There are all kinds of views, both positive and negative, on the Geithner toxic asset plan today. You can read the kudos from columnists like Steven Pearlstein at the Washington Post and John Berry at Bloomberg. Or you can read critiques from Paul Krugman at the New York Times and the folks at various blogs, including Naked Capitalism.
Suffice it to say that I believe the administration is subsidizing/propping up weak institutions at the expense of the strong. We are pursuing a policy of “No Bank Left Behind” rather than performing proper triage — separating out the weak institutions, letting them fail and then resolving the assets through the receivership/FDIC process. You can see the folly of this prop up policy approach by looking at what AIG is reportedly doing — using its government subsidy/backing to undercut stronger insurers on price in an attempt to stem the defection of customers.
For a much more detailed examination of this issue, please be sure you check out our firm’s just-released white paper entitled “Dangerous Unintended Consequences.”
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Thanks Mike!
I see a day coming when the banks will be strong and healthy and 20 million Americans will be jobless. Unfortunately the banks won’t be hiring either. Of course the Dow Jones will keep going up as if nothing is wrong with this picture?
I just took a look at the white paper, Dangerous Unintended Consequences. The major flaw that I see in that paper is the word “unintended”. The entire white paper assumes that the past, present, and future “dangerous consequences” have been and are unintended. This is naive. Wishful thinking. Requires blind disregard of overwhelming contrary evidence. I can only assume that you cannot be so naive, but rather that you accept that the majority of your readers are still in denial, and you presume that it would be harmful to your business interests to attempt to arouse them from their denial.