Posted on 02/17/2009 12:09:46 PM PST by USFRIENDINVICTORIA
Investors had any number of reasons to be in a grumpy mood on Tuesday. Add this one: The Washington Post has published an article looking at the origins of Treasury Secretary Tim Geithner's financial rescue plan, unveiled to hoots and hollers – and selling – last week. (Hat tip: Infectious Greed). According to the article, Mr. Geithner and his team had been working on a different plan for weeks, but shredded it just days before his speech because he thought it was, in the Post's words, “too expensive, too complex and too risky for taxpayers.” The Post continues: “They needed an alternative and found it in a previously considered initiative to pair private investments and public loans to try to buy the risky assets and take them off the books of banks. There was one problem: They didn't have enough time to work out many details or consult with others before the plan was supposed to be unveiled.” In the end, though, Mr. Geithner and his team believed it was better to be vague than offer more concrete proposals that might have to be changed later. The stock market, which sold off sharply almost the minute Mr. Geithner opened his mouth, seemed to disagree. And now, investors may have lost faith that the U.S. Treasury is on top of things - that is, if they ever had any faith.
(Excerpt) Read more at theglobeandmail.com ...
The commentary is based on a WaPo article (see link in the article).
I'm not quite sure of what to make of all of this. When I try to contemplate the numbers involved -- my head aches, like it does when I try to think of quantum mechanics (given an nearly infinite mass of debt, growing at an ever increasing velocity -- when do you go through a black hole?).
Is anyone surprised that Geithner's plan was cobbled together at the last minute? Is it surprising that "Plan A" was even scarrier?
Don’t we need to start acknowledging in a hurry that Obama is a disaster? It’s getting embarrassing awfully fast.
The answers they seek are right under their noses.
Cut spending; cut taxes(really cut taxes); and cut corprate taxes.
That’s it.
Tim Geithner = EPIC FAIL
“They needed an alternative and found it in a previously considered initiative to pair private investments and public loans’
After seeing how the government can change the terms of the ‘public loans’ I suspect there’s little appetite for this ‘deal’.
>> Is anyone surprised that Geithner’s plan was cobbled together at the last minute? Is it surprising that “Plan A” was even scarrier?
Not really.
Here’s the problem: it’s not that the solution is hidden, it’s that the solution is obvious, but very painful. Let the debt bubble pop. Let stupid and devious companies and people go bankrupt. Let the markets sort it out. Let those who saw it coming (and are therefore by definition smarter) and didn’t participate in the debt binge (and therefore more responsible) WIN, punish the LOSERS, and let the free market right things. Sure it’ll take a little time and sure some will experience pain (mostly those who DESERVE to), but that’s how the cookie crumbles in the adult world.
But politicians are not about doing the right thing. They’re about doing the expedient thing to get them the most popular support.
Hence Geithner is ignoring the safe, easy, obvious plan that is certain to work — and trying to choose among inferior plans A, B, C, ... It’s a tough choice, because ALL of the alternative plans are losers.
Cut spending
But that’ll hurt women, children and minorities....
Fits in with Karl Denninger’s ‘intentional manufactured crisis from massive government intervention’
Your plan is called the ‘Darwinian flush’. I like it. Short term pain, back to long term gain. But the government doesn’t want anyone to feel the necessary pain for political reasons.
>> the government doesn’t want anyone to feel the necessary pain for political reasons.
Yeah, isn’t it nice that they’re thinking of our well-being!
I wonder who will break the news to them that the result of all their meddling will be MORE pain for everyone, especially those who didn’t bring on the problems.
Meanwhile, many of those who DID bring on the problems will be rewarded. And you get more of what you reward.
Something could be done with mark-to-market, and could be done to isolate and price the toxic assets - as was supposed to be handled by TARP.
Perhaps one solution would be for government to tell the financial industry to work it out. I dunno.
It would have made a great announcement on Darwin's birthday anniversary.
I'm becoming closer and closer to being convinced that the “crisis” was manufactured — as the MOAOS (Mother of all October Surprises) to get The One elected. Decades of scorn for the tin-foil hat brigades are holding me back. I need solid proof, before I buy into a conspiracy story. However, as conspiracy theories go, this one is better than most. It is feasible. There were powerful motives (a political coup; billions to be made going short; trillions to be made from government handouts). The timing was just too convenient.
Bernanke said in his speech in London
“Following a prominent fund’s “breaking of the buck”—that is, a decline in its net asset value below par—in September, investors began to withdraw funds in large amounts from money market mutual funds that invest in private instruments such as commercial paper and certificates of deposit. Fund managers responded by liquidating assets and investing at only the shortest of maturities. As the pace of withdrawals increased, both the stability of the money market mutual fund industry and the functioning of the commercial paper market were threatened. The Federal Reserve responded with several programs, including a facility to finance bank purchases of high-quality asset-backed commercial paper from money market mutual funds. This facility effectively channeled liquidity to the funds, helping them to meet redemption demands without having to sell assets indiscriminately. Together with a Treasury program that provided partial insurance to investors in money market mutual funds, these efforts helped stanch the cash outflows from those funds and stabilize the industry.”
As you know, Geithner decided to let Lehman fail.
Kanjorski (sp) is on video saying that the first TARP was in response to a $500B+ run on the financial institutions.
Bringing me to the question, who has the capacity to withdraw such large amounts of money? The FBI would know, right?
But that’s just the start of it, what we are facing now is the continuing ‘manufactured crisis’ of government intervention.
It could be done with a form of “financial jujitsu”. Just enough withdrawals that, when combined with bearish pronouncements from the likes of Soros (their voice magnified many fold by the multitudes in the financial soothsaying business), a bear market is ignited.
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