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The reviews are in on Treasury Secretary Tim Geithner's plan to rescue the ailing banking system, and so far he's getting a lot of thumbs down, particularly from the Dow Jones, which headed south immediately after Geithner's speech, finishing the day down 382 points.

The plan is based on spending nearly $2 trillion, from the Treasury, the Federal Reserve, and from private investors. MSNBC broke it down as:

  • BAD BANK ASSETS - $500 billion
  • BANK CAPITALIZATION - $100 Billion
  • FORECLOSURES - $50 Billion
  • LENDING - up to $1 Trillion

But the overall reaction has been, where are the specifics? A few examples:

  • "Investors are disappointed by the lack of details and are skeptical about the effectiveness of getting the private sector involved," said Kathy Lien at Global Forex Trading.
  • David Kotok at Cumberland Advisors said Geithner "gave only sketchy details that would help clarify the program." "Markets and the country want clarity, transparency and reliability. Instead, they got promises it would be forthcoming but they did not get facts and details that would substantiate it," Kotok said.
  • Robert Brusca at FAO Economics said this proposal was far too sketchy. "I do not begin to understand how this private-public plan will work," he said.
  • "I wish the government would stop speaking," said Mark A. Coffelt, president and chief investment officer of Empiric Funds in Austin. "Why did you even call a press conference? Geithner said . . . nothing other than 'It's going to be transparent, good.' That's not exactly what we are looking for, it is frustrating."
  • "There was nothing to really grab on and say 'this is a revolutionary approach that has a really high chance of working,'" Denis J. Amato, chief equity strategist with Ancora Advisors in Cleveland, said of Geithner's speech.

According to the Wall Street Journal:

The absence of detail speaks to the thorny issues that lie at the heart of the financial crisis: how to value the toxic assets causing banks to report losses and how to shuffle aid to homeowners and stem the rise of foreclosures. Many of the potential solutions come with a host of fresh problems, which Obama officials have grappled with much as their predecessors did.

Paul Krugman, on the other hand, seems to think that it might be "not too bad," but he's not really sure:

It’s really not clear what the plan means; there’s an interpretation that makes it not too bad, but it’s not clear if that’s the right interpretation.

The plan deserves praise for what isn’t in it, at least as far as I can tell. There doesn’t seem to be provision for mass purchases of toxic waste at premium prices; there also doesn’t seem to be a massive “ring-fencing” guarantee against private losses on bad assets. In that sense the plan is better than what the last few weeks of of leaks led us to expect. [...]

So what is the plan? I really don’t know, at least based on what we’ve seen today. But maybe, maybe, it’s a Trojan horse that smuggles the right policy into place.

There is one group that was happy:

The American Bankers Association meanwhile lauded the plan. ABA president Edward Yingling called it "a comprehensive, yet flexible plan that can restore confidence in the markets. We are pleased they took the time to address the stress in the financial markets in a coordinated way."

Originally posted to Daily Kos on Wed Feb 11, 2009 at 07:40 AM PST.

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Comment Preferences

  •  So I guess the problem is (7+ / 0-)

    that the system is so upside down that no one can agree where to start or finish.

    Nationalization is a thorny issue because we don't know who to nationalize because we still don't know what exactly are on each banks books and where and who and everything.

    So this is is all one, big, gigantic clusterfuck.

    BR Cossacks for Barack!

    by BlueDWarrior on Wed Feb 11, 2009 at 07:43:24 AM PST

    •  Just redo the RTC (6+ / 0-)

      Resolution Trust Co that took over the failed savings and loans.  It was the least bad option.  Bankers will cry, but that's what is supposed to happen when you screw up your own investments along with the investments of half the country.

      "Speak out, judge fairly, and defend the rights of oppressed and needy people." Proverbs 31:9

      by zdefender on Wed Feb 11, 2009 at 07:50:01 AM PST

      [ Parent ]

      •  Yes, but... (4+ / 0-)

        the RTC took over already insolvent banks.  The problem right now is we can't actually determine which banks are insolvent.  That's where the "Stress Test" comes in.

        And you have to do it in such a way to avoid a domino collapse, like almost happened last fall.

        "President Obama will be the most liberal President of our lifetime."

        by rashomon on Wed Feb 11, 2009 at 07:52:11 AM PST

        [ Parent ]

        •  stress test (6+ / 0-)

          Sure seems like the devil's in the stress test.

          It increasingly feels to me like the whole bailout is a game of "who's gonna eat it." There's a lot of bad debt out there, someone's gotta eat it (since even the taxpayers can't cover it, as it turns out). Citibank shareholders? BoA shareholders? Who's gonna eat it?

          The "stress" test indeed.

          •  I've already said goodbye to my BofA shares (2+ / 0-)
            Recommended by:
            PsychoSavannah, JC from IA

            To think they were once worth $60 EACH.  
            Now the whole lot won't fetch that.

            Stress test?  Stress test???  I'll show you stress test!

            We need a new test.  Which banks are too big to rescue?  You know, those big ones with their low introductory rates.  With their sophisticated interest only and negative amatorization loans.
            They dug their whole.  Let them fall in.

            Support the small, local banks.

            Bush Administration: Proving the saying, "You can fool all most of the people some of the time, and 30% 24% all the time...."

            by Helpless on Wed Feb 11, 2009 at 08:36:20 AM PST

            [ Parent ]

          •  that's about it. Spread the pain! (0+ / 0-)

            it will be triage and many banks and other mortgage companies will go down, but some will survive.

            Countrywide's CEO seems very upbeat in an interview over the weekend with Judy Woodruffe on Bloomberg, I think that is where i heard him anyway.

            You know, it occurs to me that people might understand the depth of the financial hole the entire global system is in by envisioning it as a sort of nuclear holocaust that needs to be re-built, block by block.  Then they might be less distressed about 'bailout', which has the connotation of giving people something for nothing to let them re-build a house we had nothing to do with destroying.

            Neither did we have anything to do with Hurricane Katrina, that doesn't mean we don't need to re-build New Orleans.

            Part of the problem is that the populace has become used to someone else taking the blame and absorbing the cost, that's why we are so incredibly over-insured as a nation and litigious as a people.  Someone else has to pay.

      •  If the Banksters cry, then it is likely the (1+ / 0-)
        Recommended by:

        best thing to do for everyone else. Banks, IMHO, are by definition ongoing criminal enterprises. Banksters should be imprisoned when they are found to violate regulations. Not just fined. Hell, if you fine Banksters, they just squeeze a little more vigorish out of us anyway. The only solution is more banksters in PMITA prison, pronto!

      •  those were different times (0+ / 0-)

        when in general one mortgage was owned by one lender. Today one mortgage could be owned by 100 lenders, in fact the original mortgage doesn't even exist anymore, it has been 'securitised;, a misnomer if there ever was one, and is now split into 1000 crumbs and sold as shares. Sort of like time shares in a mortgage.

        That to me appears to be the basic problem. Noone knows who owns what portion of the original loan, and the only way to solve it is to take the house apart brick by brick.

        That of course is snark!

    •  Alexander Hamilton would be smiling. (7+ / 0-)

      Assuming colonial war debt was his pet issue and I could imagine him making a similar case for nationalizing the banks and poison assets of today.

      It is a cause for concern that an anti-science position exists and has credibility.

      by Common Cents on Wed Feb 11, 2009 at 07:57:26 AM PST

      [ Parent ]

      •  I really hope so. (1+ / 0-)
        Recommended by:

        I wonder if re-creating the federal bank may need to happen. Caveat: I need to read how Jackson dismantled the bank. The federal bank was created constitutionally, but with a 20-year limit that was renewed for another 20 years in 1808, but when 1828 rolled around, Jackson nixed it. That's my understanding. I don't know quite the impact, and I'll read Schlesinger's The Age of Jackson before I read what that Newsweek guy wrote.

        "Half of the American people never read a newspaper. Half never vote for President. One hopes it is the same half." - Gore Vidal

        by sapper on Wed Feb 11, 2009 at 08:05:32 AM PST

        [ Parent ]

        •  I don't think a national bank can work now. (2+ / 0-)
          Recommended by:
          leveymg, MoshebenAvraham

          The United States is far too large and in far too large of a global economy to centralize our banking system. We want to encourage credit and investment. People with money will not be encouraged by bureaucrats running the banks. One reason is that governments in a representative system are not stable as a rule. They elect new leaders with new ideologies all the time which means the leadership of the bank would change constantly and that is not something investors find comforting.

