Skip to main content

Tomorrow Treasury Secretary Tim Geithner will roll out Obama's bailout plan. If reports are accurate, the plan is a huge gift to Wall Street and the wealthy courtesy of taxpayers. It's not just wrong; it's a political blunder. It will ignite populist anger on both the left and right, which will hamper Obama's ability to lead.

The Times described the plan yesterday. Here's the most disturbing part.

The new financial industry rescue plan, to be outlined in broad terms on Monday in a speech by the Treasury secretary, Timothy F. Geithner, will not require banks to increase their lending. That is despite criticism that institutions that already received money from the Troubled Asset Relief Program, or TARP, either hoarded it or used the funds to acquire other banks.

The incentives to investors could be in the form of commitments to absorb some of the losses from any assets they purchase, should their values continue to decline. The goal is to relieve the banks of their worst assets so that private investors might then provide more capital.

So, if I understand correctly, we'll give more money to banks but they won't be required to lend (and so they won't.) At the same time, our money will protect from risk rich people who buy these sickly assets.

What am I missing?

This strikes me as a huge substantive and political blunder. To push this plan right now is to seriously misread the moment. Perhaps it's not too late to change it?

UPDATE: Geithner, in a briefing with Congressional Dems, said banks would, in fact, be required to increase lending.

Several people have asked what approach I favor. (For some reason, they care.) Well, Team Obama rejected nationalization out of pure ideology, but that's the approach that I think makes the most sense. That's the approach favored by economists who were right about most things in the lead up to the crisis, like Joseph Stiglitz. As most of you know, he was one of the fathers--arguably the father--of the Third Way economics who left the Neoliberal faith in the late nineties (and won the Nobel Prize.) He says nationalization of banks is the only answer.

UPDATE 2: Roll out postponed till Tuesday.

Originally posted to david mizner on Sun Feb 08, 2009 at 12:22 PM PST.

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences