[Pen-l] The really awful bad bank bailout proposal

[raghu <mraghu01@xxxxxxxxx>]

Yves Smith who is one of the most astute financial commentators
online, really hates the bad bank plan so far. I fear that Obama may
be getting some really bad advice from his economic advisors. I hope
he educates himself before it is too late..
http://www.nakedcapitalism.com/2009/02/bad-bank-assets-proposal-worse-than-you.html
-----------------------------------------------------snip
Dear God, let's just kiss the US economy goodbye. It may take a few
years before the loyalists and permabulls throw in the towel, but the
handwriting is on the wall.

The Obama Administration, if the Washington Post's latest report is
accurate, is about to embark on a hugely expensive "save the banking
industry at all costs" experiment that:
1. Has nothing substantive in common with any of the "deemed as
successful" financial crisis programs

2. Has key elements that studies of financial crises have recommended against

3. Consumes considerable resources, thus competing with other, in many
cases better, uses of fiscal firepower.

The Obama Administration is as obviously and fully hostage to the
interests of the financial services industry as the Bush crowd was. We
have no new thinking, no willingness to take measures that are
completely defensible (in fact not doing them takes some creative
positioning) like wiping out shareholders at obviously dud banks (Citi
is top of the list), forcing bondholder haircuts and/or equity swaps,
replacing management, writing off and/or restructuring bad loans, and
deciding whether and how to reorganize and restructure the company.
Instead, the banks are now getting the AIG treatment: every demand is
being met, no tough questions asked, no probing of the accounts (or
more important, the accounting).



-raghu.


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