In testimony before Congress recently, Treasury Secretary Timothy Geithner warned that by continuing to talk he might plunge the nation into a depression.
"The nation's economy is in a crisis that could easily turn into a catastrophe," the Treasury Secretary said. "In this precarious state, it is highly vulnerable to my talking."
Mr. Geithner pointed to the Dow Jones Industrial Average's 300-point drop during his previous day of Congressional testimony as proof that his amorphous policy statements posed a serious threat to the nation's economy.
"What further damage could my vague remarks do?" he asked. "The truth is, I don't know."
Overseas markets plunged on the news that Mr. Geithner was talking again, with both the NIKKEI and the FTSE shedding over eight percent of their value.
At a town hall meeting in Indiana, President Barack Obama heard from a housewife, Carol Foyler, 47, who pleaded with the President to make Mr. Geithner stop talking.
"Every time he opens his mouth, I'm afraid I'm going to lose my house," she said.
President Obama hugged Mrs. Foyler and said he would "see what I can do" about the Geithner problem.
"I will do everything in my power to get Tim to stop talking," the President said. "Quite honestly, I already have my hands full with Biden."
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WASHINGTON (Reuters) - Global credit markets are unlikely to revive as long as the U.S. government continues to dangle the vague prospect of a toxic asset purchase plan in front of distressed banks, some lawmakers warned on Wednesday.
The chance that taxpayers could be made to overpay for underperforming assets is making bankers, whose balance sheets are saddled with them, reluctant to sell to lower bidders, suggested Texas Republican Rep. Randy Neugebauer.
"People are afraid to buy and afraid to sell because they're afraid the government is going to sweeten the deal," he told Reuters in an interview. "The markets are just waiting to see when we're going to be done."
Uncertainty about the government's strategy for toxic assets props up their value above what private investors might pay for them and delays potential resolution of the problems they pose, said California Democratic Rep. Brad Sherman.
"As long as there's the prospect the federal government will overpay for the toxic assets ... these banks would be insane to sell" in the private market, Sherman told Reuters.
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There you go, gang. The news behind today's satire. Take it away....
Let the people that should go bankrupt go bankrupt. Lets find the real market prices for the assets, this will cause extreme inflation. The sooner we do this the better.
Enforcing the existing rules and regulations...
lack of monitoring caused the meltdown...
not too many additional rules...
review the existing ones that are not enforced by Paulson/Greenspan...
Hire those laid off bankers as inspectors...
Ask them what they think they did wrong...
Many probably could say... UNLEASHED system...
Meaning... roosters without heads policy...
No one "check and balance"... the way it should be...
yeah, it's Geithner's fault...I guess handing out credit like candy, giving bonuses for the sake of giving bonuses, and bundling of crap mortgages with good assets has nothing to do with the situation...
that damn Geithner....
The banks have Geitner backed into a corner. The only way out is to make it clear that we are willing to let them go into bankruptcy proceedings where a judge will force the sale of the assets.
The banks don't want to sell at current market prices because they will take a hit to earnings and that will hurt the shareholders. If they effectively force the government to purchase the assets at what will have to be higher than market prices, the shareholders will benefit.
Viola! Corporate subsidization of shareholder wealth. We don't even have to call it a tax break anymore. Now we are just handing money to shareholders.
This has nothing to do with the frozen but melting credit markets.
Pandit said: "When we look at some of the assets that we hold, we have a duty to our shareholders."
Pandit --the boss at citi says we have a duty to our shareholders. -------and that, folks, is the joke of the day.
you are just about two trillion dollars too late.
Here's a question for Wall Street ...
How many gamblers get their losses reimbursed upon leaving the Casino?
Have a nice day! Be sure to come back when you have more money, but for now ... GET LOST.
Geithner is doing the right thing. The first thing he has to do is figure out a way to value the bad assets. No one took the time to do that last September and we ended up paying .76 on the dollar. Forget market fluctuations, get it right.