          It is a cause for concern that an anti-science position exists and has credibility.

          by Common Cents on Wed Feb 11, 2009 at 08:18:55 AM PST

          [ Parent ]

          •  National Bank fine if Rep Waters is in charge! (1+ / 0-)
            Recommended by:

            Watching Rep. Waters rip into the "Captains of the Universe" at the Banking Committee hearing was a pure joy.  She is fearless and forced the investment CEO's to at least hear, if not answer, serious questions and their PR response attempts were shown up for all to see.  

            She may not always have the answers, but she sure knows how to probe and pressure those who continue to play the public and taxpayers for fools.

          •  We'll nationalize risk, but privatize profits (0+ / 0-)

            When the GSEs were created -- Fannie Mae, Freddie Mac -- the concept was to guarantee the risks of mortgage lending but privatize the profits by retailing the business end through banks and mortgage companies.

            That socialized the risks, giving these investment vehicles the stamp of government guaranteed payoff, which inflated their value and made them an attractive product.  Good enough.  But, then some bright light on Wall Street got the idea to bundle these with high-risk privately-issued mortgages, and sell derivatives that were bought up by speculators betting the whole rotten Ponzi scheme would implode.

            Well, we've seen how well that works.  Seems the proposed toxic repository bank is just another GSE.  Sure enough that too will be securitized, and become another bond-issuing semi-public agency, issuing securities which hedge funds will use to blow up yet another part of the economic system.  The currency, next time?

            And, so, the carousel goes around and around.

            But, it would be un-American to suggest that the contraption might work better the other way around, with businessmen taking some of the risks, and the public realizing some of the potential gains from a nationalized bank?  Naw.  Un-American.  Krugman may have suggested it. Let's call it a "rationalized" banking system.  Give it whirl, counter-clockwise, this time.

    •  Obama discussed nationalization last night. (5+ / 0-)

      I've posted a diary, Obama On Bank Nationalization which highlights his remarks as well as those of Roubini and Krugman.

      "If a free society cannot help the many who are poor, it cannot save the few who are rich." JFK - January 20, 1961

      by rontun on Wed Feb 11, 2009 at 08:00:29 AM PST

      [ Parent ]

    •  I'm thinking Geithner is coying nationalizing (5+ / 0-)

      the banks....and hence Krugman's lukewarm approval.

      Let's be honest, Wall Street was not going to be happy unless the government took buttloads of cash and took stinky rancid assets off their hands.

      Cry me a fucking river, Wall Street. This is what Geithner's plan does and why I think it's sort of nationalizing the banks:

      1. Capitalizes needy banks
      1. Steps into the secondary loan market (those who buy packaged new loans) because it's frozen right now.
      1. Addresses falling asset values (cuz, face folks, you can't blame "irresponsible borrowers" anymore when EVERYBODY'S values are dropping like stones)
      1. Deals with the stupidly-named "legacy" mortgages (bad loans)

      all by temporary government infusion and regulation and participation until private financing can take over.

      The government has already stepped in on the commercial paper markets.

      There's not a lot left to keep banks from being nationalized. It's sort of back alley nationalization and that may be as close as we can get to it.

      I except details to come, but what this tells me is the following:

      Wall Street isn't getting a free ride and they will have to participate in transparency. They'll have to take some knocks on restructured loans and they'll have to adhere to rules and regs they've been able to skirt so far.

      Fuck Wall Street. They have no leadership outside of concerted whining. They're lucky they're not being hung by their loafers.

  •  If the American Bankers Association is (11+ / 0-)

    happy, then I'm _________.

    "Peace cannot be achieved by force. It can only be achieved by understanding" Albert Einstein

    by BigAlinWashSt on Wed Feb 11, 2009 at 07:44:02 AM PST

  •  The main problem with the plan (2+ / 0-)
    Recommended by:
    Sherri in TX, Dave925

    is vagueness.  I felt like I was listening to him explain it in Spanish:  I could only apprehend bits and pieces.

  •  Eat a Banker - Save the World (5+ / 0-)
    Recommended by:
    Dave925, nhDave, JC from IA, uc booker, DLisa

    If Jesus saves, He'd better save himself From the gory glory seekers who use His name in death.... -Ian Anderson, Hymn 43

    by high bitrate on Wed Feb 11, 2009 at 07:45:40 AM PST

  •  Those financial guys sound like bloggers (3+ / 0-)
    Recommended by:
    soccergrandmom, droogie6655321, pvlb

    trying to decide what should come out of committee.

  •  Where do we get the money (3+ / 0-)
    Recommended by:
    Sherri in TX, Dave925, jgtidd

    pay for all of this? By selling bonds to foreign contries? How long are they going to want to invest in treasury bonds?

    McCain/Failin '08.

    by Aspe4 on Wed Feb 11, 2009 at 07:47:22 AM PST

  •  Well, yes, we don't (3+ / 0-)
    Recommended by:
    northsylvania, Dave925, jgtidd

    know enough about the "plan" and some of the things we do know aren't good. There's not enough on the foreclosure front and this reliance on private capital seems unwise and perverse.

    With its plan to shore up banks that was announced on Tuesday, the Obama administration hopes to entice investors like Mr. Marks, who has $55 billion at his command, to buy troubled assets from the nation’s banks and enable them to make the loans needed to jump-start the economy.

    The administration hopes, in short, to counterbalance some of the fear gripping the financial world with a bit of old-fashioned greed.

    To combat the bust, Washington wants to marshal some of the same financiers who grew rich during the boom: hedge fund managers and corporate buyout specialists.

    But Mr. Marks and other investors like him said they were in no hurry to wade into this mess. Distressed investors — “vultures” is the Wall Street term for them — aim to buy investments on the cheap in hopes of reaping big returns.

    Yet even for the vultures, the risks — political as well as financial — seem daunting. Some worry about being seen as profiteers who benefit at taxpayers’ expense, even though the economy could get worse unless they swoop in.

    So the plan is for taxpayers to protect from risk rich people as they invest in these troubled assets. It's so ugly--profiting from the crisis--that even the greediest of the greedy are reluctant to buy in. Or maybe it's just the financial risk involved. In any case: what's to like?

    We're headed toward nationalization.

    •  It did appear to me (2+ / 0-)
      Recommended by:
      Dave925, ohmyheck

      that the only way that taxpayers don't get boned is if there are legions of hedge fund managers with the IQs of nematodes.

      •  Not necessarily... (2+ / 0-)
        Recommended by:
        luaptifer, notquitedelilah

        the "toxic assets" do have's not like the entire country is in foreclosure.  The problem is figuring out what that value is.

        "President Obama will be the most liberal President of our lifetime."

        by rashomon on Wed Feb 11, 2009 at 07:56:23 AM PST

        [ Parent ]

        •  Call me an ideologue (1+ / 0-)
          Recommended by:

          but I doubtful that hedge fund managers, in effect insured by taxpayers, are our ticket out of this mess. But yeah, some of them, I'm sure, will find a way to get richer.

          •  This is unavoidable. (0+ / 0-)

            If this crisis is fixed, then it will be by some group coming out of it stronger than before. We can either make the private sector stronger with the government as the last resort insurer of the crisis or we can make the government stronger by nationalizing banks and having credit at the whim of whatever party is in power at the moment. I'll take private enterprise where the credit is not centralized and failure of one is not failure of all.

            It is a cause for concern that an anti-science position exists and has credibility.

            by Common Cents on Wed Feb 11, 2009 at 08:10:14 AM PST

            [ Parent ]

            •  I'll take government (1+ / 0-)
              Recommended by:

              where I have a slight say in it, as opposed to a few dozen rich people managing to torpedo the world's economy with no oversight.

              •  What happens when Republicans are in power? (0+ / 0-)

                This is the same problem Republicans are running into now. They spent like drunken sailors and expanded executive power while Bush was in office, but now they are stunned that the next president is a Democrat and is proposing massive spending and using his executive power.

