Geithner 1.0: Beware the TALF
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Bob FertikWant to meet our members? Click 'Join' above!
After months of analysis, Tim Geithner has a plan. Is it any good? One immediate red flag is TALF, because even Wall Street traders are comparing it to a Bloody Mary for a financial hangover.
An expansion of the Fed's Term Asset-Backed Securities Loan Facility (TALF) to include assets beyond the student-loan, auto-loan and credit-card debt it was set up to absorb. Under the revamp, the so-called TALF is likely to buy securities backed by commercial real estate and possibly other assets as well. The program was set up during the Bush administration to spur the consumer-loan market by providing financing for investors to buy securities backed by such loans.
The idea of buying commercial real estate securities is pure insanity because CRE values are now diving off a cliff, just like residential properties did over the past year.
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mobilize protest against bank bailouts
A growing chorus of economists from a surprisingly wide range of political views make an excellent case that the new bank bailout the Timothy Geithner didn't really explain last week would be a disaster. It wouldn't really solve our financial problems but instead dig us deeper into the hole. It makes no sense to heap more and more wealth, to be repaid by our grandchildren, into the hands of the people who screwed up the whole world economy, with minimal oversight and no real direction, in the hope that they will do something constructive with it.
Instead, the federal government should follow the example of Sweden in the early 90s -- use the money to buy stock to take ownership of the banks in a nice, capitalist way, then straighten them the hell out. Capping executive salaries is so not the point. They need to get rid of all the speculation and meta-meta-financial activity through which the super rich gamble with each other using our lives as poker chips and instead lend money to productive (and green) economic activity and major consumer purchases like homes and cars.
For learned but readable explanations of the details, see a great short piece by progressive economist Robert Kuttner on Huffington Post a few days ago: http://www.huffingtonpost.com/robert-kuttner/stimulus-yes-bank-bailout_b...
and an opinion piece in today's Washington Post by Matther Richardson and Nouriel Roubini, who describe themselves as "free-market economists teaching at a business school in the heart of the world's financial capital"
http://www.washingtonpost.com/wp-dyn/content/article/2009/02/12/AR200902...
But what I really want to ask is: how can we get the president, Congress, and the mainstream media, all of whom are determinedly ignoring this obviously sensible approach, to take it seriously?
I envision some kind of progressive internet mobilization network that could call people to demonstrate in the streets in cities all over the county with the slogans:
No bank bailout!
Take them over and run them for the good of the country!
Any ideas about how to make this happen?
the problem we face
is the enormous amount of money it will cost taxpayers if we nationalize the banks because they are so far in the red due to their toxic assets.
i think Geithner is desperately trying to buy time for the housing market to hit bottom so the mortgage-backed securities start to recover some of their lost value.