One would suspect that the massive general contempt for huge-bonus-gate will have to die down a bit because this plan wants to be the news. It needs to wow.
As Krugman suggests, if the plan fails (and Krugman expects that it will) there will not be a second plan. The political capital will be spent, but good. Obama would then somehow have to pull out of a tailspin.
A lot is riding on this thing. If investors like it the market will rally at least a little. If they don't like it, the present level of the DOW will look like Everest in a few weeks.
Reuters: Treasury to unveil bank rescue bid soon
(1)...setting up an entity to be used by the Federal Deposit Insurance Corp...to offer low-interest loans to private interests for buying up banks' soured assets...
(2) Second, the Treasury Department will hire investment managers to run public-private funds to invest for potential profit in troubled mortgages, with government capital matching private capital contributions...
(3) Finally, the Federal Reserve will...buy "legacy" assets...
Legacy assets are older securities, many of them tied to mortgage assets that have plunged in value after housing prices fell and have racked up massive losses for the banking system.
2 comments:
All too little and way too late. By the time the bureaucrats get all this going millions more will be on the UI lines and soon bread lines. Why we need to prop up all these failed institutions is beyond me? Why are they any more valuable then any other businesses out here? To BIG to fail is just to BIG. Let em all fail they deserve to. Other institutions will spring up like new growth after a forest fire. Allowing these dead trees to stand will only bring on an even worse blaze in the future.
You explained it yesterday. They prop them up because they are beholden to them. The report today that the banks are using bailout money to pay political campaigns was a bigger freaking insult than the bailout bonuses. There is no difference between Wall St and Washington DC, they are fighting on the same side of the fence.
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