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The Geithner Plan

I’m pouring over the various opinions of the Geithner toxic asset plans, as well as the plans themselves, to report back some sort of summary. There’s a lot to take in and even folks who normally agree don’t seem to be on the same page with this one.

But off the top of my head, it seems to me that the plan involves some serious risk, but not as much as a full-on takeover of the banks at a level that might be required if we adopted Paul Krugman’s “Swedish option.” I’m hardly in a position to correct a Nobel Laureate, but even the smartest people can be wrong.

Because he says that this same plan was floated and then discarded during the S&L scandal in the Eighties. Fair enough. But in the Eighties, I remember the word “trillion” as only used by the annoyingly smart kids, as in, “well, I betcha don’t know what comes after a billion!”

And I didn’t, because who had ever heard that number being used?

Now, the plan we’re working off of right now is expected to cost about a trillion dollars by itself. How much more would it cost to own these banks and their failed assets? Seems to me like the scale of the problem required some additional help from outside government.

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A Bad Plan

Paul Krugman checks in with a well-constructed, common sense explanation for why the recently-leaked Geithner plan is a crappy one. Basically, the plan only works if there isn’t any underlying problem beyond a market panic, which I think any reasonable person paying a modest amount of attention has to realize is simply not the case.

I’ve always admired Barack Obama for his ability to surround himself with good people who are competent at what they do. His financial team makes plain the down-side of this: without good people, he’s stuck in the mud on the most pressing issue of our day.

Finally for this post, let me also counterbalance these negative thoughts with ones perhaps more calm: the man’s been at work for not quite 60 days. There’s time for him to get things right and maybe if enough smart people tell him what a mistake this plan is – Krugman, Baker, I’m looking in your direction – he can reverse course. The media’s insistence on drumming up fears for the sake of ratings notwithstanding, we’ve managed to bumble along for five months without a permanent solution. I’m sure a little bit more time is not going to break us.

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Krugman on AIG and Obama

Clearly, Paul Krugman is in no mood to be charitable to the Obama Administration or Tim Geithner. Not that there’s very much reason to be charitable to an administration that’s floundering badly right now.

There’s gotta be some people who know what the hell they’re doing with money who aren’t still sucking the balls of the Captains of Industry, right? Someone else who can steer the Treasury in a way that benefits someone other than the banks?