Re: [Pen-l] rant on TARP overhaul

[Jim Devine <jdevine03@xxxxxxxxx>]

thanks for this, Doug.

Here's what SLATE's summary of big US newspapers says about this:
>The Washington Post leads with news that the White House has delayed its announcement of the new plan to bail out ailing financial firms in order to keep all eyes focused on the massive stimulus package. The Senate will hold a procedural vote today to determine whether the compromise $827 billion measure will receive enough Republican support to move forward. If it is approved, the Senate will have to spend the week negotiating with the House to reconcile their versions of the bill. The New York Times and the Wall Street Journal's world-wide newsbox lead with details on what the new bailout plan will look like. It seems the White House wants private investors to play a big part in helping banks get the bad assets out of their balance sheets.

> ... The NYT notes that the details of the new bailout plan for financial institutions are still "sketchy" and probably will remain that way even after the program is announced on Tuesday. Right now it looks as if the program will have four parts. The Treasury will inject more money into banks, institute new programs to help homeowners avoid foreclosure, expand a Federal Reserve program to thaw the consumer credit markets, and devise a method to help banks get rid of bad assets. The NYT says that in order to get the private sector involved, the government "would guarantee a floor value" on the bad assets to push investors to take up the risk. The WSJ says the plan will call for an "aggregator bank," or "bad bank," to buy up the bad assets. The government would put up some money, but the idea is that the private sector would provide most of the financing.

> By getting the private sector involved, the Obama administration hopes to avoid having the government determine the price of the bad assets and risk overpaying for them. And by taking away some of the risk for investors, the White House hopes to restore confidence in the banking system. The WSJ points out that some sort of of incentive is essential to get the private sector to participate in the bad bank, since investors can already buy some toxic assets in the open market. While cautioning nothing has been decided yet, the WSJ says it's likely that investors will buy a stake in the bad bank, which would then go out to buy the bad assets. But that assumes financial institutions will want to sell their assets for the price that investors and the government would be willing to pay. Some banks have proved reluctant to sell and are holding onto their assets in the hope that they'll be able to recoup some of their losses when the market recovers.

> The new bailout plan has so many different unknowns that Americans will soon realize that the massive stimulus plan was the "easy part," notes an analysis piece inside the NYT. The stimulus plan may involve a huge political fight, but the truth is that the government is relying on a well-known formula to jump-start the economy, while "the problems facing the financial system have no real parallels in scale or complexity," writes David Sanger. Lawmakers can easily explain the stimulus package to their constituents, but getting support to spend what could amount to trillions of dollars to save the very institutions that have "become symbols of excess and greed" will be much more difficult. "We know what we need to do," a senior member of Obama's economic team said. "But the perception is that you are bailing out a bunch of Wall Street bankers, and even many Democrats are going to rebel at that."<
-- 
Jim Devine / "Disbelief in magic can force a poor soul into believing
in government and business."  -- Tom Robbins
_______________________________________________
pen-l mailing list
pen-l@xxxxxxxxxxxxxxxxxx
https://lists.csuchico.edu/mailman/listinfo/pen-l