

http://www.talkingpointsmemo.com/archives/2009/03/why_are_we_still_at_this.php