BE VERY AFRAID: Wall Street Likes Geithner Plan


CHRISTIAN SCIENCE MONITOR: More than six months after the financial crisis began, the US government has a detailed plan that strikes at the heart of the overarching problem with the economy: “toxic assets” sitting on banks’ books. The government’s latest effort to try to help the troubled financial system involves setting up a mechanism by which the taxpayers and private investors buy those bad assets. The effort, announced on Monday by Treasury Secretary Timothy Geithner, transfers part of the risk to America’s taxpayers and the federal bank insurance system. It’s not clear how much money the government will ultimately need to commit to remove between $500 billion and $1 trillion in loans from the banks’ books.

While the Bush and Obama administrations had moved quickly since September to shore up banks in imminent danger of collapse, these “toxic assets” have remained on the books because the banks have been unwilling to sell them at deeply discounted prices. The Obama administration says it’s important to allow the banks to have the freedom to lend money and help get the economy moving again if the problem is to be solved. Geithner’s new program has been widely anticipated. On Feb. 10, he had announced a less specific bank bailout plan. A disappointed Wall Street sold off stocks, with the Dow Jones Industrial Average falling 382 points. By way of contrast, by Monday at midafternoon, the Dow had gained nearly 300 points. MORE

WASHINGTON POST: The White House’s decision to release a time line of when President Obama and his senior aides discovered that bonuses were being paid out to AIG executives has, once again, put Treasury Secretary ce_politics_wet_paint_obama.jpgTim Geithner in the spotlight. Geithner first found out about the bonuses last Tuesday and two days later he informed the president. Even before the time line was released — late last night by White House aides — questions had arisen about why Geithner wasn’t aware of the bonuses earlier and whether his job might be in trouble. At least one lawmaker, Rep. Connie Mack IV (R-Fla.), has publicly called on Geithner to resign. MORE

ARIANNA HUFFINGTON:  Geithner’s actions throughout his career are proof that the toxic thinking that got us into this mess is part of his DNA — he is a creature of Wall Street, habitually sympathetic to the people at the top of the financial system, who he clearly thinks were born to run the world. While President of the New York Fed, he eliminated two key regulatory measures — a quarterly risk report and a ban on major acquisitions — that may have prevented (or at least lessened the impact of) the unraveling of Citigroup, which his office was responsible for supervising. Then, together with Hank Paulson, he was instrumental in the original bailout of AIG and the creation of the TARP plan. And he was a key player in the decision to let Lehman Brothers fail. And now he surrounds himself with others who share his Wall Street Weltenschauung, including his chief of staff Mark Patterson, a former lobbyist for Goldman Sachs who had lobbied against then-Senator Obama’s 2007 bill to reform CEO pay. […] Just take the steering wheel out of Geithner’s hands. It might seem extraordinary to be calling for the resignation or demotion of President Obama’s point man on our financial system. But let me remind you of a few other things that are extraordinary: the government has spent $2.2 trillion and committed another $7.7 trillion to bolster America’s struggling financial system; $7 trillion of shareholders’ wealth was lost in the stock market in 2008; over 4.2 million jobs have been lost in the last 14 months; 2.3 million houses were foreclosed in 2008, with another 121,756 foreclosures last month alone. MORE

NEW YORK TIMES: Attorney General Andrew M. Cuomo of New York announced late Monday afternoon that 9 of the top 10 bonus recipients at the American International Group had given back their bonuses. He also said 15 of the top 20 bonus recipients in A.I.G.’s financial products division had given the money back, for a total that he estimated at about $30 million. “Those bonuses will be returned in full,” Mr. Cuomo said during a conference call with reporters. MORE

ATTYTOOD: You can’t blame folks for being confused about this economic mess — about what is really going on and who is to blame for outcomes that are all too real, including massive job losses, declining home values and shrinking retirement funds. Today is a prime example. Today, Treasury Secretary Timothy Geithner has come out with the latest bank bailout plan, Bank Rescue 4.0 or 5.0…we’ve all lost count. Like the earlier iterations, almost everybody hates it. Conservatives hate it. Liberals hate it. Ecomomists hate it. Paul Krugman hates it. MORE

FIREDOGLAKE: Timothy Geithner’s new TALF/PPiP plan, like all his other plans, seems designed to shovel billions into the coffers of the very same bankers who got rich on the mortgage bubble. When the public gets a glimpse of the tip of this giant iceberg, as they did with the AIG bonuses, they’re dismissed as angry rubes who Just Don’t Understand How Things Work. But his latest scheme is proof that they are absolutely right. Despite Geithner’s contention that banks are simply “burdened with bad lending decisions,” most Americans understand at this point that there was serious fraud involved in the inflation of the mortgage bubble. The Justice Department and the FBI are currently investigating Countrywide for accounting fraud, insider trading and consciously lending money to people they knew couldn’t afford to repay it. Meanwhile, AIG is suing Countrywide because they have to pay off hundreds of millions of dollars in insurance claims because Countrywide just flat out lied about the mortgages they were issuing. And who has the privilege of paying off AIG’s insurance policies? That would be American taxpayers. MORE

bag_of_money_1.jpgMAUREEN DOWD: Treasury Secretary Tim Geithner, who grew up as a Republican and was head of the New York Fed for five years, sees things from the point of view of that wellspring of masters of the universe, Goldman Sachs. (His Treasury chief of staff was a Goldman lobbyist, who fought then-Senator Obama’s attempt to curb executive compensation — just as Geithner has done within the administration.) At the New York Fed, Geithner helped preside over the A.I.G. bailout in September. But in October, it was Andrew Cuomo, the New York attorney general, who had to threaten to sue unless A.I.G. canceled $160 million in planned expenses for conferences and a $600 million bonus pool. Virtually unnoticed amid the bonus imbroglio was A.I.G.’s grudging disclosure that it had funneled $93 billion — more than half its federal money to date — to its high-flying insurees, including Goldman Sachs, Merrill Lynch and a group of European banks. Goldman Sachs separately got $10 billion in bailout money last year, but recently asserted snootily that it’s doing well enough and doesn’t want our money because of the restrictions attached. Yet as Goldman sneers at the federal money at the front door, it’s taking delivery of billions in no-strings federal money through the back door. MORE

PAUL KRUGMAN: The likely cost to taxpayers aside, there’s something strange going on here. By my count, this is krugmanbig1012.thumbnail.jpgthe third time Obama administration officials have floated a scheme that is essentially a rehash of the Paulson plan, each time adding a new set of bells and whistles and claiming that they’re doing something completely different. This is starting to look obsessive. But the real problem with this plan is that it won’t 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 — for that is what the Geithner plan amounts to — will change that fact. You might say, why not try the plan and see what happens? One answer is that time is wasting: every month that we fail to come to grips with the economic crisis another 600,000 jobs are lost. Even more important, however, is the way Mr. Obama is squandering his credibility. If this plan fails — as it almost surely will — it’s unlikely that he’ll be able to persuade Congress to come up with more funds to do what he should have done in the first place. MORE

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