Geithner Loves the Market so Give him Banking Vouchers
This week on Charlie Rose, Secretary of the Treasury Timothy Geithner said explicitly what has been implicitly all along in President Obama's approach to ailing banks and financial institutions. Responding to Rose's unusually tough questioning about why government has asked so little of the banks getting billions in bailouts, Geithner said the market is the solution to the market's meltdown, and that any attempt by government to interfere via nationalization or overly intrusive mandatory instructions would get in the way of the free market as it dealt with the crisis.
Now real market fundamentalists have made clear that this would mean keeping government out of the crisis altogether and letting Citibank and other wounded companies follow Lehman Brothers and Bear Stearns down the drain.
But Geithner doesn't love the market that much: he wants it both ways - big taxpayer bucks into bank coffers, but let the banks decide what to do with them (OK, maybe lay off those publication relations disaster bonuses and corporate jets). All risk to those civic shareholders known as taxpayers, all profits to the bankers and their private shareholders known as investors.
Well I have an alternative plan that doesn't (god forbid!) involve nationalization or government mandates, but compels the banks to spend government bucks for the purposes intended by Congress when it OK'd the bailout: vouchers. Submit the banks to the privatizing discipline of vouchers that has been used in the education and housing markets, and is the logic behind food stamps. (You can't spend them on movies or a ballgame, you gotta buy food with them.)
Keep giving out the dough to the banks but leave them with no choice but to pass the bucks on to you and me in the form of credit and loans. The banks can negotiate and administer the loans, government doesn't get involved in banking, but they will be working with federal vouchers rather than cash. And that means government bailout funds won't turn into greenbacks until they are actually in the hands of small businessmen, home mortgage applicants or consumers. If bankers stuff them into the vault to be used to pay off toxic debt or acquire some other failing bank, they will be worthless. Put a shelf life of say three to six months on them and banks will have to make these vouchers available as loans and credit. Or else. Use 'em or lose 'em.
With vouchers, the government (and the taxpayers whose money the government is giving away) can truly pass the buck without worrying that the buck will stop with the banks. And Geithner can relax, knowing nobody can call him a bank nationalizer or closet socialist. After all, what is more market than vouchers?
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This proposal of earmarking bailout money is fine as far as it goes. Unfortunately what it fails to do is to force these institutions to behave in the public interest. They get big bailout sums that are mandated to be lent. This frees up other funds to be used as bonuses. They cannot be trusted to do the right thing, stop their predatory lending practices, and forgo quenching their greed without some very abrasive regulations by the Federal government. The Secretary is a product of that culture of avarice and still doesn't understand how wrong and how much against the public interest it is.
I knew Geithner was a bad choice for Treasury. His comments concerning the market being allowed to function freely identifies him as a believer in the quack economic theories of Milton Friedman. Every country in which Friedmanism has been tried, i.e. Chile, Argentina, Brazil, Uruguay, Iceland and the United States has had its economy collapse.
I think your idea of giving vouchers to banks instead of cash to promote lending is excellent. It is probably the only thing that will get banks to lend, which is a sure bet it won't be tried, at least not in THIS country.
i have an idea. why don't we give all of that money to the credit unions instead of the banks.
Loan Stamps. Excellent!
Oooo. I *like* it.
Sauce for the goose as it were, since these are the very guys that suggested vouchers and privatization for schools and Social Security. They just wanted to get their hands on the money.
Give them vouchers!
I think he is doing a damn good job! Get off his back.
What little History I've read never indicated that this Country was built with tax cuts and free trade. It was done with a reasonable tax system and a mostly fair system of tarrifs and taxes on trade. If that translates into Socialism, so be it. We wouldn't have things like Coulie Dam, Hoover Dam, Bonniville, nor our highway system without government financing.
Any degree of socialism is way ahead of what we've had for the last eight years.
