The Plan
By now, almost everyone must know that in the last week the Federal Reserve and the Obama Administration fired coordinated bombshells at the financial crisis.
First, last Thursday the Federal Reserve announced major increases in asset purchase programs, adding buy cialis cialis buy cheapest viagra online $1.150 trillion to the
total. The total included purchase of up to $300 billion of long-term Treasuries. The Fed also expanded the list of the type of assets it would purchase under its Term Asset-Backed Securities Loan Facility (TALF).
Before the financial community and the public had a chance to catch its breath, on Monday, the Treasury unveiled the next blockbuster. Both the FDIC and Treasury would combine with private investors to purchase toxic assets from banks.
In the FDIC program, the government would put up 92.5% of the money and private investors would put up 7.5% — but, here’s the catch, private investors would get 1/2 of potential profits from their 7.5% investment and be liable for no more than their investment.
Who is responsible for additional losses? The FDIC, which in theory is underwritten by the banking sector — though if there are big losses, it seems likely buy vardenafil that you and me, the taxpayers, will end up paying.
In the Treasury amoxicillin buy program, the government and private investors would put up equal Buy Cialis amounts of initial capital, and then the government would lend the entity twice its initial investment. The entity would then bid for troubled assets from banks. The kicker here is that, once the entity has purchased assets, it will able to borrow against them from the Federal Reserves expanded buy cialis soft TALF program; then turn around and buy more troubled assets, and so on.
The private investor again may get to leverage its initial sum by 6 times or more, with losses limited to its initial investment. Who is responsible for additional losses? You know who.
You and me, the taxpayers.
A key part of the plan is to amend the TALF, which was initially a Federal Reserve initiative aimed at purchasing new loans, with the objective of expanding new lending. The amended plan allows loans levitra vardenafil against existing securities that were “originally AAA rated.” Of course, many of those online acomplia AAA mortgage buy cheap drugs backed securities are, as we are well aware, now junk.
You can be sure that these are the ones the new rescue partnerships are going to pledge to the government cheap amoxil first.
[Nouriel Roubini's RGE Monitor has provided an excellent Brand Levitra target="_blank">summary purchase viagra online buy generic levitra and brief analysis of the Geithner plan.]
Wall Street Wins!
The cheap ampicilllin response of Wall Street, with a one-day rise on the Monday of the plan’s announcement of 7% in the S&P 500 and 18% in the S&P Financials indices, was ecstatic. The big bond investment firms fell over themselves with praise. This was what the financial community viagra soft has Viagra online been looking for, but almost giving up hope of getting: for the government to step in and buy all of the crappy loans on their books. The common estimate is that their are two trillion dollars of such junk held cheap prescription drugs without prescription by banks. The government programs, not coincidently, have potential purchasing cheapest nolvadex power of about $2 trillion.
If it works, and the street is currently betting it will, the plans will get the toxic debt out of the zombie banks, making them live once again, to the great benefit of the stockholders and option holders Brand Levitra of the banks. Of course, the debt will go into the hands, primarily of the government; so if the plan doesn’t work, the economy doesn’t recover, and all of those bad mortgages, auto loans, and credit-card securities decline further in value, you and I will be left holding the bag.
And, of course, the big investment firms love the plan because they are going to be allowed to participate in buying up the bad debt with only small risk and big profit potential — to say nothing of getting to transfer their lousiest assets to the government. Bill Gross of PIMCO, the worlds largest bond company, has called it a “win-win” plan. Kamagra Gold It is a win-win plan for the propecia price investment community.
You Lose!
The Obama-Geithner plan is a lose-lose plan for you and me. We lose, first, because we as taxpayers are having to pony up almost all of the money to buy up the crappy assets that the financial community sold at very great profit to itself.
The shareholders and bondholders of the financial buy cheap buy cialis daily acomplia community are getting the BIG bailout at our expense.
If the plan fails, we are left holding the bag. Of course, the big financial firms will probably be forced into failure, too, but only after having transferred most of the bad privately-held securities Buy Amoxil Online Pharmacy No Prescription Needed into the hands of the willing government. This is bad public policy on multiple counts, not the least of which is the blatant inequity
of it all.
But, what levaquin ampicillin buy if the plan succeeds, as Geithner has clearly succeeded in convincing Obama that it will? You lose. The government buy real viagra without prescription will have succeeded in revitalizing the financial sector with the same players in charge. It will have turned the economy around by once again expanding leverage cialis Buy Viagra, Buy Cialis, Buy Levitra Without Prescription 5mg tablets and debt, raising the burden of debt that for years has been depressing our real economic performance and individual well being. The chance will have been lost for transforming our economy away from pursuit of capital gains Online buy cialis pills Viagra Shops and financial aggrandizement toward focusing on meeting the real needs of our population and of the planet.
Obama Fails!
The current crisis, caused by financial excesses, offered the opportunity for us as a country to take away the dominant power of go-go finance and corporate cytotec generic exploiters. Instead of fundamentally rethinking and restructuring the political-economic management of our country, Obama has chosen to side with the entrenched power interests.
There are no outsiders in the inner circle of economic Buy Cialis Cialis Jelly and financial advisors. All apparently Silagra come to their task with a mindset that big finance and big business are essential to the future of our country. Geithner was protégé of Larry levitra buy buyviagra cialis online brand price Summers and Robert Rubin, both instrumental in the deregulation legislation that set the stage for the current crisis.
I am disheartened by this latest episode in the unfolding crisis not so much because of the unfairness of the latest plan but because buy lasix of what it reveals about Obama’s core beliefs. The pressure that has been building around the financial meltdown has certainly required Obama to search within himself for the right answer.