                Be careful what you wish for. Credit markets at the whims of a legislature is dangerous and will destroy lending. See the Rhode Island problem during the Articles of Confederation. The people in debt far outnumbered those lending money so they voted in a legislature that passed laws saying you could pay your debts without interest in current value money rather than what the money was valued when you borrowed it. Well the masses were happy, but immediately any borrowing dried up and the economy of the state tanked.

                It is a cause for concern that an anti-science position exists and has credibility.

                by Common Cents on Wed Feb 11, 2009 at 08:23:52 AM PST

                [ Parent ]

                •  Do you have any examples from the last century? (0+ / 0-)

                  Say, newer than the Swedish nationalization?

                  •  Other than the communist countries? (0+ / 0-)

                    Of course we know the economies in the communist countries were nationalized and failed. It was the reason the Soviet Union collapsed. Not Ray-gun or the pope, but the fact that a government run economy just can't work. There are far too many variables to attempt to control an economy. It is like trying to control the weather. First we would have to definitively know what all goes into producing the weather which we don't and we don't know all that goes into creating a working economy either.

                    That is not to say the free market creates utopia or that regulation is not needed. We can understand that people exploiting others is not helpful and we can create laws to prevent exploitation and destruction of the economic system, but looking at any economic crisis as proof of the market failing or evidence that we need government ran economics is overreacting in my view.

                    It is a cause for concern that an anti-science position exists and has credibility.

                    by Common Cents on Wed Feb 11, 2009 at 08:55:35 AM PST

                    [ Parent ]

        •  I was trying to explain that problem (1+ / 0-)
          Recommended by:

          And the only way I could present it was gibberishly, as I did below in an email to a friend.  

          Sound like a reasonable way of saying it?

          What I don't understand is how anyone has any real sense of where things are valued at this point.  

          A substantial chunk of the problem seems, to me, to reside in the facts that in order to know where things are, one would have to be able to, first, have a transparent market, and second, have actual reporting and accounting of the values of those farflung tranches of MBS that are spread among how many different slices of how many different packages?

          It seems to me that the only time those tranches can be valued, now, is when the underlying asset goes at market value in some transaction.  

          Without that transaction, where is the handle on what these outstanding instruments look like?  

          And therefore, how big is the problem without that information in hand?

          adapting the world to himself...all progress depends on the unreasonable man
          -GB Shaw

          by luaptifer on Wed Feb 11, 2009 at 08:11:14 AM PST

          [ Parent ]

          •  Which is why the trillions of dollars (1+ / 0-)
            Recommended by:

            should have been (and still can be) given right back to the taxpayers.  Most of that money is going to end up back at the banks anyway through mortgage and credit card payments, so why not try to make 200 million Americans whole in the process?  $100K to each adult would go a long, long way to "fixing" many of our problems.

            Combined with the recovery package, it is a complete and total win.

            Not only do the "bad" mortgages get a value attached to them, the CDS and MBS market settles down a bit, regular people are out from under the boot of debt, and many go back to work.

    •  I think it is essential to get private investors. (0+ / 0-)

      The government working to minimize their risk seems a fair trade-off for them swallowing the poison pill of these assets.

      No plan can be pretty or perfect. No plan can stop some people from profiting from the pain of others. But, if we can take the lumps now and maintain private enterprise then I will count it as a success. Remember, Alexander Hamilton's assumption plan got a lot of merchants in new england rich that preyed on poor colonists, but that doesn't mean his move wasn't necessary.

      It is a cause for concern that an anti-science position exists and has credibility.

      by Common Cents on Wed Feb 11, 2009 at 08:07:55 AM PST

      [ Parent ]

  •  A stock broker said O should continue w's policy (4+ / 0-)
    Recommended by:
    Cedwyn, Dave925, JC from IA, I love OCD

    They are as out of touch as the goppers.

  •  They Don't Like It? (8+ / 0-)

    Good. I have a plan that will work. It's called "Nationalization". We can buy the goddamm banks for a helluva lot less than this 2 Trillion Buck sacrifice to the altar of "free market" capitalism and run the sonsofbitches right.

    Bury this particular cash cow of the Plutocracy and start over. They killed it. The do not get another whack at it on my dime. Dammit.

    "Much law, but little justice": Proverb

    by Dave925 on Wed Feb 11, 2009 at 07:48:36 AM PST

    •  Okay... (0+ / 0-)

      which banks do you buy?  All of them?  Some of them?  WHich banks are insolvent, and which aren't?

      If you're talking about all banks, that's at least 2 Trillion, if not more.  There's thousands of banks in the country...

      "President Obama will be the most liberal President of our lifetime."

      by rashomon on Wed Feb 11, 2009 at 07:54:19 AM PST

      [ Parent ]

      •  Well you see (2+ / 0-)
        Recommended by:
        mjd in florida, PsychoSavannah

        I doubt I can toss out an answer here to you in 10 seconds. But I do trust that Obama has people who can make this determination and in a timely manner.

        And not all banks, just the hopelessly insolvent.

        Quick, what's the market cap on B of A today? OK I peaked, it's $38 Billion. How much cash are we tossing at them again?

        "Much law, but little justice": Proverb

        by Dave925 on Wed Feb 11, 2009 at 07:59:58 AM PST

        [ Parent ]

    •  Problem I see with that... (0+ / 0-)

      Ok..we nationalize the banks. costs less than two trillion.

      But who's going to run them?  Do you think the federal government has a bunch of honest bank managers sitting around and waiting in reserve?

      If the banks get nationalized they are going to be run by the same people who got us into this mess.

  •  The American Bankers Association (6+ / 0-)

    heard the part of free money now and oversight manana.  Of course they liked it.

  •  For the banks that made problem, no free money (2+ / 0-)
    Recommended by:
    Dave925, owl06

    but new money for new lending and investment.

    Perlstein of Wapo says it's a good plan, just not going to inflate stock prices of banks currently under water with free money.

    "The first Republican who cries "Wolverines!" on the House or Senate floor has to be considered the front-runner for the 2012 Iowa caucus." JF on TPM

    by Inland on Wed Feb 11, 2009 at 07:49:04 AM PST

  •  The first qualm I have with this plan is that (5+ / 0-)

    it will require a lot of funding to come from the FED. And from experience with the earlier rescue, the Fed isn't really obliged to divulge where the money is going.

    With the Fed so heavily involve and the congress bypassed for much of the spending, as I understand this plan at any rate, it does not bode well for transparency.
    Also, this is a plan that seems designed to encourage inflation, which tells me that there is a risk of stagnation the Geithner fears.

    But again, my above remarks are based on little more than nothing, since that is all Mr. Geithner gave me yesterday..

    The Shape Of Things "Beware the terrible simplifiers" Jacob Burckhardt, Historian

    by notquitedelilah on Wed Feb 11, 2009 at 07:50:10 AM PST

  •  In other words, (12+ / 0-)

    Wall Street wants to know, specifically, when the truckloads of 'free' money will arrive, how large they will be, and what color they will be painted.

    Otherwise, they're not interested.  To them, you see, this whole economic meltdown thing is a natural disaster.  They had NO hand in it whatsoever. They are ENTITLED to be made whole!

    And, there had better be more tax breaks!  And, bonuses for all!


    •  they want to keep playing the same game (0+ / 0-)

      so what color will the truck's be painted?

      Attack of the Replicans, it's an inside job on America.

      by 88kathy on Wed Feb 11, 2009 at 07:59:50 AM PST

      [ Parent ]

    •  There are few options, but making them whole. (0+ / 0-)

      We could allow the real market correction to occur where many of these brokers would go the way of the dinosaur in a market selection process where the weak, foolish, and greedy are devoured, but a lot of innocent people would suffer as well.

      It is a cause for concern that an anti-science position exists and has credibility.

      by Common Cents on Wed Feb 11, 2009 at 08:01:40 AM PST

      [ Parent ]

      •  When the mob ran Vegas, (1+ / 0-)
        Recommended by:

        they thought THEY had a good deal!

        The 'House' must always win, otherwise there will be no free shrimp cocktails, and we'll have to start charging for the rooms!  The humanity!

        Look, our government stood idly by while Madoff ruined a lot of investors.  They all thought they had a sure thing, too.