Geithner-
Stick with a small bit of Capitalism. They bought the bad assets . Too bad. Their error.
Don't cram those bad assets up our assets.
Since the larger institutions were the biggest abusers, the bulk of the money to save the institutions should go to the best run small and medium banks and they should be used to buy out the best pieces of larger banks using take payer monies. I have no problem changing the name on the outside of the banks that are corruptly run.
Maybe Geithner and company should make the banks sell toxic assets on the open market within a certain time period once they reclaim the property.
Either way, the government should assign low values to many of these homes if it ends up buying them.
The banks got us into this mess...some deserve to fail. The question is figuring out which ones.
I for one wish there was a law that said if you do not understand capital markets and their functioning, do not report on them.
The situation is very very complicated.
A lot of these assets are long term in nature, ie: they have a lifetime with revenue streams over that lifetime.
The banks believe that those assets have a value the market is saying they don't have right now.
It is like someone asking you to sell your house now for a big loss, and you saying no, in 5 yrs it will be worth something so I won't sell.
That is what is paralyzing this whole thing and nobody can break it.
Derivatives on these underlying assets adds a whole other level of complication.
It is very, very complicated and it is not easy.
This is like bringing a critical patient to the trauma unit and then screaming at the trauma doctor.
It is not the doctor's fault and if he makes a mistake the patient dies, so shut up all of you and help the doctor if you can, or get out of the ICU and wait for the news.
the mortgages were bundled and sold as securities. It would have been fine if the homeowners did not default; alas, 8 eight years of GWB have been a calamity.
The banks have no money to pay dividends on mortgage-based securities.
Could it be that Geithner is being vague because of the constant surprises the banks seem to spring on everytime a statement is made about how to deal with the issue?
The bailout is ruining the stimulus plan. These banks need to go bust. The market needs to flush these assets through and down the toilet. These banks need to take their losses.
This will be deflationary which is good because it will lower the cost of living. Also, it will probably not cost too many more jobs than our present course really stupid course.
And since letting the banks go under is deflationary, this gives monetary room to enact a stimulus plan.
This Bush/Paulson bailout is going to ruin the Obama stimulus.
Pray tell: what do you tell the overseas investors that bought the mortgage based securities?
"Eat cake?"
Tell them to go talk to the guys who sold them the stuff. The US government and its people can't be held responsible for what some banker sold them.
"China will continue to buy US Treasury bonds even though it knows the dollar will depreciate because such investments remain its "only option"in a perilous world, a senior Chinese banking regulator said. We know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do."
http://www.ft.com/cms/s/0/a403d716-f8a6-11dd-aae8-000077b07658.html?nclick_check=1
I have read and heard enough Geithner-bashing in the last couple of days, about Bad Bank plan, and these following are my thoughts on that...
1. The market fell, because the Geithner plan did not have any provision to "OVERPAY" in the TARP2..
2. The people who criticize the Plan either did not UNDERSTAND the plan, or didn't CAREFULLY listen to Geithner's statement, that this is Complex issue that has to done with UTMOST CARE....
3. This is NOT a ONE-SIZE-FIT-ALL program, rather a plan that requires A CASE BY CASE determination....
It is utterly SHAMEFUL that the MSM and the Ultrawingnut jobs just pile on Without Thinking through the process.....And also this is supposed to work in conjunction with the other Economy Recovery efforts by the administration....
Too many MONDAY MORNING QUARTERBACKS!!!
The whole "not enough specifics" charge did not ring true to me either. Sounded like a lot of "You didn't tell me what I wanted to hear."
The way I see it, if the market was to have reacted positively, that would have been a warning sign, that there wasn't going to be enough accountability in the plan.
EXACTLY....Wall Street DID NOT get more GIFTS from Geithner, as they did from their pal, Henry Paulson, so they are PISSED....
Hey Dr Mum,
I think that #2 of your comment was a major factor and that you are right. I don't know what most on the market think but I was very disappointed by the lack of clarity. We can get the bill and read the specifics of the bill and that really does help. But the other shoe as we found out with TARP #1 is that it is equally important to know how the plan will be implemented. Hence your #2 comment may have been the most immediate problem with MR. G speaking.
