TALF Update

When I first posted about the TALF plan, not much was out there in the news or on the blogs, but now the opinion columns are rolling in. You know it’s scary when even Paul Krugman doesn’t like it, and he doesn’t. He calls the plan “cash-for-trash” because he doesn’t understand how the government could sell worthless assets and not lose:

“…the real problem with this plan is that it won’t work. Yes, troubled assets may be somewhat undervalued. But the fact is that financial executives literally bet their banks on the belief that there was no housing bubble, and the related belief that unprecedented levels of household debt were no problem. They lost that bet. And no amount of financial hocus-pocus — for that is what the Geithner plan amounts to — will change that fact.”

According to Mike Shedlock,

“Geithner’s plan is sheer hocus-pocus idiocy. . . . Looking at the details of the program, one might easily assume the sole plan was to enrich executives and shareholders at taxpayer expense.”

The stock market is alternately “leaping” and “plunging” in a spastic reaction to the plan.

My feeling is that the plan is not going to work, the government will shut it down, and the only alternative will be to “go Swedish” and nationalize the banks. Obama’s crew lacked the political will to nationalize, because — duh! — we all know how unAmercan that is. The TALF plan, the private-public partnership plan, certainly is American: leverage taxpayers money to help the really super rich get really super richer, and since the loans are non-recourse, only taxpayers lose.

Another alternative proposed at Marginal Revolution would be to force the banks to close until examiners have hashed out the good banks from the insolvent ones:

“…once all the remaining banks are good and known to be good, the problem of toxic assets no longer seems so paralyzing.

I’m still not sure that the Treasury buying bank assets is to best way to make this sorting, and that’s leaving aside the price tag. In fact maybe Treasury buying postpones this revelation of information.

Of course if eight of the ten banks are bad…”

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March 24, 2009 | Filed Under Great Recession 

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One Response to “TALF Update”

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