        The fact is, there is going to be suffering from all of this.  The only question is, who is going to do the suffering.  So far, that 'downside risk' has been borne largely by all of us, and all of us are paying the price.

        When do those who got the 'upside rewards'  have to kick in?

        'Cause, otherwise we don't have a 'market'.  Not when the rewards are 'privatized' and the risks are 'socialized'.  All we have is legalized organized crime.

        •  I think we need to spread the pain around. (0+ / 0-)

          You can't be a free market advocate and not support these guys taking the consequences. I am in no way a corporatist. If we could do it without hurting the entire nation I would support a full blown market correction where those that deserve it get crushed and wiped away, but far too many innocent people would have to go with them so we will have to do the best we can. If helping them helps all of us then we have to do it, but we can still spread the pain around so the cost of this trickles up.

          It is a cause for concern that an anti-science position exists and has credibility.

          by Common Cents on Wed Feb 11, 2009 at 08:34:27 AM PST

          [ Parent ]

          •  See, I think the pain is already being spread far (0+ / 0-)

            too widely.  To a lot of people who had so little to do with this that they didn't even have any 'investment' in the market at all.

            But, I don't see where one damn bit of the pain has been spread to Wall Street types.  They're all still getting their bonuses, even as a great many others are already feeling the pain quite acutely, despite having nothing to do with the mess.

            If we have got to the point that Wall Street cannot be allowed to fail because it might hurt 'innocent' investors, then I repeat: We don't have a market.  We have legalized, institutionalized, organized crime.  At a level that would have surely made the old mob bosses blush.

            But, then, the old mob bosses weren't nearly so greedy as Wall Street.

            •  American spending habits are indictable. (0+ / 0-)

              Let's be clear here. It is not as bad as big shots gaming the system, but the American people have been guilty of spending beyond their means, running up debt they had no way of paying back, and signing leases, mortgages, and car notes that they could never cover. The American people (myself included) have not lived within our means and have spent ourselves into debt. We were no better than the governmnet in handling our finances which is why I think we need to start having mandatory financial classes in high schools and college like we mandate science and math class.

              Remember, this crisis would not be as dire if the American people had been saving instead of spending. We would be in a position if we had saved to allow the market to correct itself and devour these vultures of Wall Street. As it is, we were doing the same things on a smaller scale that they were doing on a large scale.

              It is a cause for concern that an anti-science position exists and has credibility.

              by Common Cents on Wed Feb 11, 2009 at 09:19:37 AM PST

              [ Parent ]

              •  Americans were told to spend, repeatedly, (0+ / 0-)

                and from all directions.

                Savings was, decidedly, NOT encouraged.

                So, Americans did what they were told to do.

                Which is different from Wall Street, which spent its time looking for better ways to steal.

                •  Doing what you were told is the Nuremberg defense (0+ / 0-)

                  Americans knew better. I don't think it takes a degree to know when you make borrow and spend more than you make that it won't end well. That doesn't matter who told you to do it.

                  It is a cause for concern that an anti-science position exists and has credibility.

                  by Common Cents on Wed Feb 11, 2009 at 11:04:32 AM PST

                  [ Parent ]

                  •  LMAO! GMAFB! (0+ / 0-)

                    Your sense of equivalencies is truly stunning!

                    The flat fact is, Wall Street has it's panties in a bunch right now EXACTLY because the American people have decided to save and not spend!  Wall Street is apoplectic about it, in fact!

                    Do you read the news at all?

  •  If the stock market doesn't like it... (17+ / 0-)

    that's a POSITIVE sign, not a negative one.  The market is going to hate any plan that actually works, because bank stock investors are going to get killed.

    I think the answer was pointed to yesterday...we're going to have the banks open up their books (the Stress Test) to determine which are insolvent and which aren't.

    "President Obama will be the most liberal President of our lifetime."

    by rashomon on Wed Feb 11, 2009 at 07:50:38 AM PST

    •  Exactly. (7+ / 0-)

      It may be backdoor nationalization.

      President Obama: No Easy Out for Wall Street.

      While banks will be encouraged to access private markets to raise any additional capital needed to establish this buffer, a financial institution that has undergone a comprehensive "stress test" will have access to a Treasury provided "capital buffer" to help absorb losses and  serve as a bridge to receiving increased private capital. While most banks have strong capital positions, the Financial Stability Trust will provide a capital buffer that will: Operate as a form of "contingent equity" to ensure firms the capital strength to preserve or increase lending in a worse than expected economic downturn.  

      Firms will receive a preferred security investment from Treasury in convertible securities that they can convert into common equity if needed to preserve lending in a worse-than-expected economic environment. This convertible preferred security will carry a dividend to be specified later and a conversion price set at a modest discount from the prevailing level of the institution’s stock price as of February 9, 2009.

      Under this plan, the Financial Stability Trust could end up owning large amounts of common stock in essentially insolvent banks.  

      Fact Sheet: Financial Stability Plan

      Paul Krugman is cautiously optimistic:

      So what is the plan? I really don’t know, at least based on what we’ve seen today. But maybe, maybe, it’s a Trojan horse that smuggles the right policy into place.

      What happens is much of the loss falls on shareholders as the shares are diluted by government ownership.  Bad assets are stripped out, and new capital (common stock) is raised.  If the stress tests show the bank is insolvent (based on an inability to handle worst conditions in the future), the shareholders do NOT get bailed out.  They don't get zero, but they will end up losing a lot of value.   Hence the sell off of bank stocks yesterday.

      That "Wall Street" does not like it means it is not a big  enough give away.  It's still unclear, but as Krugman says, maybe, just maybe. ...  

      "What we've seen the last few days is nothing less than the final verdict on an economic philosophy that has completely failed." -- Barack Obama

      by TomP on Wed Feb 11, 2009 at 07:57:05 AM PST

      [ Parent ]

      •  Tom, (4+ / 0-)
        Recommended by:
        88kathy, Cedwyn, TomP, MoshebenAvraham

        One thing I don't get is why people are rooting for nationalization here.

        It's not that I think it's a bad thing. I don't know enough about it to say whether it's a good or bad thing.

        What would nationalization of banks mean?

        "... I'm always good for a beer." --- Barack Obama

        by droogie6655321 on Wed Feb 11, 2009 at 07:59:14 AM PST

        [ Parent ]

        •  The shareholders get nothing (1+ / 0-)
          Recommended by:

          and the banks are taken over.  We own them, including all the bad assets.  We own a bank with negative net worth.  

          The taxpayers then would get the bad assets and a "new bank" would be created and spun off.

          Krugman and Stiglitz think it's inevitable and the only way out.  

          At this point, the money we put into Citibank and BoA would make us virtually majority owners if it were common stock.  The shares have crashed over two years.  

          If the banks are insolvent, that means their debts are bigger than there assets.  Broke, bankrupt.

          We need banks in this system.  Socialism is not happening this year.  :-)  Some like nationlism becuase of old political left concepts, but that's not what we are talking about here.  Others think it's the only fair way to do it becuase otherwise tax payers are subsidizing certain shareholders.

          "What we've seen the last few days is nothing less than the final verdict on an economic philosophy that has completely failed." -- Barack Obama

          by TomP on Wed Feb 11, 2009 at 08:04:45 AM PST

          [ Parent ]

        •  Here's teh Wall Street Journal explanation. (1+ / 0-)
          Recommended by:

          Bank nationalization, in the most practical form, means giving the U.S. government the power to control banks.

          That could mean taking control of the public shares, to the power to pick and install new management and boards of directors, and set corpotate strategy. The shocks of the credit crisis last fall spurred lawmakers to semi-nationalize the banking sector; nearly 314 institutions have already signed over some of their shares and other securities to the Treasury in return for $350 billion in government aid.

          The government has taken a dramatic intermediate step toward nationalization by taking effective control of American International Group, Fannie Mae and Freddie Mac, but leaving some of their shares on the public markets and their management in private hands. Proponents of U.S. bank nationalization now envision a program by which the government would take over only the largest banks, for a short period of time, in order to loosen the ties on lending. The government may also inject more capital into the banks if necessary, but the belief is that the presence of a government overlord acts more as an implied guarantee to soothe customers and prevent assets from going out the door.