It is not one size fits all and as for over pay you probably know more than me. But I think as long as financial entities think they're going to get a better deal they will do one of two things hold on until it turns profitable or until they are forced to sell/buy.
Without knowing what the government is going to do next we are not able to follow their lead. Mr. G. needs to limit his speaking to periods of time that he actually has something substantial to say.
So they won't sell them, they'll hold onto them instead.
Fine.
But if they apply for a bailout, they will be put through a strength test, and at that point, the jig is up, those assets will have a realistic value put to them, and their bank will be judged. If insolvent, well then it's game over. If merely illiquid, then they will be heavily regulated until their asset portfolio meets the standards the Fed sets.
For God sakes, President Obama has been in office for three weeks.
What do these people expect? There's a new administration, a new Treasury Sec.
Give them some room to put the plans in place.
No one, including people at Business Week know what's going to happen, because this situation has not happened in our lifetime.
they expect him to part the sea. GOp are allowed to screw up and blame others. Dems are always placed on the defensive.
Because the CRITICS of the new Administration are MAD that finally they are being TOLD that they have to PLAY BY THE RULES, which they DID NOT have to do in the past eight years....
The Republicans, the SAVIORS of the ULTRA RICH and BANKERS do not want this Administration to succeed, as expressed by their leader RUSH, thus they spreading this NEGATIVE SHIT...with the help of the pro-business MainStreamMedia...
Geither has done nothing wrong, except maybe suggest the plan is more finished than it is.
He is struggling with the central problem of the banking crisis, how to value the assets, just as everyone has.
Remember that the main CAUSE of the banking crisis is difficulty valuing these assets. Why would it get any easier when you put one guy in the government in charge plus burden him with huge political risk as well?
My guess that he will do a mixed approach, and is probably (smartly) looking around like crazy to find private partners to do this with.
The stimulus was as easy as addition and subtraction compared to this. This is more like differential equations.
I don"t get it. Why would anyone want to invest in these toxic assets? These toxic assets were all ridiculously overvalued to begin with, for example a $200,000 home had a market value of $600,000.
The current market price of these toxic assets is finally reflecting their true value. So again, why would anyone want to invest in these toxic assets, unless they are hoping for another housing bubble to make some gains?
The current market value is still grossly bloated. Needs to fall some more.
I don't see how you can talk about the housing market as if it's the same everywhere.
They will only invest in them if they can make a profit big enough to justify the risk. That's going to have to be a pretty big profit. And I'm sure none of them will include a housing bubble in the forecast they prepare to make their decisions.
So why should the government share this big profit with any private investors they go in with? Why shouldn't the government just hold onto all the assets themselves and keep the profits? Because the partners they go in with will - in aggregate - help figure out what they and the government should pay for the things in the first place.
It's not as easy as doing a little math, there's judgment of many smart experienced investors that's needed to get to get to realistic values. The kind of judgment that is only made available when its holders have both a chance at big profits and some personal skin in the game.
It's possible that market value is below "true value" because of the tendency for market value to reflect the status of the surrounding property, among other intangibles.
Please cut the guy some slack.
I trust Geithner a bit more than I trust the very people who put us in this predicament and are now analyzing in the MSM (mostly Fox). I wish they'd all shut up and let the man do his job.
What is good for Wall Street is not automatically good for the economy. We've seen that proven over the last few years. Ignore the moans and groans from the rich repub creeps. They are moaning because the age of getting that million dollar bonus is over.
Sanity and rules are coming back and they don't like that. For 8 years they were allowed to plunder and pillage with no repercussions. Government regulators turned a blind eye and were busy surfing porn.
The thousands of mom and pop home flippers and everyone else on Main Street who sold a house at an inflated price has a share in culpability.
Wall Street and Main Street are inextricably intertwined.
