March 23rd 2009
Of Bonuses, Bailouts And Hail Marys
T
im Geithner is holding his breath. Will his announced new financial plan result in a repeat of his last debacle, when Wall Street roller-coastered downward after he ineptly punted on his plans? Early signs - the Dow opening up nearly three percent, Tokyo, Hong Kong, U.S. market futures up - indicate no, he won’t single-handedly destroy billions in wealth today.
But is it a good plan? The test of any plan is simple enough: Will people accept it and get on board, or in this case, will financial institutions bundle toxic assets - now called “legacy” assets in a ridiculous bit of sophomoric word play - and sell them through a federal program? Here, Geithner has real problems. The AIG bonus bruhaha, complete with radical zealots on bus tours by AIG exec’s homes, has made a lot of financial institutions wary of taking public funds - and the new plan has disincentives in spades. It’s not in Geithner’s op/ed, but Bloomberg reports:
Geithner will also announce plans later this week to ask Congress to give the Treasury and the Fed authority to step in and more easily tackle problems at systemically important financial institutions that are in danger of failing. Such powers would give the government the ability to limit payments to creditors, break contracts on executive compensation commitments and provide guarantees on particular categories of debt for companies that need bailing out.
It’s not clear whether these heavy-handed new powers will be wielded on all financial institutions (gasp!) or only on those who cozy up to the feds on the new plan (suckers!), but it’s evident that Obamarx and Geithner see statism as the solution to the economic problem - we give you guarantees, you give us power. I don’t think Wall Street is about to go cowardly into the night, giving up authority and decision-making to the folks who run Amtrak, the post office and social security.
Paul Krugman doesn’t see it that way. Of course, he sees too much Bush in the plan:
Over the weekend The Times and other newspapers reported leaked details about the Obama administration’s bank rescue plan, which is to be officially released this week. If the reports are correct, Tim Geithner, the Treasury secretary, has persuaded President Obama to recycle Bush administration policy — specifically, the “cash for trash” plan proposed, then abandoned, six months ago by then-Treasury Secretary Henry Paulson.
This is more than disappointing. In fact, it fills me with a sense of despair.
That’s hardly the lead Geithner was hoping for. Krugman says the new plan is just rehash number three of the first Obama/Geithner plan, with more bells and whistles, as if they were obsessed with one idea and unable to move on to another. He can’t quite get his fingers to type the words “free market,” but his advice to Obama: Don’t subsidize the assets as this plan does; let the market price them, get them off the books no matter the cost, and move on.
That’s far too foreign to Obama’s belief system, so he’s let his Treasury Sec move a plan forward that is a high risk one for the admin. If it doesn’t work out, Obama will have wasted time the economy doesn’t have to lose.
![[Post to Twitter]](http://www.cheatseekingmissiles.com/wp-content/plugins/tweet-this/icons/tt-twitter-micro3.png){kind=icon}
![[Post to Yahoo Buzz]](http://www.cheatseekingmissiles.com/wp-content/plugins/tweet-this/icons/tt-buzz-micro3.png){kind=icon}
![[Post to Digg]](http://www.cheatseekingmissiles.com/wp-content/plugins/tweet-this/icons/tt-digg-micro3.png){kind=icon}
![[Post to StumbleUpon]](http://www.cheatseekingmissiles.com/wp-content/plugins/tweet-this/icons/tt-su-micro3.png){kind=icon}
Posted in Economic Policy, Obama | 2 Comments » | 
Print This Post
| 
Email This Post
Comments
March 23rd, 2009 at 7:21 am
No one can trust him for a lot of reasons. First, his tax problem. Highly unlikely it was an honest mistake. 2nd, he was a main author of TARP, which has yet to be effective. 3: He lied about the AIG bonuses. He knew, bonuses flew; and now the story changes because of outrage. We don’t have honest people. They must have another agenda, otherwise they’d be totally honest.
It is well documented to a point there is not a question they are not telling the truth. Here is why O and G are spewing misinformation!
<a href=”http://tinyurl.com/cuer6d”>http://tinyurl.com/cuer6d</a>
March 23rd, 2009 at 7:21 am
http://tinyurl.com/cuer6d