          Why nationalize banks?

          In Western countries, bank nationalization is largely used as an emergency method to prop up banks during tough times, which includes  lending to small and medium-sized businesses and restructuring burdensome loans to consumers. It can help big banks avoid immediate insolvencey. Proponents of bank nationalization argue that current government solutions to the financial crisis have failed, in part because lawmakers have committed as much as $8.5 trillion to support programs without seeing a significant difference in the health of banks, public confidence, or an expansion of lending. Many major banks have accepted government funds but have hoarded them to protect against a rainy day or another steep drop in the value of their loans. The government has already provided $40 billion in cash to Bank of America, for instance, and added another $118 billion in support for the bank’s troubled debts. At Tuesday’s closing price, the entire market value of Bank of America was about $25.5 billion, meaning that the cash and guarantees from the Treasury are worth about six times as much as Bank of America itself.

          WSJ: Crisis Q&A: What "Bank Nationalization" Means For You

          The part above is not too ideologically biased.

          "What we've seen the last few days is nothing less than the final verdict on an economic philosophy that has completely failed." -- Barack Obama

          by TomP on Wed Feb 11, 2009 at 08:13:43 AM PST

          [ Parent ]

      •  Are you saying backdoor nationalization is good? (1+ / 0-)
        Recommended by:

        Are you wanting government run banks? I think that would be a disaster mostly because the whims of government do not make for good tidings on credit, lending, and investment.

        It is a cause for concern that an anti-science position exists and has credibility.

        by Common Cents on Wed Feb 11, 2009 at 08:03:56 AM PST

        [ Parent ]

        •  Yes, I am saying it is good. (3+ / 0-)
          Recommended by:
          hhex65, FishBiscuit, sillycilla

          I hoep you are scared.

          Oh, government run banks.  

          More scary that a depression.

          Go read some Hayek and make believe your false God of free market fundamentalism is not dead.

          The real world has passed by the ideologues who hid theoir doctrines in faux schools of economics.

          "What we've seen the last few days is nothing less than the final verdict on an economic philosophy that has completely failed." -- Barack Obama

          by TomP on Wed Feb 11, 2009 at 08:06:15 AM PST

          [ Parent ]

          •  So what happens when Republicans get elected? (1+ / 0-)
            Recommended by:

            You know, when in a representative democracy the other party is elected and controls the credit movement in the country? Will you be happy about handing Republicans the keys to the kingdom?

            You are basically wanting the credit spigot of the country to be completely ran by bureaucrats and politicians tied to the whims of the electorate? This is a recipe for disaster. You will have the potential for calamity because as the founders new concentrations of power with no checks is the path to tyranny.

            It is a cause for concern that an anti-science position exists and has credibility.

            by Common Cents on Wed Feb 11, 2009 at 08:13:38 AM PST

            [ Parent ]

            •  You are living in fantasies. (2+ / 0-)
              Recommended by:
              TJ, sillycilla

              The nationalization of banks is similar to the RTC take overs of savings and loans.  they get recapitalized and sold off.

              Don't let your exploitative heart palpitate.  Private enterprise can screw workers afterward.

              "What we've seen the last few days is nothing less than the final verdict on an economic philosophy that has completely failed." -- Barack Obama

              by TomP on Wed Feb 11, 2009 at 08:16:42 AM PST

              [ Parent ]

              •  This is a tad different. (0+ / 0-)

                I would have to see the plan mapped out rather than speaking of vague backdoor nationalization, but I think you would see the global economy recoil especially any nation invested in our debt to a nationalization plan.

                It is a cause for concern that an anti-science position exists and has credibility.

                by Common Cents on Wed Feb 11, 2009 at 08:35:53 AM PST

                [ Parent ]

        •  As opposed to their existing management (2+ / 0-)
          Recommended by:
          TomP, JC from IA

          who have bankrupted their organizations?  Yeah, I vote for government.

          •  You vote for government... (1+ / 0-)
            Recommended by:

            What about when people you don't agree with run the government. Would you want a George W. Bush running the banks or a Ronald Reagan running the banks. The concentration of power you are advocating for President Obama would be there for the next Republican fundamentalist president. Remember that. Private enterprise works because it spreads out the credit flow so we have tributaries and a matrix of rivers running to the ocean. This means if one fails all don't fail. If you nationalize the banks then if the government fails, all fail. This is how America survives bad presidents. We don't centralize power so that one bad president can destroy the country.

            It is a cause for concern that an anti-science position exists and has credibility.

            by Common Cents on Wed Feb 11, 2009 at 08:16:09 AM PST

            [ Parent ]

            •  Amazingly enough (1+ / 0-)
              Recommended by:
              JC from IA

              Dubya seems to have pulled it off.  

              You hate nationalization, figure out a way to bust up the big five and get rid of their greed and incompetence.  Otherwise you're asking me to bet with a busted flush against two pair because tomorrow I might get a full house.

              •  Government lacks greed and incompetence? (0+ / 0-)

                At least in the banking system we have multiple entities so failure of one does not necessarily mean failure of all. For instance small and regional banks are not collapsing today even though the national banks are tanking.

                You will find no utopia in government run banks because government is incompetent and greedy it just would be that now you would have all your eggs in one basket.

                It is a cause for concern that an anti-science position exists and has credibility.

                by Common Cents on Wed Feb 11, 2009 at 08:30:25 AM PST

                [ Parent ]

                •  We're talking about government-run bankrupt banks (1+ / 0-)
                  Recommended by:
                  JC from IA

                  so you're just wrong on the face of it.  Almost by definition they can't be worse than the existing management.

                  •  Buying failed banks is not a sound policy. (0+ / 0-)

                    If your focus is only on buying the failed banks then why not just let those failed banks go out of business and let the rest of the banks buy them up? Why does the government have to get involved soley for the bankrupt banks? The only way it seems to me that nationalization works is to buy them all up and actually nationalize the banking system. A competition between some nationalized banks and some private banks seems impossible.

                    It is a cause for concern that an anti-science position exists and has credibility.

                    by Common Cents on Wed Feb 11, 2009 at 08:39:11 AM PST

                    [ Parent ]

                    •  Fine (0+ / 0-)

                      The let the big five go bust.  No soup for them.

                      •  That might be feasible. (0+ / 0-)

                        But the government is there to protect our interests and our country. If we can't sustain their loss without lots of innocent people going down with the ship then I would rather help the banks to avoid hurting innocent people. I'm all for justice and market corrections that eliminate those that game the system and are blinded by greed, but we have obligations to the taxpayers and the country in general to do what we can to make this country work. I think it is a balancing act and I hope there is enough sticks to go with the carrots.

                        It is a cause for concern that an anti-science position exists and has credibility.

                        by Common Cents on Wed Feb 11, 2009 at 09:00:04 AM PST

                        [ Parent ]

                        •  Define innocent people (0+ / 0-)

                          And yes, stockholders do not count.

                          •  Okay... (0+ / 0-)

                            Small business owners, workers who've spent their entire lives saving for retirement via-401ks, employees of all kinds that work for companies that will go out of business if they can't get credit lines renewed and/or can't get help to reorganize in bankruptcy.

                            This credit crisis affects all of us not just the CEOs. I do agree that the government can stipulate things like pay ceilings for executives that require government loans. I'm saying we have to stablize this system so that those on the bottom that did not specualte or game the system don't get totally wiped out just so we can punish those at the top. I think it is a fact of life that we are going to have to help those that hurt us to survive.

                            It is a cause for concern that an anti-science position exists and has credibility.

                            by Common Cents on Wed Feb 11, 2009 at 09:15:12 AM PST

                            [ Parent ]

  •  Rumor has it (3+ / 0-)
    Recommended by:
    slinkerwink, FishBiscuit, uc booker

    that capping CEO pay to $500K per year has been scrapped by Geitner.  If that is true then-

    You're wrong for thinking I'm wrong, so that makes you wrong twice.

    by ohmyheck on Wed Feb 11, 2009 at 07:51:32 AM PST

    •  I'm inclined to agree with him, though (0+ / 0-)

      What does it cost to get a top notch person in the CEO chair? If they've got 2 trillion of my money, I want the best of the best managing it. The question is where to find those "best" people, that also had a minimal hand in causing (and benefiting from) the mess in the first place.