Perhaps not equally but they are tied together closer than many people like to admit.
and how many PROPERTY APPRAISERS overvalued properties ILLEGALLY !
Too True!!!
Plenty of blame to go around. Plenty.
I have a serious question. Can't the government just use their power of eminent domain to take the bad assets? They would only have to pay the banks "just compensation", which is usually understood to mean the fair market value. In other words, they can force the banks to sell them toxic assets for no more than what private buyers are willing to pay.
They should at least be threatening to do this.
Part of last week's sell-off in the market was the shareholders of these banks realizing they weren't getting a big payday with the government overpaying for the assets the banks own.
It's the shareholders realizing that Geithner's plan won't let them bilk the taxpayers for the bad loans currently on their books.
So they sold their shares.
Don't confuse the actions of stock traders disappointed out of a quick profit with some sort of verdict on the good or bad merits of Geithner's plan.
It seems to me that no one has a clue how to get out of this mess. They are just trying not to bungle it more. Europeans put a pay cap on and they seem to be dealing with the banks in an appropriate
manner - why do we refuse to follow their lead if we don't have a clue?
The Obama admin has been in charge for about 2 weeks.
The cabinet is just getting finalized, the staff is settling in, the computers and phones are getting activated.
The Plan was broached 2 days ago.
The MARKET RESPONSE IS NOISE!
Let's wait for some signal before we start making mid course corrections.
i totally agree with you. what is the rush? Wall street needs to realize that they are at the government's mercy and now the government will take as much time as it needs to sort all of this through.
don't want the government in your way, don't ask them to save your failing banks!!!
It took oOver 6 years for the banks to create this mess !!!!!!!!
This mess will not be cleaned up in hours, minutes, or seconds !!!!
It will take a month at least to get the people, write the job descriptions, TRAIN THE PEOPLE, rent the offices, then open the doors for business.
THE RIGHT WING PRESS IS HAMMERING YOU TO MAKE OBAMA LOOK BAD DON'T BUY IT !!!!!!!
They need to stop trying to reinflate a bubble. A recession is a naturally occurring correction to an out of whack economy.
Obama needs to let BUSH'S ECONOMY fail.
If he drags this mess out more it will be HIS ECONOMY, he will be blamed for making things worse and he will be the failure the way Rush wants.
The only real solution is to Nationalize these major insolvent banks and then get things moving; then we can also reset these mortgages and stop these foreclosures for people's primary residences especially..!
We can get lending going by Nationalizing these banks and allow 1 year before you must start to repay it..this would really help new business and small business....which create 80% of our jobs...!
If we don't Nationalize the major banks we'll be in this mess for a decade or more...and we will be throwing good money after bad for years just to make them appear as solvent entities or institutions.
What does "nationalizing the banks" mean?
it means that the taxpayers who are putting up the cash have ownership of the assets and liabilities AND a shareholders interest should the value of the banks taken over appreciate in value.
it means the taxpayers have a shot at recouping the money they put up to rescue the banks.
if they had no shareholder position thru nationalization they have NO SHOT AT CAPITAL APPRECIATION.
taxpayers currently hold equity positions in each of the banks that received a bailout, in the form of preferreds that pay an annual set dividend plus some additional warrants. (As negotiated by the previous Treasury team. Though apparently we overpaid for them.) Based on those preferreds, we do have a chance at recouping our money.
The FDIC has a competent group of people that can get a bank back on its feet.
I think that the Paulson Plan sold us short... we should get 18% to 30% interest on the money.
The creditors have to eat their toxic debts. Borrowers are upside down already. Weak banks should fail. There is no reason to continue to bail out the derivatives and complex securities. The bankers must face their own losses rather than to saddle the taxpayers with their toxic debt.
the banks need to be taken over, the management fired and an orderly resale of assets needs to be done.the government is the only entity with the finances to do the takeover.and the only entity that can hold the toxic assets for the time that is going to be needed to re-sell them at a reasonable price.
