The Plan (via FT.com):


FOR:

“This is perhaps the first win/win/win policy to be put on the table and it should be welcomed enthusiastically. We intend to participate.” (Bill Gross, PIMCO manager)


"The plan looks like the best hope yet for creating a viable market for all the toxic mortgage-based investments plaguing the balance sheets of banks large and small. The banks today don't have a suitable benchmark to guide them in valuing these assets on their books, let alone selling them." (Michael Hiltzik, LA Times)


"This is not a panacea; it is not a silver bullet. But this will take some of the overhang out of the marketplace. It is incrementally a really good thing." (Larry Fink, Blackrock)


"Clearly these assets aren't going to be sold at par...They are held on banks' balance sheets and held to maturity, which means if they were Triple-A rated securities they will have been held at par and not written down." (Ron D'Vari of New Oak Capital expressing interest in participating in the plan)


AGAINST:

"It may well succeed in giving the bank the opportunity to dump the bad assets but I think the most likely outcome is that those assets will realize massive losses which will be charged to the Treasury and the FDIC...the Geithner plan is presuming the assets will recover over time and there's really no reason to believe that's the case." (John Galbraith, UT economist)


"For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem." (Paul Krugman)


"Traders and portfolio managers don’t want to be investing with career bureaucrats."(Kevin Hebner, strategist at Third Wave Global Investors)


Noteworthy others:

"The hardest truth for Obama supporters to swallow about the Geithner plan is that it is essentially an extension of former Goldman Sachs CEO and Bush administration Treasury Secretary Hank Paulson's much derided scheme to end the credit crunch by having the government step in and buy all the toxic assets from the banks at inflated prices." (Andrew Leonard, Salon)
A tougher regulatory stick is needed to force banks to face reality. Instead, generous terms may help bridge the pricing gulf – further reason for investors fearful of a political backlash to stay clear. (Lex)
"This isn't the worst idea the federal government has ever had, and if it works it will help banks take their losses and burn down debt...we sincerely hope this works. The feds have so thoroughly botched the TARP execution and various bailouts that Treasury has few options left. No accounting change can make bank losses vanish, or inspire investors and short sellers to value bank assets at more than their market price. Yes, banks need to earn their way out of trouble, and many are doing that, but they also need to burn losses. Might as well get on with it." (WSJ)


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1 comments

  1. Spiderman // 3/24/2009 04:24:00 PM

    Beware of anything that is called "win/win." (See comment by (Bill Gross). It usually turns out to be "win/lose," with you and I, the taxpayers, on the losing end. What most people don't seem to understand is that the Treasury doesn't have an endless supply of money. When it needs money, such as to bail out these banks, it has to print money. This has the effect of devaluing the currency - that means we all will get less for each dollar, and conversely, we'll have to pay more for what we buy. It's inflation in disguise. And, that's if this policy is successful. If it fails, the effect will be even worse.
    When faced with a crisis, we are easily persuaded to give the Government emergency powers, under the assumption that the Government knows best. In retrospect, that has not been borne out. Look at how many people favored the war with Iraq, who now believe that was a big mistake. My point is that, before we undertake something that has to potential to jeapardize our financial system, we need to examine the possible consequences.

    Carl Pfeiffer

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