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Geithner Attempts To Tackle Toxic Debt
By Joe Murray, The Bulletin
Hoping to turn the page on a week that saw him lose credibility and confidence in and outside Washington, Treasury Secretary Timothy Geithner unveiled a new $1 trillion plan to address the toxic assets paralyzing the nation’s financial system yesterday.
The plan, which was cheered by the president and jeered by lawmakers in both parties, is slated to be the newest edition to a line of controversial economic policies offered by the administration and is premised on a public-private partnership to detox bank balance sheets.
“I’m very confident this scheme dominates all the alternatives,” Mr. Geithner said shortly before the opening bell on the New York Stock Exchange rang.
Initial indicators signaled the markets responded positively to the long-awaited plan as the Dow closed up nearly 500 points. This was the best one-day gain since November.
In an attempt to reverse the slowdown in lending, which, in turn, has hindered economic growth, the Obama administration is hoping the “Public-Private Investment Program” will restore stability to the marketplace. Under the program, taxpayer funds will be used to finance partnerships with private investors wishing to buy the so-called toxic assets.
The initial goal of the program is to purchase $500 billion of the flawed assets, but it remains possible the program could swell to $1 trillion. After being burnt by a rush to judgment on legislation such as the $787 billion stimulus, the administration is only initially pledging $75 to $100 billion of the Troubled Asset Relief Program (TARP) until it sees how the program is performing.
After suffering an embarrassing week with the AIG bonus scandal, Mr. Obama attempted to change headlines by aggressively lobbying for the new program. But the president was careful not to build expectations.
“It’s not going to happen overnight,” Mr. Obama told a reporter yesterday. “There’s still great fragility in the financial systems. So the good news is that we have one more critical element in our recovery. But we’ve still got a long way to go, and we’ve got a lot of work to do. But I’m very confident that, with the team that we’ve got assembled, we’re going to be able to make it happen.”
This, however, is not the administration’s first attempt to change the course on a recession that has been driving the U.S. economy for months. Facing mounting criticism over the administration’s record spending, Mr. Geithner called for patience and, in a plea to those upset with AIG, said the government’s attempt to rebuild the nation’s banking system must move forward despite “deep anger and outrage.”
But even Democratic leadership in Congress expressed concern over the amount of risk in Mr. Geithner’s plan the nation will assume, a development that could signal rough waters ahead.
“The Treasury Department plan is based on the sound principle that if we are to revive our economy, we must unfreeze the credit markets so people can get the loans they need to keep their small businesses open, buy a car or send their children to college,” Senate Majority Leader Harry Reid, D-Nev., said in a statement.
“Like any investment, this plan carries the potential for both risk and reward. But above all, we must act — one risk we will not take is standing on the sidelines and doing nothing while a bad situation gets worse,” he said.
Others were much blunter in their criticism of the plan and economist Paul Krugman, writing in the New York Times, argued the administration’s plan will fail because it “recycles” the abandoned policy of former President George W. Bush.
“This is more than disappointing. In fact, it fills me with a sense of despair,” Mr. Krugman wrote. The Nobel Prize-winning economist said the plan was doomed for failure because it “assumes that banks are fundamentally sound and that bankers know what they’re doing.”
But others are arguing the government should be reducing its involvement in the marketplace and letting some of these companies go belly-up.
“Bankruptcies are a net positive for the economy because more productive competitors are rewarded by opportunities to buy up remaining assets at bargain prices to strengthen their operations. In an economy that allows this kind of growth and change, any jobs lost by bankruptcy are soon replaced by new ones as the most efficiently managed businesses gain access to more assets and expand,” said U.S. Rep. Ron Paul, R-Texas. “A recession should be a time of strengthening and regrouping for an economy. But as long as the government insists on maintaining the status quo by propping up failed institutions, we will continue to dig a bigger hole for ourselves.”
Joe Murray can be reached at jmurray@thebulletin.us
The plan, which was cheered by the president and jeered by lawmakers in both parties, is slated to be the newest edition to a line of controversial economic policies offered by the administration and is premised on a public-private partnership to detox bank balance sheets.
“I’m very confident this scheme dominates all the alternatives,” Mr. Geithner said shortly before the opening bell on the New York Stock Exchange rang.
