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The Geithner Plan is the Shit
So, I was on a private BBS formed out of the ashes of Netslaves, and someone asked the following:
Short:
Cross posted from 40 Years in the Desert.
CNN keeps talking about it raising the DOW today, but I have no idea what it actually is supposed to do.So I quickly riffed on this, and the response was very positive, so I thought that I should share my (somewhat profane) explanation with the world:
Short:
- Place your hand in your pocket.
- Remove wallet
- Hand to Wall Street Executive.
- The Treasury/FDIC/FED will make non recourse loans to allow investors to buy into the big shitpile
of mortgage backed securities (MBS), credit default swaps (CDS) and
other alphabet soup so that they buyer will put down about 3% for a 20%
stake in this shit.
- A non recourse loan means that if the investment fails, the lender (i.e. the taxpayer) takes back the shit, and the loan is settled, basically, they are only out their 3% (or less) down payment.
- Basically, it's a subsidy to the big banks and investment houses, who created the shit, because the small investor cannot get the shit for cash deal without going through the big banks and investment houses, and paying a shit load of commissions.
- This has the effect of creating a taxpayer subsidy for the shit that is (at least, there are other programs that feed in) of at least 30%.
- So eat your shit sandwich, and know that somewhere a Wall Street banker is spending your money on some prostitute to shit on him.
Cross posted from 40 Years in the Desert.
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I know, I used a bad word....my bad.
March 24, 2009 9:38 AM | Reply | Permalink
Bentley's second Law of Economics: The only thing more dangerous than an economist is an amateur economist!
March 24, 2009 11:39 AM | Reply | Permalink
Well, I'll just quote Joan Robinson:
March 24, 2009 11:45 AM | Reply | Permalink
And maybe Barack Obama and Timothey Geithner know more than you do. I hope they do. Let's give them a try, since this is absolutely new. No one has seen this before, so no one knows more than anyone else.
A person I used to work with told me once, that when you have kids, it doesn't matter so much WHAT your philosophy is; it matters that you HAVE a philosophy and that you stick to it.
That way if you make a mistake along the way, you just keep going within the confines of the philosophy, rather than throwing it all out and trying a new way.
I think that is what Obama is doing, (although I am stating it simplistically). So let's just have a little confidence in the person we elected. The fact that he is so supportive of this young guy makes me think we should just sit back a little bit and give him a chance.
---What would you prefer? John McCain and the dope from Alaska?
March 24, 2009 7:41 PM | Reply | Permalink
That sounds suspiciously like 'stay the course' in the face of the utter disaster that became the Iraq Quagmire :(
While day 2 of a plan is far too early to call it quits, we do need to be prepared to dump it if something makes it clear that the plan is a failure.
As for what this plan does, there are plenty of investment firms, pension funds, etc. that just want a safe place besides 3 month t-bills to park their wads of cash. This could be that 'safe' place.
March 24, 2009 9:43 PM | Reply | Permalink
We need to ban all Bush metaphors. They are like Nazi metaphors. You are either with or against. Mission accomplished. Katrina. Iraq. Seriously, knock it off, it's nothing but a smear.
March 24, 2009 10:08 PM | Reply | Permalink
One more thing, I've noticed some liberals with this notion that because the GOP stuck with Bush long after it was evident he was an idiot -- like 6 years --, that we are going to show them by deliberately dumping on our president after only two months. So we punish Obama to spite Bush!
Yeah, we showed them!
March 24, 2009 10:11 PM | Reply | Permalink
We need to learn from the mistakes of the past 8 years, not bury them. Part of that learning is drawing parallels between what's going on now to what happened then. Ignoring history dooms us to repeat it.
One thing that really bothers me about a good segment of the GOP is the utter disgusting hypocrisy they exhibit. Where are their cries of "spreading the wealth is horrible" in the face of this AIG bonus BS? If they really felt that way they'd be flipping out over the House's bonus tax bill bonanza, and the general public's response.
