Treasury's Good Idea
February 9th, 2009 by Jon Taplin
I’ve been pretty hard on Tim Geithner, but I think the way he is going to position the Aggregator Bank idea is very smart.
The entity would be seeded with funds from the $700 billion financial-sector bailout fund, but the idea is that most financing would come from the private sector. Some critical elements remained unclear, including exactly how the government would entice investors to participate in the private bank, given that they can already buy soured assets on the open market if they want to. The government will likely offer some type of incentive, such as limiting the risk associated with buying the assets.
The Vulture Investors can hopefully do something to help the country that made them so rich. What a concept?
Jon, I know very little about this, but I think there’s something I’m missing here.
This plan seems to provide all of the opportunity for profit to the private sector, but all of the risk (on the assets) to the public. Worse, the opportunity to participate in the scheme will be limited to a certain class of investors – ie if most citizens or businesses wanted to participate in this government-underwritten scheme, they couldn’t. It’s limited to the banks that got the world into this mess in the first place – not exactly an inspiring move.
I get the thinking that says “make these assets attractive to buy”. Why, then, doesn’t the Government just buy them? Why guarantee a floor price to cap someone else’s risk?
Why not set up something akin to Resolution Trust again (the “Bad Bank” discussed in the article)? At least the Government could make some money that way. I understand why Geithner’s proposal is more attractive to Wall Street, but why are they the arbiters of what’s sensible?
I’m sure there are good reasons. I don’t know enough about this to know what they are. I’d like to hear them better articulated.
Jon, I know very little about this, but I think there’s something I’m missing here.
This plan seems to provide all of the opportunity for profit to the private sector, but all of the risk (on the assets) to the public. Worse, the opportunity to participate in the scheme will be limited to a certain class of investors – ie if most citizens or businesses wanted to participate in this government-underwritten scheme, they couldn’t. It’s limited to the banks that got the world into this mess in the first place – not exactly an inspiring move.
I get the thinking that says “make these assets attractive to buy”. Why, then, doesn’t the Government just buy them? Why guarantee a floor price to cap someone else’s risk?
Why not set up something akin to Resolution Trust again (the “Bad Bank” discussed in the article)? At least the Government could make some money that way. I understand why Geithner’s proposal is more attractive to Wall Street, but why are they the arbiters of what’s sensible?
I’m sure there are good reasons. I don’t know enough about this to know what they are. I’d like to hear them better articulated.
Rachel- Let’s see the details in the morning. I’m pretty sure the treasury will get it’s piece of the upside if it exists.
Rachel- Let’s see the details in the morning. I’m pretty sure the treasury will get it’s piece of the upside if it exists.
Prediction, no it won’t.
Any private investor is going to want first money out. Ask Buffet.
Prediction, no it won’t.
Any private investor is going to want first money out. Ask Buffet.
The market is down because instead of talking about new ideas and how to finance them on a fast track , the center of attention is on the banks.
Ok then, a trillion $ goes to the banks and then what ? Where is the dream of a better future.
I am bit disapointed I hope I am wrong.
The market is down because instead of talking about new ideas and how to finance them on a fast track , the center of attention is on the banks.
Ok then, a trillion $ goes to the banks and then what ? Where is the dream of a better future.
I am bit disapointed I hope I am wrong.
Unfortunately, all the bank CEOs are learning from all this is that they can screw up and not personally pay the price for their misdeeds. They still have their entitled point of view…they know best how to get us out of this mess, and all that… Personally, I think the bankers need to go be tellers for a couple of years or be the people servicing the ATM machines for a while. Or maybe they should flip burgers at McDonalds and learn to get real.
Unfortunately, all the bank CEOs are learning from all this is that they can screw up and not personally pay the price for their misdeeds. They still have their entitled point of view…they know best how to get us out of this mess, and all that… Personally, I think the bankers need to go be tellers for a couple of years or be the people servicing the ATM machines for a while. Or maybe they should flip burgers at McDonalds and learn to get real.
My bankers a jerk and I told him so. He doesn’t care and he told me so. It’s BofA and now their stock is $5.
My bankers a jerk and I told him so. He doesn’t care and he told me so. It’s BofA and now their stock is $5.
Rick, the bankers who caused this need their heads on pikes.
Or we need the financial crimes equivalent of a war crime.
Oh wait, that’s death by hanging isn’t it? Or have they now gone to the more humane “life in prison without parole”?
Rick, the bankers who caused this need their heads on pikes.
Or we need the financial crimes equivalent of a war crime.
Oh wait, that’s death by hanging isn’t it? Or have they now gone to the more humane “life in prison without parole”?
