Treasury Secretary Tim Geithner’s
bad assets buy-up plan has been roundly knocked about by both economics and non-economics bloggers from across the political spectrum.
And, despite the plan
now being defended by himself, with bullshit PR such as “legacy assets,” the pig doesn't look any better with makeup.
Here’s the details of Geithner’s “assumption”:
The plan to be announced next week involves three separate approaches. In one, the Federal Deposit Insurance Corporation will set up special-purpose investment partnerships and lend about 85 percent of the money that those partnerships will need to buy up troubled assets that banks want to sell.
In the second, the Treasury will hire four or five investment management firms, matching the private money that each of the firms puts up on a dollar-for-dollar basis with government money.
In the third piece, the Treasury plans to expand lending through the Term Asset-Backed Securities Loan Facility, a joint venture with the Federal Reserve.
The third prong has already, in an earlier form, drawn drools from hedge funds and the like, meaning we should be suspicious.
The FDIC partnerships in leg one will also have these types of folks drooling.
To entice private investors like hedge funds and private equity firms to take part, the F.D.I.C. will provide nonrecourse loans — that is, loans that are secured only by the value of the mortgage assets being bought — worth up to 85 percent of the value of a portfolio of troubled assets.
Yeah, where do I sign up to get the government pay for 85 percent of something and still let me call it mine?
That leaves the second leg, and given both Geithner’s and Ben Bernanke’s lack of forthrightness on TARP and TARP 2.0 issues, what sort of guarantee will he have about any clarity re these investment management firms?
Elsewhere,
Krugman,
Calculated Risk and
John Cole weigh in, as do
Naked Capitalism and
James Galbraith.
One thing all of them miss, though, Krugman hinted at it in a previous blog post, and that is:
What if Geithner (Summers) NEVER, last-ditch never, is going to do the Sweden plan? What if this is, in essence, a take it or leave it offer?
Joe Stiglitz, the man who should be in Geithner’s seat, kind of thinks along those lines, wondering how many more times
will he try to ram this crap down our throats.
But, Geithner is not without defenders who are not named Obama or Summers.
Bucking the trend of the almost universal centrist-to-liberal economics blogbashing of Geithner’s TALF plans, Brad DeLong
goes totally homer for him. DeLong, who shows that myths of Berkeley being the hotbed of liberal academia are just that in its econ department, and also showing another reason why I thought Kevin Drum was such a squish at Washington Monthly, claims:
1. Geithner actually knows what he’s doing, and for more than his G. Sachs BFFs;
2. TALF as structured by Geithner is actually a bit of a financial burden for them, etc.
Krugman has now responded, congratulating DeLong for “the old college try,” then pointing out how
Ihe basically didn’t do the old college homework on a significant part of Geithner’s plan.
