Monday, March 23, 2009

Geithner has op-ed in WSJ; stocks soar but economists still mistrustful of The Banks, The Street

Treasury Secretary Timothy Geithner has a major opinion piece on p A15 of the Wall Street Journal today, “My Plan for Bad Bank Assets”, link here. The summary is “the private sector will set prices. Taxpayers will share in any upside”.

Geithner opens his piece by acknowledging the personal suffering resulting from “letting our financial system take on irresponsible levels of risk.” Toward the end he says that we need 21st century regulation, not outmoded and misleading rules from the 20th Century. Regulation needs to ensure that investors can understand the risks that are being taken, but he says investors still need to accept some risk, and right now, shell shocked, they will accept none. Regulation is like the rules of baseball. The home team can determine the distances to the outfield fences, but the basic rules have to be the same.

Stocked soared on Monday as Geithner announced the plans to help removed bad assets, and as housing numbers improved.

However, Paul Krugman and James Galbraith have called Geithner’s plan “dangerous” and will leave Americans in debt, holding paper essentially work nothing for years, a Yahoo! Finance story says, along with a video, here. The Henry Blodget story also says that the banks are “massively corrupted” and comes from the Business Insider, here.

Picture (baseball "analogy" to "rules"): Griffith Stadium, Washington, around 1958; model boyhood stadium for board game, around 1957.

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