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WTF !! WTF !! NYT'S KRUGMAN TRASHES GEITHNER'S BANK PLAN !! "IT WONT WORK , FREE MONEY FOR BANKS " !!!!

 
THE WTF GUY !!
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03/24/2009 11:45 AM
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WTF !! WTF !! NYT'S KRUGMAN TRASHES GEITHNER'S BANK PLAN !! "IT WONT WORK , FREE MONEY FOR BANKS " !!!!
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[link to www.businessinsider.com]

Krugman Trashes Geithner's Bank Plan...And Obama
Henry Blodget|Mar. 23, 2009, 6:25 AM|28

Paul Krugman and other respected observers have come out strongly against Tim Geithner's latest plan to fix the banking system, which is a slightly modified version of Geithner's original plan to fix the banking system.

Krugman also lays the blame at Obama's feet and wonders whether it will destroy his political capital.

Krugman made his despair known in his blog on Saturday. Today, he lets fly in his New York Times column:

[T]he Geithner scheme... isnít really about letting markets work. Itís just an indirect, disguised way to subsidize purchases of bad assets...

[T]the real problem with this plan is that it wonít work. Yes, troubled assets may be somewhat undervalued. But the fact is that financial executives literally bet their banks on the belief that there was no housing bubble, and the related belief that unprecedented levels of household debt were no problem. They lost that bet. And no amount of financial hocus-pocus ó for that is what the Geithner plan amounts to ó will change that fact.

As we explained on Saturday, here's what Krugman is so upset about:

Remember the crux of the problem: Banks say their assets are worth 60 cents on the dollar. The market says they are worth 30 cents on the dollar.

Geithner continues to accept the banks' argument that this huge bid/ask spread is just a temporary condition: The market just doesn't understand that the assets are actually worth 60 cents on the dollar. When it realizes this, everything will be fine. The majority of smart economists (at least the ones we read) think this is a crock. The banks are hallucinating (or worse), and most of the assets are worth what the market says they are worth.

In any event, the only way banks can be induced to sell those assets is if someone agrees to pay 60 cents (or more) on the dollar, because otherwise the banks will have to take more writedowns and require more capital. The only way someone will pay 60 cents or more on the dollar is if someone gives them a boatload of free money to be reckless with. That's where Geithner and the taxpayer come in.

Krugman:

In effect, Treasury will be creating ó deliberately! ó the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isnít, thatís someone elseís problem. [The taxpayer's]...

This plan will produce big gains for banks that didnít actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And I fear that when the plan fails, as it almost surely will, the administration will have shot its bolt: it wonít be able to come back to Congress for a plan that might actually work. Read all >

Calculated Risk and Yves Smith slam a different part of the plan. Keep reading here >
Anonymous Coward
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03/24/2009 11:58 AM
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Re: WTF !! WTF !! NYT'S KRUGMAN TRASHES GEITHNER'S BANK PLAN !! "IT WONT WORK , FREE MONEY FOR BANKS " !!!!
Read DIET's thread today.
It goes beyond this.
The problem is the pooling and repackaging of MBS. These hybrid/exotic/new millineum bundled packages are so intertwined that it is going to take an army of accountants to decipher what belongs where and who owns what. Let alon what the percieved/market value is.
Anonymous Coward
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03/24/2009 12:01 PM
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Re: WTF !! WTF !! NYT'S KRUGMAN TRASHES GEITHNER'S BANK PLAN !! "IT WONT WORK , FREE MONEY FOR BANKS " !!!!
"For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isnít, thatís someone elseís problem. [The taxpayer's]..."

I heard Krugman on PBS last night. He did say that it's a win-win situation for the "private investors" as their downside risk is at the most 15%, the taxpayer on the hook for the rest. And...the profits are split 50-50! Huh?

Krugman is rightfully asking what the toxic assets are worth. The banks lost enormous amounts of money. Geitner's plan isn't going to help much.

If you ask me, this bailout plan is only buying time for this lost cause. The debt is just too large to even fathom.
.
flybyshoeing
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03/24/2009 12:20 PM
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Re: WTF !! WTF !! NYT'S KRUGMAN TRASHES GEITHNER'S BANK PLAN !! "IT WONT WORK , FREE MONEY FOR BANKS " !!!!
Krugman is a cry baby. Did he stamp his feet and hold his breath too ? All he know how to do is criticize. Where is his plan ? President Obama was asked about Krugman's comments in the first Press Conference. He said that if Paul Krugman has ideas he should bring them forward and Treasury will look at them. Has he done that? Not that I have heard or read anywhere. Krugman has become a pundit. Take it for what's it's worth.
Avian

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03/24/2009 12:24 PM
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Re: WTF !! WTF !! NYT'S KRUGMAN TRASHES GEITHNER'S BANK PLAN !! "IT WONT WORK , FREE MONEY FOR BANKS " !!!!
Denninger said the same thing, so did Peter Schiff and Ron Paul...

