Posts Tagged ‘venture capital

29
Mar
09

The Geithner Plan

Loan money to “investors” so they can buy undervalued companies? What if the properties are not undervalued? The rich gambling with tax $?

“MR. GREGORY:  Paul Krugman, Nobel laureate, New York Times columnist, been very critical of this plan.  He and others have said this is effectively a transfer of wealth from the banks’ balance sheets to the government’s balance sheets. A bailout for the banks, trash for cash.  You’ve heard all of these terms. And in fact, Krugman writes in a column last Sunday that your approach is very similar to your predecessor’s in the Bush administration, Hank Paulson.  This is what he writes.  I want to have you respond to it:  “The common element to the Paulson and Geithner plans is the insistence that the bad assets on banks’ books are really worth much, much more than anyone is currently willing to pay for them.  In fact, their true value is so high that if they were properly priced, banks wouldn’t be in trouble.  And so the plan is to use taxpayer funds to drive the prices of bad assets up to `fair’ levels.  Mr. Paulson proposed having the government buy the assets directly.  Mr. Geithner instead proposes a complicated scheme in which the government lends money to private investors, who then use the money to buy the stuff.  …  The Geithner scheme would offer a one-way bet:  if asset values go up, the investors profit, but if they go down,” and again, these are all mortgage backed, “the investors can walk away from their debt.  So this isn’t really about letting markets work. It’s just an indirect, disguised way to subsidize purchases of bad assets.” Respond, please.”

Read The MSNBC Geithner Plan Article

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