  •  One important consideration (2+ / 0-)
    Recommended by:
    Dave925, MoshebenAvraham

    I would ask not to forget the point that the principle of "living beyond one's means" is the basis on which the whole scam was built. While all the considerations mentioned in your great diary are worthy and important, we will have to learn from this mess that it is not possible for anybody to live beyond one's means on credit forever. Too many Americans were unaware of this insight for too long a time.

    I am aware of the unduly tight credit market, but still I got a shudder when I read of the projected amount for new "securitized consumer loans" in that plan ...

    Enlightenment and Responsibility ... P.S.: In the Palestine conflict debate, "Justice" is nothing but a code word for "more dead people".

    by anaxiamander on Wed Feb 11, 2009 at 07:51:50 AM PST

  •  On the one hand I would (2+ / 0-)
    Recommended by:
    Catte Nappe, JC from IA

    like to hear more specifics even though I doubt that I'm smart enough to understand the full implication of said specifics (but hopefully someone out there would be).  But on the other hand, it is nice not to have to hear the talk radio zombies glom on to one specific thing in the the plan that people aren't happy about it and act like it's the whole plan.  "See, we told you that you all wouldn't be getting free ponies!"

    STEELE: But they come- yes, they- and they come back, though, George. That's the point. When they go- they've gone away before, and they come back.

    by asm121 on Wed Feb 11, 2009 at 07:52:32 AM PST

  •  homeowners get .05 trillion (3+ / 0-)

    and the banks get 1.6 trillion

    banks get other subsidies too that are outside the cost of the act like interest on reserves:

    I this it fails to "use a heavy hand against the economic arsonists who ran our banks into the ground"

    and that fiery language is from FORBES. commies!

    "Your victory has demonstrated that no person anywhere in the world should not dare to dream of wanting to change the world for a better place." -- Mandela

    by agoldnyc on Wed Feb 11, 2009 at 07:54:20 AM PST

  •  I liked what Steven Pearlstein (23+ / 0-)

    said yesterday on Hardball

    PEARLSTEIN:  OK, Chris, Wall Street is not going to be happy until the Treasury fills up, you know, a thousand tanker trucks with cash and drives it up to Wall Street and unloads it in their loading docks, and takes the toxic assets off.  OK?  They‘re never going to be happy.  And to use as a criteria that the traders up in Wall Street, or the executives up on Wall Street aren‘t happy yet, well, they‘re never going to be happy, Chris, until you solve all their problem.  That is not our job to make them happy, frankly.

    MATTHEWS:  My worry is, like everybody else who has some stock, I‘m worried when this thing gets below 8,000.  I‘m afraid when it gets below 8,000, it is going to keep dropping.  That‘s my fear.  What do you think?

    PEARLSTEIN:  What I think, Chris, is what drove those markets down today is exclusively financial stocks, because those guys were hoping for those tractor trailers full of freshly-printed money, coming up to the loading dock.  And Geithner said, you know what?  It isn‘t going to be that easy, guys.  And by the way, how about saying, A, I‘m sorry, B, thank you, and C, what is your plan for this?

    So far we have heard nothing from them, a big goose egg on what their plan is.  These guys are hunkered down and they‘re contributing nothing.  Their leadership is nonexistent on this issue.  So for them to complain about Geithner, well, excuse me, but I don‘t ascribe much importance to that.  

  •  Youi are incorrect to say that. (5+ / 0-)

    With all due respect you are incorrect to say that the market gave thumbs down on Geithner's proposal.

    The market started to dive immediately as Geithner started speaking.  No one could have possibly already digested what he had to say.

    Instead, the market did a rather typical thing:  it bought before the news, and then it sold on the news.  It was purely speculative timing on the part of traders.  It's an old adage:  buy the rumor, sell the news.  

    Better keep your opinions on issues where you are much more knowledgeable.  Because I highly respect your diaries and comments.

    •  Excellent point. (0+ / 0-)

      See also Stephen Pearlstein's discussion of this on Tweety's show last nigght.  Link in my latest diary.

      Men with guns maturing in age will always pay a shitty wage.--Belle & Sebastian

      by andrewj54 on Wed Feb 11, 2009 at 08:11:03 AM PST

      [ Parent ]

    •  I based that on (0+ / 0-)

      ...what was in the articles I read (linked above):

      Traders and Wall Street analysts attributed the nosedive to a lack of detail in Treasury Secretary Timothy F. Geithner's highly anticipated speech earlier in the day, in which he described the administration's plan to commit up to $1.5 trillion in public and private funds to help financial firms and get credit rolling through the economy again.

      Treasury Secretary Timothy Geithner promised forceful action to get credit flowing again in the economy, but the lack of detail in his much-anticipated speech helped drive stocks down nearly 5%, the worst selloff since President Barack Obama assumed office.

      Financial markets saw wild gyrations after the announcement. Stock markets went into a freefall, and Treasury bonds surged as investors sought a safe haven from market turmoil.

  •  Oh, Joy! The bankers love it. (1+ / 0-)
    Recommended by:

    To quote Bob Dylan, "Where's a hole I can get sick in?"

    Sarah Palin is the skinny hipster jeans of ignorance crushing the balls of wisdom.

    by president raygun on Wed Feb 11, 2009 at 07:58:37 AM PST

  •  They don't know what they're doing (1+ / 0-)
    Recommended by:

    that's simply my conclusion. What Geithner presented was a total joke. They really don't know what the hell to do--or are putting lipstick on Bush's pig, because it's basically the same thing.

    "People place their hand on the Bible and swear to uphold the Constitution. They don't put their hand on the Constitution and swear to uphold the Bible." --J.R.

    by michael1104 on Wed Feb 11, 2009 at 07:58:55 AM PST

    •  Yeah, Obama/Axelrod's plan (0+ / 0-)

      that was floated as a trial balloon sounded terrific and then Geitner tore all the teeth out of it. WTF. O' you are the president, you're allowed to tell your treasurey sec. "Look, you're a dumbass, we're doing it my way."

      GOP - GOt nuthin' and Proud!

      by president raygun on Wed Feb 11, 2009 at 08:04:06 AM PST

      [ Parent ]

      •  you have no idea what you are talking about (0+ / 0-)

        if you had some facts to back this up it would be great.

        Obama is president, he makes the calls. If Geitner is making the calls, then I have a major problem with Obama. Obama is talking about the details of the plan. He knows what is, and what the risks are.

        First they ignore you, then they ridicule you, then they fight you, then you win - Gandhi

        by mysticlaker on Wed Feb 11, 2009 at 08:18:48 AM PST

        [ Parent ]

        •  All the details of the plan that Obama talked up (0+ / 0-)

          were killed in a meeting in which he and axelrod relented to Geitner. I read it on huffpost yesterday and no... I will not waste my time scouring the net for a link. Google is a wonder.

          GOP - GOt nuthin' and Proud!

          by president raygun on Wed Feb 11, 2009 at 08:40:15 AM PST

          [ Parent ]

  •  Yo (1+ / 0-)
    Recommended by:

    The plural of thumb is not thumb's; it's thumbs.

    This adding apostrophes for plurals is becoming an epidemic.

  •  Love Krugman (5+ / 0-)

    He's getting so much better at communicating complicated economic thought and theory.  'Interpretation' is a word he used to indicate that it's anyone's guess what the plan really means.  Kudos to nuance.

    An error does not become truth by reason of multiplied propagation, nor does truth become error because nobody sees it. Mohandas Gandhi

    by msmacgyver on Wed Feb 11, 2009 at 08:00:18 AM PST

  •  B....aka B....:you know how to get a laugh, viz (1+ / 0-)

    the last section.  A laugh coming just about when I'd like to scream.....Thanks.

  •  It the banks that are holding up the reforms (2+ / 0-)
    Recommended by:
    Dave925, mjd in florida

    If you listened to Obama last night he said that the banks have yet to come clean on their toxic assets.

    Also be aware that the private capital that the administration wants to use to assist in the bailout are trying to cut the best deal possible for their investors.

    So between the foot dragging by the banks and the hardball from private capital there was not much for Geithner to announce.