See the state of the financial sector SINCE Lehman failed.
the $500bn+ run on money markets the Thursday after Lehmans falied nearly lead to the complete collapse of the entire banking industry -- ie ALL major banks failing.
Bank failure is what lead to the Great Depression. If most banks failed the Feds would be on the hook through the FDIC There would be 0 credit so no more car loans, home loans, business loans, etc. As of right now credit is tight but at least it exists, had everything failed there would be 0 credit other than whatever the feds would lend out.
Hasn't it become clear yet that the level of devastation in the banking sector is unprecedented? That any type of action will need to by huge and risky? That there is no way that it's humanly possible to come up with a "solution" in just the few months they've had to address it, when the problems have been years in the making affecting institutions worldwide?
Everyone wants instant answers and magic bullets. But we are all part of the mess that has been made (yeah, I said it) and it's going to take a long hard slog to find our way back again.
Why don't we all fix our own financial houses? ie: stop buying everything on credit and pay off oue debt. If we the public didn't act so irresponsibly, we wouldn't be in this mess.
As for the banks and the banking industry, they are getting their just desserts with stock prices in the single digits and layoffs up the wazoo. They are not having fun. They are learning like the rest of us about leveraging and going crazy with credit.
But why the double standard for mega banks? The FDIC restructures small/medium sized banks all the time. Seems that the discredited philosophy of The Chicago School just won't die.
Miss Mary - I had a long explanation to your question written, but when it comes down to it, the double-standard is based on size, complexity, and derivatives. When they let Lehman go, and it almost brought down the system, it scared everyone to death.
The demise of our banking system has everything to do with the Federal Reserve printing money backed by air. Everything to do with Daddy Bush and his CIA stooges ripping us off blind. Everything to do with Greenspan, Greenberg, Bernake, drug laundering, oh, the list is long.
the devastation is the result of the banks' risk mismanagement, GOP led deregulation and incompetence.
Banks worldwide are not hurting... they'll be made whole by the US taxpayers that will be holding the bag of toxic assets.
The power-that-be at the banks are scott free, Phil Gram is pontificating somewhere and GWB is on his way to Canada. Worry, what - me worry? The fundamentals of our economy are strong...betcha wink wink.
The real reason investors dislike TARP 2.0 is because
the new plan may treat taxpayers a lot better than the old one did. (http://tr.im/fzce)
"Wall Street was hoping for another multi-billion, no strings attached, taxpayer funded giveaway," wrote money manager Barry Ritholtz today on his site, The Big Picture. "Instead, they got something much tougher than they expected."
Sure, one pundit after another complained about the vagueness of the Financial Stability Plan, as the Troubled Asset Relief Program (TARP) has been renamed.
But in fact, the new plan was very specific about the price that shareholders would have to pay for further taxpayer largesse: Banks are barred from paying dividends above a penny a share, buying back stock, or purchasing rivals until taxpayers are repaid (or unless a bank gets specific regulatory approval).
The next time they come to us hat-in-hand we must get the loans paid with an 18 to 30% interest rate.
What is good for the goose is good for the gander.
These banks are now "Zombies" and no new government money should go to them.
These banks will not lend as long as they have these toxic assets on their books, but they are NOT willing to dispose of these assets because they cannot afford to write down the loss. It's a Catch-22.
As long as these banks hold these worthless assets on their books and pretend that they will be worth a lot of money some day, they will continue to screw the consumers by raising interest rates and fees.
Their irresponsible actions have driven their stock prices and their dividends so low that they are worthless to investors. These institutions are now worthless to society and our country. They are just leaches.
Instead the government should encourage the creation of new banks by legislating incentives for investors to form new banks that will lend to businesses and consumers.
The Fed has a Zero Interest Rate Policy so banks are now getting free money. With the pent-up consumer demand even in this bad economy, this is a great time for a community bank to open its doors.
These TARP banks should be sent a message, get better or we will get better banks.
FDR nationalized the Banks. Just sayin'...
They will have to do it once they figure out how bad things are.
