Rearranging the icebergs on the Titanic

OK, the Geithner 2.0 plan officially looks wretched.  When I’m agreeing with the top Republican on the House Financial Services Committee, you know there’s a problem.  And the problem is not merely that the plan is a lousy deal for the taxpayers because it throws lavish subsidies at institutional buyers of toxic assets and grossly overpays the banks who would sell those assets; that’s all been said before.  The new problem is that it wouldn’t even remove toxic assets from the banking system! As the Financial Times reports:

‘US banks that have received government aid, including Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase, are considering buying toxic assets to be sold by rivals under the Treasury’s $1,000bn (£680bn) plan to revive the financial system.’

Can you say “playing with the house money”?  Unfortunately, that would be your house and my house.

It’s not completely clear that Geithner’s Treasury will allow this to go forward, as a Treasury official says that a bank’s supervisors will weigh in on whether the bank is healthy enough to buy assets.  But Geithner and Obama have implied that all of our big banks are fundamentally sound (shades of Herbert Hoover, John McCain, and Lake Wobegon), so I suspect that the ink is already wet on those supervisors’ rubber stamps.

Seems like we’ve made literally zero progress since Halloween 2008:  captured regulators attempt to prop up insolvent banks with hundreds of billions of dollar bills and won’t even consider that some of them might need to be closed.  Cue Mark Fiore’s “Zombie Bank” cartoon.

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One Response to “Rearranging the icebergs on the Titanic”

  1. demoommie Says:

    Meanwhile the reptilicans act like a bunch of drunks who are gambling with the grocery money while their children starve.

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