    This is a big time poker game that is being played out as the US economy is heading for a landing in the Hudson River.

  •  can't we just write the pink unicorn assets (3+ / 0-)

    off?  i mean, it's all fantasy/unrealized money anyway, a giant bookie's sheet.  just declare all that nonsense for what it is and say "fuck it."

    "Government, like dress, is the badge of lost innocence; the palaces of kings are built upon the ruins of the bowers of paradise." Thomas Paine, Common Sense

    by Cedwyn on Wed Feb 11, 2009 at 08:01:10 AM PST

    •  Too big? (1+ / 0-)
      Recommended by:

      the amount of outstanding derivatives worldwide as of December 2007 crossed USD 1.144 Quadrillion, ie, USD 1,144 Trillion.....

      1. The entire GDP of the US is about USD 14 trillion.
      1. The entire US money supply is also about USD 15 trillion.
      1. The GDP of the entire world is USD 50 trillion. USD 1,144 trillion is 22 times the GDP of the whole world.
      1. The real estate of the entire world is valued at about USD 75 trillion.
      1. The world stock and bond markets are valued at about USD 100 trillion.
      1. The big banks alone own about USD 140 trillion in derivatives.
      1. Bear Stearns had USD 13+ trillion in derivatives and went bankrupt in March. Freddie Mac, Fannie Mae, Lehman Brothers and AIG have all 'collapsed' because of complex securities and derivatives exposures in September.
      1. The population of the whole planet is about 6 billion people. So the derivatives market alone represents about USD 190,000 per person on the planet.

  •  Honesty points for Krugman. (1+ / 0-)
    Recommended by:

    No honest person anywhere is sure.
    It's the nature of the beast.

    Economics is a hairy, hoary blend of finance and psychology.

    Free speech? Yeah, I've heard of that. Have you?

    by dinotrac on Wed Feb 11, 2009 at 08:02:16 AM PST

  •  an intermediary step (1+ / 0-)
    Recommended by:
    Catte Nappe

    before bank nationalization.

    Let's get to work.

    by owl06 on Wed Feb 11, 2009 at 08:02:18 AM PST

  •  You know, honestly, I wish they'd STFU (1+ / 0-)
    Recommended by:

    I'm tired of hearing what wall street types and investment people think. Let's see - you are the people who bought the CDOs and the toxic assets. Why the FUCK should we trust your advice? Buy a clue. STFU.

    •  These happen to be the ones who are telling us (0+ / 0-)

      we should not be shoveling trillions of dollars blindly down a hole, which Geithner--also "a Wall Street type" and "investment person" (however you define it)--wants to do, and which the Daddy Warbuckses at the American Banking Association are glad to see happen because they are the recipients of said trillions of dollars.

      But, purchasing overpriced toxic assets by the billion to support the principle that corporations own their profits, and the public their losses, will always have its cheering section. I just don't think that cheering section should be in the Obama administration. What about you?

      "It's like we weren't made for this world, But I wouldn't really want to meet someone who was." --Of Montreal

      by andydoubtless on Wed Feb 11, 2009 at 08:16:46 AM PST

      [ Parent ]

  •  The Geithner Speech (2+ / 0-)
    Recommended by:
    andydoubtless, drpmeade

    And comments from Obama and the media later on in the day made me want to emigrate.

    You can call me "Lord Bink Forester de Rothschild."

    by bink on Wed Feb 11, 2009 at 08:04:54 AM PST

    •  Emigrate to where? (1+ / 0-)
      Recommended by:

      As far as I can see Wall Street and our financial geniuses have screwed not only the United States but the rest of the world as well. China can't call in all of its debt and paper that it bought because it would cause a complete market collapse. Russia still loves rattling sabers, but there wealth was cut drastically by the collapse of the hyperinflated oil markets.

      Let's face it: Nobody has a clue as to what will really help in this crisis so that's why Geithner's proposal was so vague. The banks are at the root of all the trouble and the majorities are probably insolvent.

  •  The market didn't like it (2+ / 0-)
    Recommended by:
    mjd in florida, MoshebenAvraham

    because of the stress-tests.
    Stephen Pearlstein of WaPo said that the bulk of the divresting was in financial services.

    See my latest diary if you are interested.

    Men with guns maturing in age will always pay a shitty wage.--Belle & Sebastian

    by andrewj54 on Wed Feb 11, 2009 at 08:08:42 AM PST

  •  But Jim Cramer's response is the best!: (1+ / 0-)
    Recommended by:

    "It's like we weren't made for this world, But I wouldn't really want to meet someone who was." --Of Montreal

    by andydoubtless on Wed Feb 11, 2009 at 08:12:04 AM PST

  •  the fact that banks like it tells you it SUX n/t (1+ / 0-)
    Recommended by:
  •  A better plan... (0+ / 0-)
    ...would have been to announce nationalization of TARP fund-receiving banks, followed by mass firings of their loser Boards and upper management.  Bring in managers from the GAO to run the places for a while.  They can't possibly lose more shareholder value than the present worthless crew did.  Characterize the whole thing as a bold move to revive shareholder value in these companies, and the market will come back.  Oh, and it'll have the aded effect of scaring the shit out of other bank managers who might have been thinking about creating/buying/selling flatulent fairly-tale securities in the future.

    Wall street needs a purging, and everyone knows it--except Wall Street and Congress.

    I'd rather have a bottle in front of me than a frontal lobotomy.

    by TheOrchid on Wed Feb 11, 2009 at 08:14:48 AM PST

  •  a musically tribute to our economy... (0+ / 0-)

    die welt ist shizer

    by Unbozo on Wed Feb 11, 2009 at 08:14:56 AM PST

  •  pop-psych analysis here (0+ / 0-)

    maybe the reason Obama is proving to have such a soft spot for banking executives is that his grandmother, to whom he was so deeply attached, was a highly skilled career banker. (In Geithner's interview with Brian Williams last night, G. even somewhat resembled the image of the late Mrs. Dunham that was used in one of Obama's campaign commercials.)

  •  wall street was sad because geitner's plan (2+ / 0-)
    Recommended by:
    MoshebenAvraham, itzik shpitzik

    is not a give away...

    The stress test is scaring the shit out of wall street, for good reason.

    First they ignore you, then they ridicule you, then they fight you, then you win - Gandhi

    by mysticlaker on Wed Feb 11, 2009 at 08:16:55 AM PST

  •  Edward Yingling (0+ / 0-)

    wasn't he the credit card spokesman on Frontline the episode "The Secret History of Credit Cards"?

  •  personally I took the stock market tanking (2+ / 0-)
    Recommended by:
    andrewj54, MoshebenAvraham

    as a positive sign. It meant that the traders, who make money selling short or long, whether the market is making money or betting on it losing money, don't have a clue either what the depth of the problem is and were waiting for signs that it was safe to go back into the water.

    Their panic selling shows that Geithner's decision to send government auditors in to examine the financial institutions and banks books, maybe as a trojan horse, preparatory to nationlising some aspects of them, means the cowboy days are over and the sheriff has come to town and means business.

    It is a very good sign inmo and that basically was what Paul Krugman intimated last night on PBS News Hour.

    The teachers have returned to the classroom and the riots are contained.

    It is a huge mistake to judge the health or sickness of the  financial global stability by the way the markets tank or rise.  They are giant gambling casinos and know no morality.  They'll bet their last dollar oin the exact moment the global  financial system crashes!!!  bottom feeders all.

    •  I just emailed Rachel Maddow about this (0+ / 0-)

      It is a huge mistake to judge the health or sickness of the  financial global stability by the way the markets tank or rise.

      That's exactly what she did on her show last night.  Very surprising.

      Email her at and let her know what you think.  You can watch the segment at (sure you know that).

      Men with guns maturing in age will always pay a shitty wage.--Belle & Sebastian

      by andrewj54 on Wed Feb 11, 2009 at 08:24:00 AM PST

      [ Parent ]

      •  I watch most nights and feel she has gone (0+ / 0-)

        off message a lot lately to make cheap populist points, based in ratings not reality.  

        I have started to watch the financial channels a great deal more than I used to and it is fascinating to watch in the night as the Asian markets open , then move through Europe and finally the USofA.  It is like watching a tsunami ripple around the globe and clearly shows the gambling nature of the markets that react en masse to ups and downs.

