Treasury Secretary Tim Geithner is set to appear here in a large conference room in the Treasury Building momentarily. There are at least 200 reporters waiting to hear him talk about the latest plan to stabilize the credit markets.
Here’s the gist though: the bad assets that were supposed to be tackled by the TARP last fall still haven’t been taken off the books of many institutions. The government hasn’t figured out how to buy them up without either overpaying, which rewards institutions and hurts taxpayers, or underpaying, which is a deal that financiers just won’t take them up on.
So now the feds are trying to use a public-private partnership to buy up the assets in a market-based manner. Those are the principles at least. The Treasury says they’ll use $75 billion to $100 billion of TARP money (Congress approved $700 billion through TARP) to leverage $500 billion “with the potential to expand to $1 trillion over time.”
It sounds like a reasonable plan. But the problem is the politics and public perception of spending more taxpayer dollars to help financial institutions, especially after the AIG fiasco last week.
The Journal captured the problem well today: “Administration officials are hoping the public will draw a distinction between financial firms that receive a government rescue, such as AIG, and those such as hedge funds and private-equity firms that participate as investors in broad government programs.”
— Jon Ward, White House reporter, The Washington Times