Its a fucking house of cards...its falling

June 2009 TICK TOCK TICK TOCK
"When plunder becomes a way of life for a group of men living together in society, they create for themselves, in the course of time, a legal system that authorizes it and a moral code that glorifies it."
- Frédéric Bastiat

food, water, ammo, weapons, battery back up solar, hand well pump, wood stove and 1 year of food...oh yeah PM's too...good luck
Anonymous Coward (OP)
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03/24/2009 12:27 PM
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Re: WTF !! WTF !! NYT'S KRUGMAN TRASHES GEITHNER'S BANK PLAN !! "IT WONT WORK , FREE MONEY FOR BANKS " !!!!
Krugman is a cry baby. Did he stamp his feet and hold his breath too ? All he know how to do is criticize. Where is his plan ? President Obama was asked about Krugman's comments in the first Press Conference. He said that if Paul Krugman has ideas he should bring them forward and Treasury will look at them. Has he done that? Not that I have heard or read anywhere. Krugman has become a pundit. Take it for what's it's worth.
 Quoting: flybyshoeing 253360


I think you should read more about Krugman in his website !
He says : "Let the banks fail and sell the banks someone else !!
In the other hand , Krugman is a analyst , he is not in the Govt. team or so, if they want his advice they must show the money , no free lunch no free advice !!
cruise
Hiro Protagonist

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03/24/2009 12:31 PM
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Re: WTF !! WTF !! NYT'S KRUGMAN TRASHES GEITHNER'S BANK PLAN !! "IT WONT WORK , FREE MONEY FOR BANKS " !!!!
Denninger said the same thing, so did Peter Schiff and Ron Paul...

Its a fucking house of cards...its falling

June 2009 TICK TOCK TICK TOCK
 Quoting: Avian


Ok Avian, I've seen you repeat this often enough. Point me to the thread where you talk about June.
Yours Truly!
flybyshoeing
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03/24/2009 12:41 PM
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Re: WTF !! WTF !! NYT'S KRUGMAN TRASHES GEITHNER'S BANK PLAN !! "IT WONT WORK , FREE MONEY FOR BANKS " !!!!
Krugman is a cry baby. Did he stamp his feet and hold his breath too ? All he know how to do is criticize. Where is his plan ? President Obama was asked about Krugman's comments in the first Press Conference. He said that if Paul Krugman has ideas he should bring them forward and Treasury will look at them. Has he done that? Not that I have heard or read anywhere. Krugman has become a pundit. Take it for what's it's worth.


I think you should read more about Krugman in his website !
He says : "Let the banks fail and sell the banks someone else !!
In the other hand , Krugman is a analyst , he is not in the Govt. team or so, if they want his advice they must show the money , no free lunch no free advice !!
cruise
 Quoting: Anonymous Coward 569371


Ok, I will go to his site and take a look.
Anonymous Coward
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03/24/2009 01:03 PM
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Re: WTF !! WTF !! NYT'S KRUGMAN TRASHES GEITHNER'S BANK PLAN !! "IT WONT WORK , FREE MONEY FOR BANKS " !!!!
dumbass bsflag


,
Anonymous Coward
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03/24/2009 01:17 PM
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Re: WTF !! WTF !! NYT'S KRUGMAN TRASHES GEITHNER'S BANK PLAN !! "IT WONT WORK , FREE MONEY FOR BANKS " !!!!
Kruggy's afraid somebody somewhere might make some money - God forbid!

The only way someone makes money is if the toxic assets turn out to be not so toxic. Which means that the banks are OK and there is no crisis. Just an accounting disagreement.

But if the toxic assets are worthless, why make the goby stuck with them all. At least Geitners plan puts private money at risk. If the things are worthless the goby won't take the whole hit.
AsperGirl

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03/24/2009 01:25 PM
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Re: WTF !! WTF !! NYT'S KRUGMAN TRASHES GEITHNER'S BANK PLAN !! "IT WONT WORK , FREE MONEY FOR BANKS " !!!!
Denninger said the same thing, so did Peter Schiff and Ron Paul...

Its a fucking house of cards...its falling

June 2009 TICK TOCK TICK TOCK
 Quoting: Avian


Yep... explosion
Anonymous Coward
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03/24/2009 01:27 PM
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Re: WTF !! WTF !! NYT'S KRUGMAN TRASHES GEITHNER'S BANK PLAN !! "IT WONT WORK , FREE MONEY FOR BANKS " !!!!
Kruggy's afraid somebody somewhere might make some money - God forbid!

The only way someone makes money is if the toxic assets turn out to be not so toxic. Which means that the banks are OK and there is no crisis. Just an accounting disagreement.

But if the toxic assets are worthless, why make the goby stuck with them all. At least Geitners plan puts private money at risk. If the things are worthless the goby won't take the whole hit.
 Quoting: Anonymous Coward 641790


They are going to have to detangle the MBS in order to sell this crap.

A non performming mortgage that was worthzero in 2008 is still going to be worthless today. The problem is that the banks are going to have to have accountants do a item by item assessment of these instruuments and that is goign to take time.

There are perfoming mortgages on the books and those can be sold. It's the non performing mortgages that owned in whole or in part that is the real problem.
Anonymous Coward
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03/24/2009 01:32 PM
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Re: WTF !! WTF !! NYT'S KRUGMAN TRASHES GEITHNER'S BANK PLAN !! "IT WONT WORK , FREE MONEY FOR BANKS " !!!!
If the banks and other institutions holding these bundled packages don't segregate the good from the bad then the sell job they have is a grab bad one. Here's the pitch:

'Like my mama always said Mortgage Backed Securities is like a box of chocolates. You never know what your going to get inside.'

So be a good American and buy that box of chocolate and you might find your own golden ticket.


ohyeah





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