Geithner, in a nifty bit of sleight of hand, did away with the Mark-to-Market accounting rule in the new bail-out package.
I am increasingly unhappy with the approach taken here. We need big change. We need to get the foxes out of the hen houses.
It seems to me that we have merely another group of Wall Street insiders running our economy right now.
Can someone tell me what would happen if we simply let some of these behemoths fail? I’m sure some entity would pick up their slack. The only losers I can see are the stock holders – and that’s a risk they took when they bought these “high fliers”, it seems to me.
All the “insiders” are saying we can’t let these guys go under it would be catastrophic, but I have yet to see any details of the impending catastrophe.
Geithner, in a nifty bit of sleight of hand, did away with the Mark-to-Market accounting rule in the new bail-out package.
I am increasingly unhappy with the approach taken here. We need big change. We need to get the foxes out of the hen houses.
It seems to me that we have merely another group of Wall Street insiders running our economy right now.
Can someone tell me what would happen if we simply let some of these behemoths fail? I’m sure some entity would pick up their slack. The only losers I can see are the stock holders – and that’s a risk they took when they bought these “high fliers”, it seems to me.
All the “insiders” are saying we can’t let these guys go under it would be catastrophic, but I have yet to see any details of the impending catastrophe.
Geithner, in a nifty bit of sleight of hand, did away with the Mark-to-Market accounting rule in the new bail-out package.
I am increasingly unhappy with the approach taken here. We need big change. We need to get the foxes out of the hen houses.
It seems to me that we have merely another group of Wall Street insiders running our economy right now.
Can someone tell me what would happen if we simply let some of these behemoths fail? I’m sure some entity would pick up their slack. The only losers I can see are the stock holders – and that’s a risk they took when they bought these “high fliers”, it seems to me.
All the “insiders” are saying we can’t let these guys go under it would be catastrophic, but I have yet to see any details of the impending catastrophe.
Geithner’s press conference obviously left a lot to be desired. Just look at the market drop today. No one, worldwide, is satisfied. Nevertheless, this administration has only been in office for three weeks.
How many other administrations have dealt with so many combined, negative economic factors at the beginning?
Geithner has a tough, almost insurmountable, road ahead of him. Nothing like this has existed since the Great Depression. Solving it won’t be easy, especially in a worldwide economic recession in which all economies are so closely tied together.
So, even while the market wanted a quick answer, because that’s what we Americans want and the world banking system hoped for, answers to the banking problem are not easy.
So, settle down everyone and give the guy a couple of weeks to lay out a plan in more detail.
I took great heart from his initial statement…and I think he’s on the right path. It ain’t gonna be easy. Banks are gonna scream bloody murder at having to take a loss on their balance sheets when they sell those toxic assets…but selling them at a fair price will be the only way they’ll survive. They’re also gonna scream at having to make loans with government money when they’d rather buck up their balance sheets. For far too long, financial institutions have worked on the premise that profits for shareholders was the only way to do business.
That is a fallacy. What brought banks – like Wells Fargo and BofA – into fashion was personal banking. Knowing their customers.
Unlike the economic gurus who argue for fewer and larger banks, I believe that mega-banks are an anathema to business growth and productivity. Small banks, focused on the community and community businesses, provide greater business impetus. Moreover, small banks that focused on sponsoring local businesses and development, rather than on unsustainable real estate gambles, have weathered the financial meltdown better than the megabanks that focused only on profits, regardless of the risks involved.
TR was right when he pushed through legislation that broke up monopolies. Unfortunately, GOP administrations and Congresses failed to learn from TR. Over the last 30 years, mega-mergers brought enormous wealth to the few while hurting the overall economy as we now see.
Nevertheless, Geithner and his cohorts at the FDIC and the FED have their work cut out for them. It’s going to take all of their combined efforts to clean up the mess created during the last 10 or more years. As a NPR financial analyst stated today, one press conference does not solve the problems facing the American banking system.
A lot of details have yet to be worked out…and those solutions are not going to be easy.
Geithner’s press conference obviously left a lot to be desired. Just look at the market drop today. No one, worldwide, is satisfied. Nevertheless, this administration has only been in office for three weeks.
How many other administrations have dealt with so many combined, negative economic factors at the beginning?
Geithner has a tough, almost insurmountable, road ahead of him. Nothing like this has existed since the Great Depression. Solving it won’t be easy, especially in a worldwide economic recession in which all economies are so closely tied together.
So, even while the market wanted a quick answer, because that’s what we Americans want and the world banking system hoped for, answers to the banking problem are not easy.
So, settle down everyone and give the guy a couple of weeks to lay out a plan in more detail.