  •  The Trojan Horse (1+ / 0-)
    Recommended by:

    The Trojan Horse that Krugman speculates about are the audits. His assertion last night on The Newshour was that once the auditors discover just how insolvent the banks really are a temporary nationalization of them will be the only logical choice. But as he said, that is only one possible interpretation.

    •  yes, I am aware of that (0+ / 0-)

      I understood what I was hearing. I didn't think they were sending in a Trojan Horse under cover of darkness disguised as a cleaning crew so when the workers came in the next morning they would find themselves unemployed and the banks taken over by Geithner's minions.

      The soldiers will be government auditors as was made quite clear, by if I recall correctly Paul Krugman.  They can then hopefully determine how these 'securities' or toxic assets which have been sliced and diced, pureed and mashed and sold in crumbs to investors all over thew orld, so noone knows how to value them, in crumbs, in slices? what!!!!!

  •  I wouldn't pay the stock market any mind (3+ / 0-)
    Recommended by:
    askew, JC from IA, itzik shpitzik

    The best plan would have been to naitonalize the banks, and if that was what was announced I guarantee the market would have gone down even further.

    Any good plan is going to call for transparency and accountability, and the market isn't going to like it.

    •  Stock Market is not a useful metric for anything. (0+ / 0-)

      It's so amazing to see television hyperventilating every time the stock market dives after financial news comes out. It doesn't matter!!!

      They would do it for most any damn issue!

      "Let's make sure that there is certainty during uncertain times in our economy." -- George W. Bush, Washington, D.C., June 2, 2008

      by Wynter on Wed Feb 11, 2009 at 09:05:24 AM PST

      [ Parent ]

  •  How to get the banks to loan money (0+ / 0-)

    Under George Bush, hundreds of billions (billions!) of dollars were doled out to the banks because we were told it was urgent to solve the "credit crunch" and get the banks loaning again. Instead, banks used the money to, among other things, buy other banks, an action which eliminates jobs. Now Obama and Geithner are about to follow with more of the same.

    Really, if you don't want to have the government loan money directly (i.e., by nationalizing a bank and setting its policies according to public priorities), and you insist on using private banks, making sure that banks use the money to make loans is simplicity itself. For every billion the bank loans out, the government loans the bank the same billion. For every billion the bank spends to buy another bank or give a bonus to their executives or anything else, they get nothing.

    What, too simple?

    Eli Stephens
    Left I on the News

    by elishastephens on Wed Feb 11, 2009 at 08:34:54 AM PST

  •  for those who still don't quite get the (0+ / 0-)

    gravity of the position the lending institutions are in, no matter how they got there, is articulated quite clearly in this NYT article.

    Geithner's strategy is a smart and sensible one and basically diametrically different from Paulson's throw money at the problem. What I heard anyway was that they were going to go in and find out exactly what shit has been shovelled under the rug before giving anyone anything.

    No wonder the markets are quaking in their boots.  This is time to invest in 'house cleaning companies'!!!

  •  Register for NetRoots Nation Aug13/16 Pittsburgh (0+ / 0-)

    SIGN UP for NetRoots Nation! 80 % of success is just SHOWING UP

    by Churchill on Wed Feb 11, 2009 at 08:47:21 AM PST

  •  Damn Bobbleheads! (1+ / 0-)
    Recommended by:
    JC from IA

    Gee... I guess this guy should write faster? What is it with people? Of course he doesn't have ALL the fineprint defined yet!! But at least he didn't bring a three page outline to Congress!

    The fact is that this has never been done before at this grand scale. More people than we have in the Treasury Dept and the Fed are going to have to add definition to this overall plan. We need to get the Banking system involved in the definition as well. And the investment arm of Wall Street to start work on how each of these badly bundled loans are to be approached. Each one is considered a financial vehicle, but there are more combinations than you would believe. It's like cleaning out an attic the size of a small country in time for a detailed audit. It ain't happening quick!

    Patience is needed on this financial plan. At least this time around we have people at the helm that will actually give complete transparency to the actions they take. But its going to be a long process. Today, I give Geithner the benefit of the doubt since in only inherited this mess and has been working on it less than a month. To bring anything back to Congress in that short time period takes Balls!

    Congress passed the TARP Bailout without considering the results. They need to give the new administration a fair shake since they screwed up when they were dealing with the idiots in the Bush Administration and gave them a Blank Check back then. No squabbling on the Hill. You don't have that great of a record in doing things right in this area. Listen to the smart man and nod knowingly like the friggin bobbleheads you are. Give advice when and where its needed. Otherwise, keep your damn politics out of it. Let the man work for his living!

    "Let's make sure that there is certainty during uncertain times in our economy." -- George W. Bush, Washington, D.C., June 2, 2008

    by Wynter on Wed Feb 11, 2009 at 09:00:37 AM PST

  •  No Money for Awards (Bonuses) (0+ / 0-)

    The banksters were really mad because there was less money for the bankster awards, aka, bonuses.  I think the big thing was the money for helping regular (not rich) homeowners with their foreclosures.  It looks like it will make banks help homeowners refinance their homes.  Bankers would rather steal the homes and sell them over and over again at high interest rate to people who can't afford the loans so will be foreclosed on again.  Banks make money on bad loans, and they want to continue their same practices.  President Obama needs to set up more regulations, and be tougher on banks.  That is my biggest problem with Geithner.  I don't think he has it in him to be tough on wallstreet.  Why we have a wallstreet insider as Treasury Secretary beats me.  Are wallstreet people the only finance people President Obama could get????

  •  "So what is the plan" that is the problem (0+ / 0-)

    The excerpt from Paul Krugman is on point---"What is the plan?"

    Geithner failed the test that Pres. Obama set out in his press conference about Geithner's moment "in the sun".

    One is tempted to say that Geithner's speech was as well prepared as his infamous "Turbotax" personal tax return.

    See from Huffington post:

    It is one of the many comments on point.

    I hope Geithner really is as capable as President Obama says, but so far Geithner is not revealing that the confidence is well placed.

  •  The TM meme lacked specifics (0+ / 0-)
    about which specifics they thought were missing.  
      All I heard yesterday was that same "it lacks specifics" meme, which I finally tuned out because it was repeated so often without much background.

    My Karma just ran over your Dogma

    by FoundingFatherDAR on Wed Feb 11, 2009 at 09:49:50 AM PST

  •  Heads up people! We are being targeted !! (0+ / 0-)

    Public Knowledge, a DC non-profit interested in protecting citizen's rights in the internet, and other reporting sites are reporting that Diane Feinstein is attempting to attach a repeal of Net Neutrality to the bailout bill during the bailout conference proceedings. She apparently failed during the Senate vote. If she suceeds it would be a huge political loss to online communities such as this one !

  •  Andrew Sullivan 'A Wacky Idea' (0+ / 0-)

    wacky maybe, but it shows the complexity of the problem of these toxic assets and why Geithner's go slow and find out what's there approach is better than anything else right now.

  •  I think we need to stop making one little... (1+ / 0-)
    Recommended by:
    JC from IA

    ... mistake in the telling of this.  That is the faulty notion that the stock market began to tank by 275 points as soon as Geithner began to speak.  That's not true.

    The Dow was already down 190 points of that 275 before he even turned on the mic.  So really the actual response to his words were only 85 points down.  A decision they seemed to have already made before he took the podium.

    Remember September?  The dow tanked 777 points upon passage of the TARP - something they all wanted - something that was incredibly vague.  We cannot allow the Dow jones to be the lead indicator on whether or not the Obama administration is doing a good job.

    They had eight years to f'this up.  Geithner's been in office for two weeks.  I give him the benefit of the doubt.

    And for those who say we can't trust Geithner because he's beholden to the banks... I like the answer he gives to Bloomberg here:Geithner's Own Words on Efforts to Ease Financial Crisis.  Essentially he says he has been a public servant all his life.  He is in it to improve the system and work for Obama and the American people.  I think he is credible in this.  

    As far as whether it will work, we shall see.

  •  Dowd nails it---unfortunately---Geithner voice cr (0+ / 0-)

    voice cracking and all

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