Obama bets bank fix won't be a political risk (Barry's administration risks total meltdown alert)

San Francisco Chronicle ^ | March 25, 2009 | Carolyn Lochhead

[Zakeet]

President Obama is banking that Treasury Secretary Timothy Geithner's complicated new plan to fix big U.S. banks doesn't transform their toxic assets into toxic political risk.

The administration faced a Hobson's choice: fixing banks is a prerequisite to economic recovery; populist rage sharply limits options. Large U.S. banks are believed to be holding $2 trillion in dubious assets, valued perhaps at 50 cents on the dollar. That means they could need $1 trillion in fresh capital to get them lending again.

Even close Obama allies such as House Speaker Nancy Pelosi all but shut the door last week to more taxpayer funds. That made a more direct approach, such as nationalization, a nonstarter.

Instead, the administration will loan money on sweetheart terms to hedge funds and other politically radioactive private partners to buy bad assets. Large amounts of financial leverage will be used to stretch fast-disappearing rescue funds. Taxpayers will be exposed to hundreds of billions of dollars in risk. And if the plan fails, the economy might not recover.

Geithner raised the stakes again Tuesday, asking for authority to take over failing nonbank institutions, a power now limited to the Federal Deposit Insurance Corporation, which can take over regulated banks. Obama said the lack of such authority is the reason the government has not been more forceful in dealing with such institutions as insurer American International Group.

Similar problems and popular outrage in Japan in the 1990s toppled one Japanese government and led to more than a decade of economic stagnation.

"The public anger that's resonating in Congress constrains what it is that the government can do," said Arthur Alexander, a Japan expert and economist a Georgetown University. "If it turns out that this whole thing doesn't work at all, the Obama administration may only be four years long."

[Zakeet]

Things are not good for Barry when a liberal rag like the SF Comical discusses the possibility of total Rat failure because of their ineptitude.

IMHO, the article is worth a read.

[dennisw]

As if 0bomo has the sligtest clue what Tim Guithner is doing which is another raid on the taxpayers anyway

[dennisw]

"Screw this economics jive! Who is entertaining tonight at the White House and will my favorite bartender be back?"

[Need4Truth]

If the loans default, taxpayers could lose between $1.50 and $4 for every $1 Treasury spends, Kyle said. "It's got a huge, huge, huge hidden cost to taxpayers that's far more scandalous than the AIG bonuses."

This is the obama/geithner plan. Holy crap.

[Does so]

Rush Limbaugh suggested yesterday that the Income Tax be eliminated for one year—as a fix.

How does that work?

[JPG]

This whole thing reminds me of a Beavis and Butt-head episode where they are selling candy for a school project and keep passing a dollar or two back and forth to buy candy bars from each other. In the end, no more candy and no more money. Come to think of it, Obama is a Butt-head.