Geithner Banks On Private Cash To Help Remove Toxic Assets

Wall Street Journal:

WASHINGTON -- Treasury Secretary Timothy Geithner said the only way to resolve the financial crisis is to work with the private sector to remove troubled assets clogging banks' balance sheets, even at a time when Wall Street moneymakers are being vilified by the public and politicians.

In an interview with The Wall Street Journal Sunday, Mr. Geithner said the government cannot do this alone. "Our judgment is that the best way to get through this is if we can work with the markets," he said. "We don't want the government to assume all the risk. We want the private sector to work with us."

Read the whole story: Wall Street Journal

Comments

[YankinCanada]

Second post part 2

My first reaction was nationalize all of them clean them up and lock up the weasels. I'd still like to see the weasels pay but the nuts and bolts of nationalization is crazy. How long will the banks be closed while they do that? It would most assuredly create a run on the banks in some form (and it won't be the average Joe trying to take some cash out to tied him over, it will be other banks trying to get enough liquidity and pulling in loans from other banks that will do it in).

One step at a time, not all steps will be nice but I think it's going to be a recovery that will transform Wall Street and eventually (with stronger unions, tariffs on exporting jobs) get more cash to the Average Joe (like me) and back in the Fed Guv.

[YankinCanada]

First post

I'm coming to the conclusion that it's not going to be about the money in the short term. Inflation will have to be kept in check;there are mechanisms for that. The money is going to be spent and this may work , as unpalatable as it is.

The revolution will come from the regulations that reign in Wall Street. This is what I'm looking for and basing my vote on. Hedge funds and derivatives need to have a continual choke hold placed on them. I'd like to believe that they would be regulated out of existence but I stopped smoking the stuff a while ago.

Jon Stewart mentioned it, the Rolling Stone article talked about it and the simplest way is to maintain a much tighter ratio of borrowing to lending. At its peak, Wall Street was betting (lending and borrowing) at 34-1.

The Canadian Banks are doing fine through this, although they have no idea who to lend to right now, because government regulations ( called governance up here) kept them at 8-1. That might be a bit low for Wall Street, the engine of the world. I believe that under Clinton it was around 12-1.

Separating the two types of banks is next, one you save with the other you invest with. The combining of the 2 makes it too easy for the foxes to pillage.

[zedhed]

sure they have reservations . . . maybe they can get more of our money.

[leonel]

The biggest lesson from last week is how emotional everybody is getting. Obama did not think he was giving everybody else permission to get so angry. Enough already. The plan is so big and the bottom is still unknowable, so there will be back and forth situations, like what if private investors need a lot of persuasion to invest. Not enough adults in the room yet. Is this like the spats that Iraqis had to go through in setting up a government. The country almost gave up until Petraeus spent a lot of sweat and blood on the ground and at a given point the violent subsided. Very pragmatic general, but even he didn't know where the bottom was. A real soldier.

[truthynesslover]

This is the biggest robbery in the history of the world.
I guess where no1 in something now,

[LeftLeanWing]

provide more detail to you 'Biggest Robbery' theory .

[jerrydenim]

"It's just a scheme to transfer losses from the bank to the taxpayer with an egregious payout to a middleman to effectively money launder the transaction.

"One would have to be a criminal to participate in this."

http://www.nakedcapitalism.com/2009/03/investor-on-private-public-partnership.html

"In order to limit moral hazard and get public support, it is important to have a stronger approach and deal with the banks firmly, enforcing the principle that losses are to be covered in the first place by the capital provided by the shareholders. If that means that banks must be nationalised, then so be it. They can be privatised again at a later stage."

http://www.nakedcapitalism.com/2009/03/guest-post-geithners-faustian-bargain.html

[TXfemmom]

The government needs to just from a National Bank, fund it, and then open up the credit market and give loans to those who qualify and have a good chance of paying it back. Let the other banks fend for themselves, after the government claws back everything AIG paid them above ten per cent of face value on those derivatives and credit swaps.