I took great heart from his initial statement…and I think he’s on the right path. It ain’t gonna be easy. Banks are gonna scream bloody murder at having to take a loss on their balance sheets when they sell those toxic assets…but selling them at a fair price will be the only way they’ll survive. They’re also gonna scream at having to make loans with government money when they’d rather buck up their balance sheets. For far too long, financial institutions have worked on the premise that profits for shareholders was the only way to do business.
That is a fallacy. What brought banks – like Wells Fargo and BofA – into fashion was personal banking. Knowing their customers.
Unlike the economic gurus who argue for fewer and larger banks, I believe that mega-banks are an anathema to business growth and productivity. Small banks, focused on the community and community businesses, provide greater business impetus. Moreover, small banks that focused on sponsoring local businesses and development, rather than on unsustainable real estate gambles, have weathered the financial meltdown better than the megabanks that focused only on profits, regardless of the risks involved.
TR was right when he pushed through legislation that broke up monopolies. Unfortunately, GOP administrations and Congresses failed to learn from TR. Over the last 30 years, mega-mergers brought enormous wealth to the few while hurting the overall economy as we now see.
Nevertheless, Geithner and his cohorts at the FDIC and the FED have their work cut out for them. It’s going to take all of their combined efforts to clean up the mess created during the last 10 or more years. As a NPR financial analyst stated today, one press conference does not solve the problems facing the American banking system.
A lot of details have yet to be worked out…and those solutions are not going to be easy.
Geithner’s press conference obviously left a lot to be desired. Just look at the market drop today. No one, worldwide, is satisfied. Nevertheless, this administration has only been in office for three weeks.
How many other administrations have dealt with so many combined, negative economic factors at the beginning?
Geithner has a tough, almost insurmountable, road ahead of him. Nothing like this has existed since the Great Depression. Solving it won’t be easy, especially in a worldwide economic recession in which all economies are so closely tied together.
So, even while the market wanted a quick answer, because that’s what we Americans want and the world banking system hoped for, answers to the banking problem are not easy.
So, settle down everyone and give the guy a couple of weeks to lay out a plan in more detail.
I took great heart from his initial statement…and I think he’s on the right path. It ain’t gonna be easy. Banks are gonna scream bloody murder at having to take a loss on their balance sheets when they sell those toxic assets…but selling them at a fair price will be the only way they’ll survive. They’re also gonna scream at having to make loans with government money when they’d rather buck up their balance sheets. For far too long, financial institutions have worked on the premise that profits for shareholders was the only way to do business.
That is a fallacy. What brought banks – like Wells Fargo and BofA – into fashion was personal banking. Knowing their customers.
Unlike the economic gurus who argue for fewer and larger banks, I believe that mega-banks are an anathema to business growth and productivity. Small banks, focused on the community and community businesses, provide greater business impetus. Moreover, small banks that focused on sponsoring local businesses and development, rather than on unsustainable real estate gambles, have weathered the financial meltdown better than the megabanks that focused only on profits, regardless of the risks involved.
TR was right when he pushed through legislation that broke up monopolies. Unfortunately, GOP administrations and Congresses failed to learn from TR. Over the last 30 years, mega-mergers brought enormous wealth to the few while hurting the overall economy as we now see.
Nevertheless, Geithner and his cohorts at the FDIC and the FED have their work cut out for them. It’s going to take all of their combined efforts to clean up the mess created during the last 10 or more years. As a NPR financial analyst stated today, one press conference does not solve the problems facing the American banking system.
A lot of details have yet to be worked out…and those solutions are not going to be easy.
Just read the Bloomberg assessment of Obama’s speech today.
Found myself relieved by the President’s candor, saying, in essence “the reason we’re not going to nationalize is because we can’t run bank. We’re the government, that’s just not the kind of thing we’ve ever done well, and we’re not about to start now.”
He went on to note that there are actually several well-managed banks, affirming my own sense that this is, above all, a failure of management within certain overly-connected and insanely hubristic institutions, as opposed to a systematic failure of each and every bank in America.
That’s backed up by the other part of the assessment, which is a lack of transparency among banks holding bad assets.
I don’t know if this is an over-simplification, but it seems that Geithner has said (a) private capital is the only realistic way to restore the banking system, and (b) it’ll stay sidelined as long as key players in the banking industry persist in trying to hide the extent of their losses.
Obviously, all the very high priced ‘talent’ that’s doing the hiding knows full well that the kind of disclosure being called for is career-ending at best, and possibly criminal at worst. Polity be damned – these guys are fighting for their lives.
When Obama said ‘there’s no easy way out’ I think he meant ‘for you’. Also, I believe I heard the sound of a gauntlet hitting the floor.
