Robert Kuttner, a co-founder of the Economic Policy Institute,
Boston Globe columnist, publisher of
American Prospect Magazine, and former investigator for the Senate Committee on Banking, Housing and Urban Affairs, among many other distinguished career achievements, has nailed it in terms of defining everything that's wrong with the current vague excuse for a TARP II proposal now being put forth to all by U.S. Treasury Secretary Tim Geithner: "
What Went Wrong for Tim Geithner."
Along the way to doing this, Kuttner also provides us with some great behind-the-scenes insights as to how this played out in the Obama administration over the past few days, right down to explaining what happened with that so-called New York Times leak about all of this on Monday night, (See: "Geithner Said to Have Prevailed on the Bailout") and on which I blogged earlier in the week (and for which I caught a bit of flack from a few bloggers in denial), as well. Kuttner's narrative and opinions are a great read!
(NOTE: If you'd like more background, I've posted three or four diaries on this over the past week.)
What Went Wrong for Tim Geithner
Tim Geithner was supposed to be the answer to all our financial woes. Why, then, did the markets panic after he announced his plans for TARP?
Robert Kuttner | February 11, 2009 | web only
...This is not a plan that fixes Wall Street. It is a plan that rebuilds it using the very profit-hungry traders and exotic financial instruments that caused the crisis in the first place.
There were signs that some in the administration were uncomfortable with the proposal before it was even announced. In a strange and revealing preemptive leak, The New York Times published an anonymously sourced article on the eve of Geithner's performance in which other Obama officials took pains to distance themselves from Geithner. It was Geithner, they said, who had weakened the plan's more punitive elements and who had struggled against strict limits on executive compensation. It was Geithner's plan, and it would be Geithner, they implied, who should be blamed if it failed.
Their desire to distance themselves was not misplaced. The plan is a convoluted mess, but here is the essence: The basic problem is that America's largest banks are insolvent. They owe more than they own. Geithner's strategy is to disguise this reality. His problem is that Congress is in no mood to legislate another nickel of bailout funds. If his latest plan were written as legislation, it could not get even a majority of Democrats. So his scheme takes $100 billion of the Treasury's remaining $350 billion in TARP money, uses the Federal Reserve's enormous funds, which are outside congressional control, to leverage that sum to $1 trillion, and then uses that money to insure private purchases.