The Bank Bailout Boondoggle
February 11th, 2009 | 
Author: 
Now that a weak, and underfunded stimulus plan has been voted on by the Senate and is on its way to conference, let us turn our attention to something a bit more important: the looming collapse of our financial sector. In the midst of the political squabbling over the stimulus plan, we missed the fact that the $750 billion bank bailout passed under the Bush administration, also known as TARP, has failed to shore up our financial markets. Mr. Obama’s Treasury Secretary, Tim Geithner, unveiled his $2.5 trillion dollar plan to buy up toxic assets from failing banks. Unfortunately, Wall Street was underwhelmed by Mr. Geithner’s proposal and stocks fell by 5% yesterday. In addition to rapid deflation, these toxic assets are the most significant threat to the very foundation of our economy. Mr. Geithner wants taxpayers to spend trillions of dollars on essentially worthless bank assets.
What are the alternatives? If the government does nothing, and allows large banks such as Citigroup to fail, the consequences for our economy could be catastrophic. The other alternative would essentially nationalize the banking system and place the government into an unprecedented administrative role. Unfortunately, Mr. Obama and Mr. Geithner have not been forthcoming with the details of this plan. For instance, there is as of yet no agreed upon price for the worthless assets.
Normally, I eschew doom and gloom scenarios. Unregulated emotions plus hyperbole clouds the decision-making process. However, I believe that Mr. Obama’s administration has greatly underplayed the threat to financial markets. Coupled with a failure of will on the stimulus plan, what is his prescription for solving this monumental crisis? Couching his language in equivocations does a disservice to the American public. No one is expecting a magic bullet solution. Yet, most Americans will weather hard times if they can see some light at the end of the tunnel. It is time for Mr. Obama to truly level with the American people. There is no end in sight.
Posted in Bank Bailout, News, Recession Opinions | 
Tags: Bank Bailout, financial collapse, Miscellaneous, Recession Opinions, TARP, Tim Geithner, worthless bank assets 
5 Responses to “The Bank Bailout Boondoggle”
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interesting. so if the country takes over the banking..
barack might actually become the furer after the 2nd American revolution. this oughta be a sci fi novel..
just a thought from dr apocalypse
Honestly, I think President Obama has been leveling with us. The problem is larger than anyone has ever had to deal with and unfortunately, this was something that has been decades in the making. The economic crisis has been going on for at least the last couple years of Bush’s administration, he just chose not to comment or address these issues in light of pushing for this war.
He has been honest in saying that we won’t get out this crisis very soon. However, that is obvious to any one that is even casually following this crisis. No, he compromised on the stimulus plan when there was no need. If this bank bailout isn’t handled correctly, that could be the last straw.
Here is what I was responding to, “Yet, most Americans will weather hard times if they can see some light at the end of the tunnel. It is time for Mr. Obama to truly level with the American people. There is no end in sight.”
The point of my comment was that I believe that President Obama is leveling with us to the best of his ability at this point. Nobody really knows how to solve this problem, so how can he say anything other than what is obvious right now without creating false hope? At least he is saying something about it.
The larger issue with all of this is that there is no magic bullet solution to solving this problem. Economists and others have theories on what has worked well in the past and there are critics on both sides willing to fight to the death for which way they propose it will go. Perhaps you should do an article educating us simpletons on the not so obvious. What is the best way for this bank bailout to be handled?
I apologize if my comments seemed disparaging. I was merely saying that Obama’s comments lowering expectations have penetrated into mainstream consciousness and most Americans do not expect a quick fix.
Actually, I have been mulling over a post that would address what I believe is the best means to deal with these problems. Unfortunately, it wouldn’t get us out of this crisis, but our economy may be better off in the long run.