- Obama’s regulatory agenda will cost U.S. economy $143B next year: report
- Patriot Act author on James Clapper: Fire, prosecute him
- Russia P.M. Medvedev: No amnesty for political prisoners
- Michigan GOP Senate hopeful reminds government is the ‘servant’
- Christmas, by Congress: Members mull a 15-cent tax on trees
- U.S. unemployment falls to five-year low of 7 percent; 203K jobs added
- World mourns Nelson Mandela and celebrates his life; burial set for Dec. 15
- Bill O’Reilly reminds: Nelson Mandela ‘was a communist’
- John Boehner says GOP should support gay candidates: ‘I do’
- Grass-Whopper: Pan-fried cricket burgers go over big in New York City
LAMBRO: Will investors buy in?
Question of the Day
This week’s $1 trillion question is whether Treasury Secretary Timothy F. Geithner’s public-private bank bailout plan will lure enough investors into buying up bad assets to end the nation’s lending paralysis.
Wall Street cheered the plan - as well as a welcome increase in home sales - by sending the Dow up nearly 500 points. Yet economists and cautious leaders in the financial community had their doubts.
The plan calls for using the fast-dwindling remainder of the $350 million share of the bank rescue money when economists say a great deal more will be needed to finance the government’s share of the buyout deal. Financial experts told me Monday that private investment funds were going to be very hesitant about buying up assets “when no one knows how much they are really worth.”
New York Times columnist Paul Krugman, the scourge of American capitalism, said Mr. Geithner had talked President Obama into “recycling” the Bush administration’s “cash for trash” plan that then-Treasury Secretary Henry M. Paulson Jr. tried last year - only this time with a few more bells and whistles.
But Mr. Geithner’s scheme is a one-way bet that is doomed to fail, Mr. Krugman argues. If the government’s incentives to buy the bad assets drive up their value, investors and banks profit - but if they don’t, taxpayers will be left holding the bag. Mr. Krugman, a bleeding-heart socialist, thinks the feds should take control of the insolvent banks, as Sweden did in the 1990s.
University of Maryland economist Peter Morici levels similar complaints. The plan Mr. Geithner “is cooking up could unnecessarily stick the taxpayers with big losses on those toxic assets and give the banks big, unearned profits. It could save many bank executives’ careers while running up the federal deficit even further and undermining international confidence in the dollar,” Mr. Morici said.
Other economists maintain there are not enough funds left in resources of the Troubled Assets Relief Program (even with government loans and guarantees) to bankroll a plan aimed at potentially trillions of dollars in bad assets.
Treasury will need at least another $400 billion to make a noticeable dent in the toxic assets clogging up the financial industry’s books, said Wall Street economist Mark Zandi at Moody’s financial rating company.
”The plan could fail to remove enough toxic assets from the balance sheets of the banks to unlock private credit markets. Ultimately, the resulting federal deficits and domestic economic paralysis could make financing federal budget deficits, through domestic and foreign borrowing, extraordinarily difficult,” Mr. Morici said.
The Obama administration’s latest attempt to bring some stability to the financial system comes at a time when it is getting poor to failing grades for its handling of the economy thus far.
Economists and private investment fund analysts tell me they think Federal Reserve Chairman Ben S. Bernanke has been doing the heavy lifting in policy initiatives up to this point.
A survey I conducted last week of several government and economic analysts turned up surprisingly blunt assessments of Mr. Obama’s performance - even from some very liberal quarters.
”His success thus far is the stimulus bill, which is a necessary though not sufficient condition for keeping the recession from leading to deflation and global depression,” said Thomas E. Mann, senior fellow in governance studies at the Brookings Institution.
”The financial rescue efforts have been shaky. What little public support for the effort that existed under Bush has diminished further under Obama. He has been behind the curve of populist anger, which leads to the kind of harmful legislation that the House passed Thursday” to slap a draconian 90 percent tax on American International Group Inc. executive bonuses, Mr. Mann told me.
About the Author
- Bill OReilly reminds: Nelson Mandela was a communist
- Bradley Manning, as Chelsea Manning, pens thank-you to MLK from prison
- Activists urge Obama to go rogue, sidestep Congress
- U.S. pilot scares off Iranians with 'Top Gun'-worthy stunt: 'You really ought to go home'
- Spike in battlefield deaths linked to restrictive rules of engagement
- NAPOLITANO: Pope Francis should be saving souls, not pocketbooks
- Kill team: Obama war chiefs widen drone death zones
- Pope Franciss colorful past: Gods nightclub bouncer
- 'Hunger Games' delivers Obama's message on income inequality
- MOVIE REVIEW: 'Out of the Furnace'
Independent voices from the The Washington Times Communities
The Constitution: Every issue, every time. No exceptions, no excuses. And how to get from here to there.
Why can’t humans just be free to be humans?
Get in the middle of all the action inside and outside the boxing ring.
Find the latest news and happening that effect those in the Washington D.C., Northern Virginia and Maryland Metro region.
White House pets gone wild!