Just read the Bloomberg assessment of Obama’s speech today.
Found myself relieved by the President’s candor, saying, in essence “the reason we’re not going to nationalize is because we can’t run bank. We’re the government, that’s just not the kind of thing we’ve ever done well, and we’re not about to start now.”
He went on to note that there are actually several well-managed banks, affirming my own sense that this is, above all, a failure of management within certain overly-connected and insanely hubristic institutions, as opposed to a systematic failure of each and every bank in America.
That’s backed up by the other part of the assessment, which is a lack of transparency among banks holding bad assets.
I don’t know if this is an over-simplification, but it seems that Geithner has said (a) private capital is the only realistic way to restore the banking system, and (b) it’ll stay sidelined as long as key players in the banking industry persist in trying to hide the extent of their losses.
Obviously, all the very high priced ‘talent’ that’s doing the hiding knows full well that the kind of disclosure being called for is career-ending at best, and possibly criminal at worst. Polity be damned – these guys are fighting for their lives.
When Obama said ‘there’s no easy way out’ I think he meant ‘for you’. Also, I believe I heard the sound of a gauntlet hitting the floor.
VC – “How many other administrations have dealt with so many combined, negative economic factors at the beginning?”
See, other than being optimistic about how long it would take, Biden was right when he said, “It will not be six months before the world tests Barack Obama like they did John Kennedy.” Trouble was, he was thinking international, turns out, it’s coming from the enemy within, the Republican congress critters, bankers and neo-con die hards.
VC – “How many other administrations have dealt with so many combined, negative economic factors at the beginning?”
See, other than being optimistic about how long it would take, Biden was right when he said, “It will not be six months before the world tests Barack Obama like they did John Kennedy.” Trouble was, he was thinking international, turns out, it’s coming from the enemy within, the Republican congress critters, bankers and neo-con die hards.
VC – “How many other administrations have dealt with so many combined, negative economic factors at the beginning?”
See, other than being optimistic about how long it would take, Biden was right when he said, “It will not be six months before the world tests Barack Obama like they did John Kennedy.” Trouble was, he was thinking international, turns out, it’s coming from the enemy within, the Republican congress critters, bankers and neo-con die hards.
I don’t think the fact that Wall Street and the Market go down is a bad thing at all – merely reflective of the reality of their situation.
Uhh, let them eat cake. And bring on a few tumbrels to boot, IMO.
I still don’t see what is wrong with letting these dinosaurs die??
I don’t think the fact that Wall Street and the Market go down is a bad thing at all – merely reflective of the reality of their situation.
Uhh, let them eat cake. And bring on a few tumbrels to boot, IMO.
I still don’t see what is wrong with letting these dinosaurs die??
I don’t think the fact that Wall Street and the Market go down is a bad thing at all – merely reflective of the reality of their situation.
Uhh, let them eat cake. And bring on a few tumbrels to boot, IMO.
I still don’t see what is wrong with letting these dinosaurs die??
And now it’s “retention payments” instead of calling the largesse “bonuses”. The problem is that when that much money passes through certain hands, the stickiness on the fingers just wants to keep too much of the dough. The bankers and brokers still think that just because the money goes in their front doors that they deserve a huge piece of it because they were so smart as to game the system into letting them be the conduits.
How about negative bonuses for executives whose companies lose money? That’s what happens to the stockholders…and now us taxpayers…
Bonuses when they win, retention payments when they lose…wait a minute! They can’t lose with rules like that… But we can and did and continue to.
And now it’s “retention payments” instead of calling the largesse “bonuses”. The problem is that when that much money passes through certain hands, the stickiness on the fingers just wants to keep too much of the dough. The bankers and brokers still think that just because the money goes in their front doors that they deserve a huge piece of it because they were so smart as to game the system into letting them be the conduits.
How about negative bonuses for executives whose companies lose money? That’s what happens to the stockholders…and now us taxpayers…
Bonuses when they win, retention payments when they lose…wait a minute! They can’t lose with rules like that… But we can and did and continue to.
