A plan is in the works for announcement tomorrow:
Mr. Geithner, who will announce the broad outlines of the plan on Tuesday, successfully fought against more severe limits on executive pay for companies receiving government aid.
He
resisted those who wanted to dictate how banks would spend their rescue
money. And he prevailed over top administration aides who wanted to
replace bank executives and wipe out shareholders at institutions
receiving aid.
Because of the internal debate, some of the most contentious issues remain unresolved.
On Monday evening, new details emerged after lawmakers were briefed on the plan.
It intends to call for the creation of a joint Treasury and Federal Reserve program, at an initial cost of $250 billion to $500 billion, to
encourage investors to acquire soured mortgage-related assets from
banks.
It wants the Fed to use its balance sheet to provide the financing, and the Federal Deposit Insurance Corporation might provide guarantees to investors who participate in the program, which some people might call a “bad bank.”
A
second component of the plan would broadly expand, to $500 billion to
$1 trillion, an existing $200 billion program run by the Federal
Reserve to try to unfreeze the market for commercial, student, auto and
credit card loans. A third component would involve a review of the
capital levels of all banks, including projections of future losses, to
determine how much additional capital each bank should receive.
The capital injections would come out of the remaining $350 billion in the Troubled Asset Relief Program or TARP.
A
separate $50 billion initiative to enable millions of homeowners facing
imminent foreclosure to renegotiate the terms of their mortgages is to
be announced next week.
If that's enough, that's splendid news. We'll see. If that were enough, you think they would have done it by now already.
can’t resist:
http://www.economist.com/daily/kallery/displaystory.cfm?story_id=13061979
When the historians look back at this moment in time, they will write this was a missed moment and failed opportunity. “America the Rise and Fall: Between Iraq and the hard financial place which could be avoided.”
How very disappointing. More of the same.
Terminate the walking dead, remove their boards & management, place them into receivership, auction their “toxic” assets.
Take our lumps, learn our lessons, and move on.
Tyler, after five months neither Geithner nor you knows what the right questions are. You say “if that’s enough..” None can know in advance what it’s enough: we will know the losses after the fire is over. The right questions are about incentives to limit the losses and to assume losses quickly–that is, the same questions that economists have been trying to answer when designing bankruptcy proceedings.
If that’s enough unfortunately we will know ex-post. It would be far better to have more disclosure of balance-sheets and off-balance positions before announcing anything. Some projections would be desirable. Yet it appears they continue to be willing to drive lemons and deal with lemon banking
The only thing worse then giving people government money, in my mind, is to then mandate how they spend it.
Warren Buffett says hire good hitters and then don’t tell them how to hit. Obviously, these people aren’t MVPs, but that still doesn’t make the politicians and bureaucrats hitting coaches.
I’ll probably accept a government paid propping up of the current system (do I have a choice?), but what we need is a total rebuild. The finance system can’t pick and choose worthy projects any better than the government. Now they’ve shown they can’t even pick and choose borrowers who will pay back the money. Ha! They are JUST LIKE the government!
Andrew, is it really that obvious the leaders of the banks being bailed out aren’t MVPs? Does an MVP not maximise their organisation’s value taking into account conditions as they exist at the time? The banks did very well when real estate prices stayed up – and almost nobody recognised the bubble and saw it bursting in advance. It is far from obvious to me at least that managerial incompetence is important or an obvious cause of this whole mess. Obama is much too certain of himself on that point.
Note: always build your close tag first.
So we’re going to do something roughly equivalent of nationalizing Manchester United the imposing a £500,000 annual salary cap. Oh, while asking Arsenal and Barcelona please not to poach our star players.
OK with me so long as ManU keeps the AIG logo on its jerseys….
Think back to last year during the presidential debates. Guiliani, McCain, Mitt Romney, Hillary, Obama, Tyler Cowen, Krugman not even Huckbee foresaw anything like this happening. If the greatest minds in the world couldn’t see this coming then why are we so mad? obvuiously things are bad, but everyone is doing there best and we have to let the samrtest people int his country try and fix it the best they can….no stand back everyone and let Tyler do his work. He was wise enough to tell us that the Paulson plan was better than nothing…just imagine where we would be now if we hadn’t listened.
I think we must give the Obama administration a chance to put their financial bailout or rescue plan into action. I mean sometimes in order to be successful; you would have to take a little risk. I know some thoughts were put into making the plan for instance, the changes that are going on in the economy in these present times. Our economy as of now isn’t stable and for it to become stable, a lot of changes have to be made. Even though the plan involves lots of money, it is still for the greater good. The main reason for the plan is to prevent the bank from closing down or running out of business, and to prevent this issue from occurring again later on in life.
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