That said, personally I'm still behind Obama. It's far too early to start throwing in the towel on any of the administration's approaches. It makes me a bit nauseous when people say "it's been 50 days already" with disdain, like by now we should all be sucking on gold plated lollipops and watching Al Qaeda surrender to open up Subway franchises. Give the guy a chance - I think he's doing a great job considering the &%^#storm he's in.
Give it time, but be objective about the indicators when they start to appear.
March 24, 2009 10:36 PM | Reply | Permalink
No!!!!
The REPUBLICANS need to learn from THEIR mistakes for the past eight years.
If Dems turn on their own, the GOP will gladly return the favor by repeating their blind loyalty for their next Bush-like idiot.
This is a battle, my friend.
March 24, 2009 11:39 PM | Reply | Permalink
ps. This reminds me of how Clinton balanced the budget and the GOP gladly took it and squandered it. Never again! Let's push our programs and agenda to the max, just so that when the GOP tries to dismantle it later it will be that much harder.
March 24, 2009 11:41 PM | Reply | Permalink
Last I checked we're all in this together. Republicans, Democrats, Independents - all of us.
So you criticize (IMO rightly so) the GOP for their blind ideology, yet do the same thing just to get something, *anything* done? And enough of it done so it can't be undone when enough people get tired of the same old crap and vote the GOP back into power?
If you can still cling to blind loyalty despite seeing how totally screwed we are thanks to the last 8 years of it....wow, I don't even know what to say.
This is a battle, alright. It's a battle against the hyper-partisanship that is ruining our country. Sadly, I think we're all losing :(
March 24, 2009 11:55 PM | Reply | Permalink
I'm a bit slang impaired, but when you say that something is "the shit" (as opposed to just "shit") doesn't that mean you actually think it's good?
March 24, 2009 9:10 PM | Reply | Permalink
Fo' shizzle.
March 24, 2009 11:59 PM | Reply | Permalink
shizzle
On the Rizzle--partner Saroff snared me in the same way--I thought huh?? Saroff must really know something I don't...alas, irony intruded.
March 25, 2009 12:37 AM | Reply | Permalink
Some good debate here:
http://roomfordebate.blogs.nytimes.com/2009/03/24/will-the-geithner-plan-work/
March 24, 2009 11:42 PM | Reply | Permalink
I do not mind good debate. And I know your intentions are good.
But such language.
hahahahaahaha.
We must discuss this. Good post.
March 25, 2009 12:30 AM | Reply | Permalink
Is this Wall Street's silver lining? You betcha!...now we know why the market is up...the Geithner's Plan means that the government owns the downside risks and investor's (wall street) own the upside profits...more champagne thank you.
The truth is that No Company or Country is 'to big to fail' (history is full of the 'bones' of both)...here's the problem...
The same people who got us in this mess are now tying to get us out...this is humanly impossible of course...they will, and have instead spent most of the time & money trying to cover-up the industry's underlining behavior. (normal human behavior).
That's why we need an elaborate system of rules & regulations with absolute 'transparency' throughout. Remember President Reagan's slogan re the Russians...'trust but verify'...that's means a system of verifications, checks & balances, and a whole lot of transparency.
What we've witnessed here and around the world in the financial sector (and most other sectors) is a complete collapse of most proper 'rules & regulations' and a surge of 'systemic corruption'.
Above all else, we the people need to be absolutely involved in the solutions...and for the first time in history we have the media/information tools to participate.
So lets start finally Restructuring (nationalize, fix, resell) these financial institutions, the FDIC does it all the time. Only 'Restructuring' can give us the necessary 'Transparency' to get out of this crises.
March 25, 2009 3:49 AM | Reply | Permalink
I am having a hard time understanding why so many folks here and on other sites are equating the dislike that others have of Obama's banking plan as tantamount to a rejection of Obama. I think that many of us who think his banking plan is seriously flawed are not arguing that he is seriously flawed or that he has sold us out.
March 25, 2009 8:25 AM | Reply | Permalink
ODS...It's the explanation that I have.
March 25, 2009 1:07 PM | Reply | Permalink