But they have to get into the banks to find that out.
Let these greedy suckers GO DOWN.
Open the new, fresh FED TREASURY Bank of the US.
Take the $1 Trillion they're talking about sticking into these old tired banks and capitalize the new bank.
The small businesses in trouble get the first dibs and under 5% interest rates the banks enjoy.
New home Mortgages - send applications directly to the new GOOD bank.
Yes, with that delicious interest rate the banks have enjoyed all these years and pissed away.
Next auto companies can take loan applications to the new FED TREAS Bank for approval - especially of customers whose credit is okay but they can't get a loan now from the crooks.
Anybody who still wants to do business with the Citigroups could still GO FOR IT. Keep the private hope alive....Heheheheheh.
But those banks need to be dealing with all that crap from the last 10years - cause it's not just the defaulted mortgages they're trying to make the people eat either.
The best part of Geithner's plan is the "stealth" part that does a stress test on the financial giants. See whether they have a pulse or if they are moribund.
Once that part of the diagnosis is done, they are going to have to nationalize. There is not enough money to keep the shareholders and the officers/directors going on like they have been. A combination of nationalization (like in Sweden) and direct purchase of the mortgages is in the offing. No one knows how long this will take. Perhaps it will take long enough to build a new regulatory structure that protects the investors and depositors better, and re establishes fire walls around the big banks in order to promote more small community banking, diversity, and an alternative to having only 5 big banks.
Why don"t we accept the wisdom of crowds and accept the market"s judgment that the big banks are worthless? Let them all go bankrupt.
With Bank of America (BAC) and Citigroup (C) down 95% from their peaks, shareholders have already been wiped out. All we are considering is whether they should be allowed to come back in the next economic recovery.
The Geithner bailout plan missed a golden opportunity to shock us all to our senses.
Whatever happened to creative destruction? Let the weak banks go, and they will be replaced by stronger, better managed ones without any government involvement at all.
Let the natural Darwinian survival of the fittest run its course.
I watched with chagrin while Japanese banks pretended they were solvent for 15 years. Everyone in the country suffered as a result, and a whole generation"s worth of economic growth was lost.
Darwinian Survival to the Death would take too long. The Feds should chose one bank, take it over watch the other banks fail. Why would any depositor keep his money in Citibank when Bank of America is run by the Feds.
Implementation of this threat would be the last resort, but a threat has to be made in order to shock these banks into changing their ways.
Part of the point of Geithner's plan is to avoid overpaying. So any bank hoping it can screw the taxpayer is dreaming.
And it seems they are perfectly aware of this and exhibiting perfectly sound sense: Pandit said the treasury should take the toxic assets, do the workout and then 'send the bill'. An unsmart way of saying it, but if he means that he is willing to take the full losses as they materialize (and what else could he expect?) - there's not really an issue to worry about.
The other part of the plan is to get credit flowing again even if banks are stuck, by using the FED and private investors directly.
I think it's just fine.
It's leaving the TARP banks to deal with their nonperforming mortgage backed securities on their own.
That's great!
I wasn't clear on this...if the proposal means the government guarantee is to buyers, but that all cash flow losses are pushed back to the originating banks, I am Ok with this...as long as the government has the expertise to evaluate what a reasonable long-term economic value of the securities are. Which can be a tall order, all of our "financial engineering" has resulted in some assets that are incredibly hard to value on an economic basis.
If the government guarantee means a bank can sell at 100 cents on the dollar a mortgage pool or security that is unlikely to generate enough cash flow to value today at 50, market value aside, I do have a problem with it.
Banks that hold assets so far above economic value that they can never be recovered, even if the market stabilized (and there are some)...and if measured at economic value would have their regulatory capital wiped out, should be allowed to fail. Regardless of size.
I'm not sure I understand what you're saying.
Shortage of regulatory capital and insolvency are two different problems.
With respect to the first, discretionary powers of the regulator are not too difficult to come up with and in some cases are even available even without any further legislation or bailout plan - as far as this problem is concerned, the FED or treasury certainly don't assume any credit risk.