[jerrydenim]

That money is gone.

Obama won't even tell his AG to go after corrupt executives at failed banks in his own country, do you really think he would go after Deutsche Bank?

[Barbyrah]

Adapted from bIts and pieces posted by two other financial bloggers (different website):
"This is becoming an issue of public morality. No one can duly commit public funds for fraudulent mortgage on books of banks without DUE DILIGENCE. Before anything moves forward, we need to block Geithner and his procedure with a Congressional Resolution REQUIRING public due diligence of the balance sheets of any bank or hedge fund that's trying to get in on the deal."

[cordyc]

We the people need to take over control of these assets and rely upon salaried worker to untangle the mess.

The hedge fund guys need to go to trail for stealing our 201K's before it's too late.

[anothervoice2]

Geithner has been a part of the Goldman mafia - and is ensuring a huge realignment of power to WS using this crisis as an excuse:
http://www.rollingstone.com/politics/story/26793903/the_big_takeover/print

[strangerinthenight]

Wasn't only 3 weeks ago when the President's dramatic oratory build up Geithner to present a "plan" to buy those toxic assets that would require more than 4 trillion from the National Treasury - and was just an initial installment. He estimated the final cost over 60 trillion. The public, economist and Wall Street went had hissy fits. Even Wall Street voiced a "no confidence vote" , thus fell 500 in 3 days. hen in stunning reversal, he admits the detail are not yet known, that "its too big and too complex.

Now, he is extending his hat to the Private Sector. And the PS have the money where they are all in dire shape to get a loan ?

Geithner as many have predicted, will be the FALL GUY ! Does Obama has the grasp of ECO 101 ? Does he even realized the enormity of the Economic collapse and what it means for the American people ?

Apparently not. There is just any mark of an experienced and well seasoned President that would really lift us from this Black Hole.

IF ONLY ORATORY COULD SAVE THE DAY. TIME IS NOT ON HIS SIDE.

[eastearll]

All Right Timmy! I'll look at paying 15-30 cents on the dollar for your toxic assets. Resolution Trust Corporation here we come!

[Barbyrah]

From a fnancial blogger - found what he had to say compelling:
"Simple way to game the system:
Banks set up an AIG-2 ......AIG-­9999.
Fund them with enough capital (5-15 cents on the dollar) to buy all crappy assets for 100 cents on the dollar using FED provided leverage (translate: our money covers 85% on the dollar).
Allow AIG-2 through AIG-9999 to go belly up and leave the government (us) holding the bag.
Banks have 100% of capital returned minus 5% to 15% loss.
Treasury has 100% of bad assets
Or even better for the banks, have AIG-2 through AIG- 9999 purchase (the toxic) banks assets for 200 cents on the dollar, then go belly up."

[Sundialsvc4]

Whoever heard of an "asset" to be "toxic?"

If it's "toxic," it's not an "asset." It's worthless paper.

Okay... instead of throwing trillions of dollars (sic...) of public money down a gaping hole created by fraud, let's confront this problem at its source. We have a crime here, albeit a long-standing one.

We are not responsible for "gambling losses."

Any of these securities has a proper place ... in a very limited context. But they have been grotesquely displaced out of that context, such that the obligations they supposedly represent are not credible ... and the issuers, and their credit-rating agencies, knew it. They engaged in a deliberate pattern of deceit and fraud. They swindled trillions of dollars ... drastically affected the lives of hundreds of millions of ... PLAINTIFFS.

And it's still a game. They're introducing new "collateralized securities" on the Merc even as we speak.

[Barbyrah]

From another commenter on a financial blog: "What do you think the American public will say when it realizes that Act II consists of non-recourse loans to hedge-fund moguls at 33-to-1 leverage to "'induce' them to run over us a second time on bailout assets?"

[americadead]

He should be waterboarded for ruining the country!!

http://www.flickr.com/photos/coyote2012/3340867099/