I don't think the GOP likes Democracy. They don't want anyone to benefit from any government programs except them. The very essance of Democracy is that everyone benefits equally. But the GOP doesn't understand that, and don't want anything to do with it. Obama is on the right track, but he must get some sereious regulations back into the banking system. Why not reinstate the Glass-Steagal Act? And whats wrong with the old 'Usary' law? We, need those things back in service.
BAr77,
First off the essence of democracy is not everyone benefits equally. That's socialitic drivel. The essence of democracy is every person is equal in the eyes of the law and has an equal opportunity to make something of themselves. And, I might point out that's what we Republican embrace not guaranteed outcome and DNA preferences and set asides like the liberals.
As for the national highway system, I believe the person who had it built was Eisenhower who was a Republican. And it was built not to make life easier but to be able to move the army anywhere in the country faster than by rail. Read a history book sometime. And, wasn't the person who pushed to end the Glass-Steagal Act Bill Clinton? Hmm.
This country was built on God, Guns, Guts, Glory, personal responsibility, and reward from taking risk by individuals for their own and not a shared prosperity. Read a real history book sometime.
Actually, our rail system was cheap and efficient.
Highways were built to replace rail backed by Big Oil and the Big Three so we'd have no choice but to buy gas and drive. By building the highways, they could then have our rail system dismantled.
Aren't we sorry now.
BLKCPA, the essence of democracy is NOT that some have more than others. You are equating democracy with CAPITALISM, which is not democratic. Anybody who has ever worked in any corporation knows there is no democracy in the work place. Corporations are typically feudal institutions structured on a quasi-military hierarchy. No freedom of speech is to be found there. Decisions are all made by higher ups; you must be very careful about making any decision on your own; better to let it be done by somebody who's paid to think. That's capitalism, not democracy.
America was built on the labor of slaves, immigrants and ordinary men and women. The country didn't really get settled until the guns were set aside, you don't shoot your way to a developed country, you have to work. You guys, white men, are all alike. You believe in nonsense, do the same things, get into the same predicament lead always to war. We voted for a black man to get rid of the white guys. So GIT! GO AWAY! Give us the civilization found in limited socialism, not pure capitalism which is the jungle!
Doesn't a little chauvinist like you know that prosperity was once shared right here in America !!!! After working for a lifetime and saving up in the Social Security fund, we are all entitled to receive our pensions without having them called "set asides" or "guaranteed income" with the implication that we are getting something for nothing!!
"The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness." John Kenneth Galbraith
Great idea. Unfortunately, the financial industry is already using our taxpayer dollars to keep lobbying what we laughably call our "federal government" to act against our best interests. No health care, no mortgage relief, and absolutely NO accountability for the robber barons.
I totally agree. And I don't like Geithner.... I have very little faith in the fact that he's doing somethign for the America public.
Maybe he just wants to throw another 30 billion at AIG.
Vouchers????? We ask for transparency, and they say we will have transparency, but when? It's a bit like "I'll go line by line and eliminate wasteful spending," but was that vow kept this week? Obama is Wall's Streets best new friend. Nationalization is the true answer and will give us all the transparency we want for our $$$$$. On a weekly basis, the F.D.I.C. seizes small banks it deems insolvent. The F.D.I.C. program is very elementary: seize a bank, pay off the debt, restore order and sound fiscal principles (bye bye big bonuses for fat cats) and then resell the cleaned-up institution to private investors. It is a temporary but effective solution that has worked for years. How is that not nationalization? IndyMac will soon earn the first half of its name back. The government, which seized the failed bank last summer, is expected to close a deal in the next week that would return the California mortgage lender to private ownership. For IndyMac, the deal means independence in less than eight months. How was that not nationalization?
Citibank's smoke and mirrors accounting may keep the government at bay for the moment, but it is an accident waiting to happen. Obama and Geithner have to get off the fence and make a decision. Nationalize now! www.helpthemiddleclass.com
That's correct, only something stupid, white male stupid, disasterous for the general welfare (one of the purposes of government according to the Preamble of the US Constitution), and favorable for white male fat cats will actually be done. Doing everything so this same group prospers is why we are in a crisis.