Insolvency and restructuring is different, and this is where the danger of overpaying comes in.
Assuming the scenario that (some large) banks are actually insolvent, buying their toxic assets now would be simply a loss for the taxpayer.
But generically speaking, it seems perfectly possible under the proposed plan to use FED and treasury guarantees to merely smoothen out the workout of the bad debt, meaning that there is a new and temporary government sponsored source of funding with the sole purpose of avoiding fire sales - hence allowing the banks to realize the hold-to-maturity value of the debt without having to sell it, without having to mark down excessively and without having their capital ratio alarm bells ring.
Even with all these provisos in place - which are a gift in various respects to the banks - they would still have to take the losses on the assets themselves.
They would merely get relief in terms of suffering less from the extra punishment of increased funding costs and shareprice meltdown that would otherwise be imposed by markets on them.
Uh, what Nostro said. Yep.
lol
The credit markets just want the US taxpayers to buy up all their bad shit.
Geithner should make an announcement that the US will not be buying up toxic assets.
If banks do not find investors to buy up those assets, then they should and will fail.
I am tired of being threatened by these horribly run and operated banks.
This credit crunch may need some tough love. A game of chicken is being played right at this moment.
And why haven't the highly touted and well compensated bank execs come up with a solution? Probably because they don't want to expose their hands and admit that they desperately want the US taxpayers to soak up all their toxic and corrosive assets.
I know one thing, new laws need to be enacted that will allow these execs to be thrown in the slammer whenever they repeat these mistakes, because they will.
Mark my words.
There is a lot of justified anger at the banks and Wall Street generally, plus anxiety about Geithner's debut (he should not have rushed to announce a "plan" that was not yet a plan).
But it's a form of collective suicide to propose allowing big banks to go bankrupt.
One or two of the size of Citi would surely collapse the whole credit bubble on which our economy (and much the the world's) has been floating for years.
We need to let air out of the bubble -- a lot of air -- but in a controlled way to avoid a total economic collapse.
What happened in September after the Lehman bankruptcy and a hefty dose of fear was horrendous.
A Citi bankruptcy or two or three would absolutely be "catastrophic" to use Obama's word.
Yes, it's infuriating. Yes, the bankers should be punished.
But banking and finance are a lot like energy utilities. Turn off the power and everything grinds to a halt. Turn off credit -- and the credit crunch to date is not close to a total freeze -- and likewise, everything stops.
We really will see people selling apples on street corners again if we go that route.
Young Chuck moved to Texas and bought a Donkey from a farmer for $100.
The farmer took his $100 and agreed to deliver the Donkey the next day.
The next day he drove up and said, 'Sorry son, but I have some bad news, the donkey died.'
Chuck: 'Well, then just give me my money back.'
Farmer: 'Can't do that. I went and spent it already.'
Chuck: 'OK, then, just bring me the dead donkey.'
Farmer: 'What ya gonna do with him?
Chuck: 'I'm going to raffle him off.'
Farmer: 'You can't raffle off a dead donkey!'
Chuck: 'Sure I can, Watch me.. I just won't tell anybody he's dead.'
A month later, the farmer met up with Chuck and asked, 'What happened with that dead donkey?'
Chuck said, 'I raffled him off. I sold 500 tickets at two dollars a piece and made a profit of $898.00.'
The farmer said, 'Didn't anyone complain?'
Chuck said, 'Just the guy who won. So I gave him his two dollars back.'
Chuck now works for the government as a top adviser on the Bailout Plan.
Off the subject, today is President’s Day. Legend has it George Washington heaved a silver dollar across the Potomac. To commemorate the event, this week Congress will throw lots of money away.
I hate to be critical this early into the new administration, but I don’t know if this Timothy Geithner is the guy for the job. He may not be up to it. Turns out, he thought the Treasury Secretary was in charge of buried treasure.
Ba dum bum ching!
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