Rick, very odd they would call their shipwreck captains “talent.” Here’s something you’ll hate….
http://online.wsj.com/article/SB123436527233573227.html?mod=testMod
Rick, very odd they would call their shipwreck captains “talent.” Here’s something you’ll hate….
http://online.wsj.com/article/SB123436527233573227.html?mod=testMod
Rick, very odd they would call their shipwreck captains “talent.” Here’s something you’ll hate….
http://online.wsj.com/article/SB123436527233573227.html?mod=testMod
Dave, I’d have expected nothing less than that. I’m amazed it’s only 15 million and not 50. “Withdrew”…what does that mean? Boxes of “C notes” in wheelbarrows? BTW, the “C note” is the largest bill in current circulation. They’re like 20s used to be now…a stack of them just isn’t very impressive. Suitcases and bankers’ boxes worth, though…that might be something. I can just see Ruth with a eye shade and a thumb cot on, sitting under a bare bulb counting the stacks of dead presidents and other luminaries including the guy who invented the glass harmonica…
Dave, I’d have expected nothing less than that. I’m amazed it’s only 15 million and not 50. “Withdrew”…what does that mean? Boxes of “C notes” in wheelbarrows? BTW, the “C note” is the largest bill in current circulation. They’re like 20s used to be now…a stack of them just isn’t very impressive. Suitcases and bankers’ boxes worth, though…that might be something. I can just see Ruth with a eye shade and a thumb cot on, sitting under a bare bulb counting the stacks of dead presidents and other luminaries including the guy who invented the glass harmonica…
Dave, I’d have expected nothing less than that. I’m amazed it’s only 15 million and not 50. “Withdrew”…what does that mean? Boxes of “C notes” in wheelbarrows? BTW, the “C note” is the largest bill in current circulation. They’re like 20s used to be now…a stack of them just isn’t very impressive. Suitcases and bankers’ boxes worth, though…that might be something. I can just see Ruth with a eye shade and a thumb cot on, sitting under a bare bulb counting the stacks of dead presidents and other luminaries including the guy who invented the glass harmonica…
How many good ideas, inventions, projects, have been killed by these bankers because they thrive on the concept of the Status quo or “Don’t rock the boat we are making Money.” If there is no justice there will be social unrest . Wait a few months and you will see riots if the wrong decisions are made. The banks should be down sized to spread the risk and some of these CEOs should be taken to a public courtroom to disclose all their dirty laundry (including the offshore accounts) live on PBS .
Special credits at low interest should be given to recycle all the old industries into an efficient state-of-the-art technologies that will set new World standards . The old industrial state as we know it is dying and a totally new approach must be set in place. Then, like the myth of Phoenix, America will rise from its ashes. The time for change is now, because it is coming anyway whether we like it or not.
How many good ideas, inventions, projects, have been killed by these bankers because they thrive on the concept of the Status quo or “Don’t rock the boat we are making Money.” If there is no justice there will be social unrest . Wait a few months and you will see riots if the wrong decisions are made. The banks should be down sized to spread the risk and some of these CEOs should be taken to a public courtroom to disclose all their dirty laundry (including the offshore accounts) live on PBS .
Special credits at low interest should be given to recycle all the old industries into an efficient state-of-the-art technologies that will set new World standards . The old industrial state as we know it is dying and a totally new approach must be set in place. Then, like the myth of Phoenix, America will rise from its ashes. The time for change is now, because it is coming anyway whether we like it or not.
How many good ideas, inventions, projects, have been killed by these bankers because they thrive on the concept of the Status quo or “Don’t rock the boat we are making Money.” If there is no justice there will be social unrest . Wait a few months and you will see riots if the wrong decisions are made. The banks should be down sized to spread the risk and some of these CEOs should be taken to a public courtroom to disclose all their dirty laundry (including the offshore accounts) live on PBS .
Special credits at low interest should be given to recycle all the old industries into an efficient state-of-the-art technologies that will set new World standards . The old industrial state as we know it is dying and a totally new approach must be set in place. Then, like the myth of Phoenix, America will rise from its ashes. The time for change is now, because it is coming anyway whether we like it or not.
So is it time for Obama to remember that the President is also the Top Cop?
There is an answer to ‘whatcha got?’ “I got the law and this gun.”
Roll some heads.
So is it time for Obama to remember that the President is also the Top Cop?
There is an answer to ‘whatcha got?’ “I got the law and this gun.”
Roll some heads.
Rick, yes, where the $50 Billion?? not that $15M doesn’t warrant criminal charges as accessory. It just may be all of the flotsam they can get their hands on!!
Rick, yes, where the $50 Billion?? not that $15M doesn’t warrant criminal charges as accessory. It just may be all of the flotsam they can get their hands on!!
the ONLY reason we’re not rioting (like Europe) YET, is that we just got a new president.
let’s see where we are in 6 months time if Messr Geithner’s plan goes belly-up.
the ONLY reason we’re not rioting (like Europe) YET, is that we just got a new president.
let’s see where we are in 6 months time if Messr Geithner’s plan goes belly-up.
the ONLY reason we’re not rioting (like Europe) YET, is that we just got a new president.
let’s see where we are in 6 months time if Messr Geithner’s plan goes belly-up.