I think Obama can't decide just to put the top five banks into bankruptcy receivership because Geithner keeps talking him out of it. Mr. President, don't listen to Friedmanites, they caused this collapse.
It will not work because it makes to much sense.
No more unspecified money to banks. They cannot be trusted to use it wisely for the economy, only for their own bottom lines. Capitalism means nothing if it is a case of socializing the loses and privatizing the profits.
I like this voucher idea. Conservatives theoretically love vouchers (unless it reduces bonuses and privileges for their CEO buddies), so they should get on board.
Geitner's "Lot's wife" problem is that he keeps looking backwards an ideology that doesn't work in these circumstances and if he's not careful, he's going to turn the whole shebang into a pillar of salt..
An excellent suggestion, and certainly the most cost-effective way to unfreeze the credit markets. I would lobby for a couple of changes, however. Instead of vouchers, I would refer to them as food stamps for bankers, and I would require gang bankers to sign an affidavit admitting that they're the equivalent of welfare queens.
who change banking law that you don't need 20% down -- that made this banking mess mmmmmm
lets go back to congress year 93-94 look it up -- who was president and who ran congress mmmmmm - history can't change if don't know it
Clinton, wise guy. What makes you cons think everybody loves Clinton? Clinton made his biggest mistakes when he was pressured by bankers to rescind the Glass-Steagal Act. They wanted commercial banks to be allowed to sell investment products--and they went mad!
FDR had made progress in lifting the country out of the Great Depression until l937 when he was persuaded by conservatives to "balance the budget." That meant cutting spending and the stats started down again. Unlike Clinton, who never got wise, FDR reversed his course and the numbers went back up. This is the closest thing to scientific proof that goverment spending works.
No, it wasn't World War II that GOT US OUT OF THE GREAT DEPRESSION, it was the great man himself. War usually sets everything back, especially social progress and domestic development.
Or, if you wanted to be intellectually honest, which I know is anathema to Republicants, you could go all the way back to Reagan and find the very roots of the conservative ideology that has gotten us where we are. Yeah, Clinton screwed up, see I admitted it. Why can't you Republican admit to some fault, somewhere? It's completely childish to not accept blame for anything.
How are vouchers going to get there asset ratios in line?
They don't, we're talking about lending credit only. The bad assets have to be written off as part of reorganization in bankruptcy.
I watched Geithner on Charlie Rose and I did not come away with the gist of what this article is sayings. I found that Charlie Rose's questions were worded to help Geithner articulate in laymen's terms the plan.....
I hear all this flack about Geithner and what he's not doing, but he mentioned several points:
1. not just throwing big checks to these banks with no accountability
2. having much more regulation and transparency
3. having the private sector buy up these bad assets guaranteed by the tax payer's
4. the potential profit from investing in these banks
funny thing is since that interview I've noticed Citibank has shown a 2 month profit all of a sudden, they along with other banks no long need TARP, GM doesn't need TARP (for right now), Ford signed a new contract with their employees, GE can weather the storm , and the market hass inched up a few points, WOW!!
I'm just baffled,??? was all of this just a coincidence or could it be that maybe Prez. Obama (the intelligent man that he is) has done it again...
Geithner does have a jump shot, a few quick passes, a few fake moves on the floor, and some new refs; and now all of a sudden these parasites don't want to play anymore because they don't like the new rules being applied to the game.
Just a thought but it seems to me the court is clearing out pretty quick all of a sudden...
The profits are the result of the decision last week to postpone mark to market accounting. In other words they are smoke and mirrors. If we value a non-performing mortgage on an empty, deteriorating house at historic cost, banks don't have losses. It makes sense if you are trying to create fictional capital so that they have the ability to lend. It does seem to conflict with the president's stated goal of transparency.
The suggested voucher system has a lot to say for it as long as it doesn't have too many strings attached. The rules against red lining were great if you were trying to expand home ownership but they forced banks to make loans that they would not otherwise have made. Part of today's problem stems from that govermental intrusion into bankers' decision making. That's the famous law of unintended consequences.
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