Initial indicators signaled the markets responded positively to the long-awaited plan as the Dow closed up nearly 500 points. This was the best one-day gain since November.
In an attempt to reverse the slowdown in lending, which, in turn, has hindered economic growth, the Obama administration is hoping the “Public-Private Investment Program” will restore stability to the marketplace. Under the program, taxpayer funds will be used to finance partnerships with private investors wishing to buy the so-called toxic assets.
The initial goal of the program is to purchase $500 billion of the flawed assets, but it remains possible the program could swell to $1 trillion. After being burnt by a rush to judgment on legislation such as the $787 billion stimulus, the administration is only initially pledging $75 to $100 billion of the Troubled Asset Relief Program (TARP) until it sees how the program is performing.
After suffering an embarrassing week with the AIG bonus scandal, Mr. Obama attempted to change headlines by aggressively lobbying for the new program. But the president was careful not to build expectations.
“It’s not going to happen overnight,” Mr. Obama told a reporter yesterday. “There’s still great fragility in the financial systems. So the good news is that we have one more critical element in our recovery. But we’ve still got a long way to go, and we’ve got a lot of work to do. But I’m very confident that, with the team that we’ve got assembled, we’re going to be able to make it happen.”
This, however, is not the administration’s first attempt to change the course on a recession that has been driving the U.S. economy for months. Facing mounting criticism over the administration’s record spending, Mr. Geithner called for patience and, in a plea to those upset with AIG, said the government’s attempt to rebuild the nation’s banking system must move forward despite “deep anger and outrage.”
But even Democratic leadership in Congress expressed concern over the amount of risk in Mr. Geithner’s plan the nation will assume, a development that could signal rough waters ahead.
“The Treasury Department plan is based on the sound principle that if we are to revive our economy, we must unfreeze the credit markets so people can get the loans they need to keep their small businesses open, buy a car or send their children to college,” Senate Majority Leader Harry Reid, D-Nev., said in a statement.
“Like any investment, this plan carries the potential for both risk and reward. But above all, we must act — one risk we will not take is standing on the sidelines and doing nothing while a bad situation gets worse,” he said.
Others were much blunter in their criticism of the plan and economist Paul Krugman, writing in the New York Times, argued the administration’s plan will fail because it “recycles” the abandoned policy of former President George W. Bush.
“This is more than disappointing. In fact, it fills me with a sense of despair,” Mr. Krugman wrote. The Nobel Prize-winning economist said the plan was doomed for failure because it “assumes that banks are fundamentally sound and that bankers know what they’re doing.”
But others are arguing the government should be reducing its involvement in the marketplace and letting some of these companies go belly-up.
“Bankruptcies are a net positive for the economy because more productive competitors are rewarded by opportunities to buy up remaining assets at bargain prices to strengthen their operations. In an economy that allows this kind of growth and change, any jobs lost by bankruptcy are soon replaced by new ones as the most efficiently managed businesses gain access to more assets and expand,” said U.S. Rep. Ron Paul, R-Texas. “A recession should be a time of strengthening and regrouping for an economy. But as long as the government insists on maintaining the status quo by propping up failed institutions, we will continue to dig a bigger hole for ourselves.”
Joe Murray can be reached at jmurray@thebulletin.us
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Brittanicus wrote on Mar 24, 2009 2:28 PM:
They have shown their allegiance is-- not--to THE PEOPLE of these United States, but to the US Chamber of Commerce, UCLA, subversive foreign entities and of course the 40 million illegal aliens calculated by the Heritage Foundation.
The 1986 Immigration Rule of Law is the law of our land and cannot be violated. The Simpson/Mazzoli bill that was passed by legislators has been abused, even though it was drafted on behalf of the US electorate.
E-Verify is a simple, accessible system that an identify illegal labor in the workplace. Businesses who ignore the computer friendly e-verify data base and hire foreign nationals, have no excuses in federal court. They are traitors to America and should be dealt with severely. E-Verify is funded till September and must be extended forever.
We are being--HEARD-- in Washington, but we must not stop the roar of outrage. 202-224-3121 To locate your Senator www.senate.gov/ For your Congressman www.house.gov/ President Obama: Switchboard: 202-456-1414 Comments: 202-456-1111 FAX: 202-456-2461 "