There was no shortage of voices recommending that the failing banks be allowed to fail, to be restructured cheap buy ampicillin with government generic levitra buy online assistance, and the shareholders and bondholders be required to bear
the results of their poor investment judgment.
I have published many of these voices here.
It seems highly likely that Axelrod, Plouffe, levitra cost and Emanuel would have seriously Cialis generic viagra online price challenged Geithner’s online amoxil plan. Yet, in the end, when Obama had to decide, he supported a plan that is designed to make the financial sector as whole as possible, at huge cost to the government and, ultimately, us taxpayers.
From this episode, I infer that in matters of economics, Obama operates within the order buy Amoxil generic diflucan buy propecia cheap mindset of the prevailing viagra female economic paradigm of prosperity through continued growth in output, with little concern about what makes up that output.
For me personally, this is very sad. I had hoped, I realize now with little evidence, that Obama would bring a fresh perspective to managing our economy, one that would provide for rebalancing the economy as well as the distribution of income. It is not just who get the money (although this needs Brand Viagra to change), but what as a nation we choose to produce and consume. To make changes in the latter, we need to redistribute political and economic power. In Obama’s actions on the financial crisis,
there is no evidence that he saw it as an opportunity to accomplish some of this redistribution. This is not encouraging for the future.
Is it possible–no: likely–that Obama, faced with an environment as daunting as his is, chooses to keep close to the men who were in on its gestation, being the few who might be able to undo it, ready to change course when a change is obviously indicated? The financial sector is so basic to the world’s management of wealth and need that a man schooled in law, however bright and quick, might consider the less-revolutionary steps first–not to say that these are not draconian–but they fall short of nationalizing the banks and other major financial institutions (or,as advocated by many, eliminating the Fed). Obama must be seen as daring and cautious at the same time. The “right” moves might require failure of the wrong ones before they can find the needed legislative and public support, because they will be even more destructive of the status quo and more conducive to hysteria (or the semblance of it) among the entrenched and connected traders and congress people. Mob action is not typical of the American public, but we’re not incapable of it, and the rich and powerful sleep uneasily, always. In the end, all governments–even those of kings–are democracies, as Louis XVI, Mussolini and Ceausescu discovered.
Your comment?
Anyway, thanks as always for your clear and cogent information.
Mitch — Your’s is a hopeful interpretation. Obama is very smart, and a good learner. He said he expected to make some mistakes. Perhaps this is one from which he will learn.
More positively, bailing out the banks doesn’t foreclose reforms that will reduce their political power and regulations to hamper their ability to inflate the value of assets to their benefit. As you suggest, perhaps this is a politically possible first step.
I think you judge too soon, too harshly. Obama is first and foremost a pragmatist, and second an idealist. Else he never ever would have won the nomination or election.
He realizes full well that he needs to work with the system, and from within the system, in order to make solutions work. This is going to take some time. I suggest a little more watch and wait.
What disappoints me, however, is that he is taking at face value the statement that mandating electronic medical records EMR will save money and help solve the health care crisis. If you read Groopman’s recent article in the WSJ, you will realize that this belief is not based on any evidence. Most of the medical centers that I know that have implemented them, e.g. Stanford, have not found any economic benefit, and lots and lots of problems.
Obama is not evaluating the source of that suggestion about EMR saving money, and judging the motives and methods of that advice.
THAT is disheartening. He is much smarter than that…..
peter
@Peter Glusker, I’m the recipient of extraordinary medical care from the VA. I had throat cancer. They used surgery, chemotherapy and radiation to kill it, and kill it they did. Yesterday I was in SF for a checkup. It was a crazy day, going from one part of the SFVAMC to another, double-time, to make my appointments, only one of which was cancer-related. Late in the day, I had an MRI and a couple dozen X-rays taken for knee and shoulder complaints (I’m 70). Then I went straight to the Orthopedic Clinic. The doctor was at the monitor, reviewing the images from both, taken moments before. I looked, too. She had at her glance all the information about me. That this lent efficiency and the joined expertise of the center to her examination of me is obvious and something I’ve benefitted from more times than I can count. It takes time and exasperation to make the changeover in record-keeping, but the end result is wonderful to behold.
the above was helpful but need something more on “expanded talf”
Yes. I agree, and am sad.
It’s time to rename the West Wing. New name: Wall St. Wing
I presume the rocketing stocks on that day in question (Wall Street Wins!) was as much a matter of China stating they would continue to by our debt (Treasuries) than the “Plan”. Next question, since the Chinese asked for “guarantees” about the safety of their purchases of our bonds, what do you suppose we gave them in exchange? Certainly not the guarantee of the full faith of our currency? The IMF’s SDR’s (a global “currency”) seems to be talked about more, too, which I believe the Chinese are supporting, if not instigating. Another note (though this is late) is the re-regulations coming out of Geitner’s office, (though many of them will be new, in regards to the first regulation of hedge funds, etc.). My question is: what guarantee is there that these re-regulations will not be turned over, again, just as Geitner, Summers and other cohorts did in the late 90′s. Regulations are, just as contracts and laws of the US, including the Constitution, seem to be amenable upon the right circumstances and people in office. The Glass-Steagle Act lasted a long time, but in the end, well, that repeal is what led to this present mess. There is no way to make an act or law or regulation eternal. Obviously, we need a different way of operating in the world, without money. A different set of values to reach for. The present system(s) are tired and ready to be retired. Too bad we have to experience the massive changes by default instead of design. Designing a moneyless society is but a tiny blip on the radar screen, but it is being talked about more and more, and by some prominent thinkers and economists. I think that is where we are going, where we have to go.
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