FinancialStability.gov: "Coming Soon"

That's the actual message at the Treasury Department's new website that will solve all our economic woes! Transparency! Accountability! Jocularity!

Lest we forget in yesterday's stroke-inducing excitement over one of the biggest legislative mistakes since at least last fall, Treasury Secretary and tax rebel Tim Geithner was busy unveiling—or was it unraveling?—his department's plans for the continuing nationalization of the country's financial sector.

Some details (though they really aren't that) from USA Today:

First, the Treasury Department would use part of the $350 billion remaining from last year's $700 billion financial rescue fund as seed money, to induce the private sector to buy bad assets from banks. The government will create a public-private entity that could buy $500 billion in toxic assets, and could be expanded to a trillion dollars. Treasury has not yet settled on a final design for the program.

The administration will use another $80 billion in financial rescue funds to expand a recently created $200 billion Federal Reserve program. That program, designed to free up money for student loans, credit cards and auto loans, could also cover bonds backed by commercial real estate and privately issued mortgage-backed securities. The new funding is designed to leverage as much as $1 trillion in overall activity under the Fed program....

Banks could receive more capital under the plan, which will be funded from the remaining $350 billion of last year's $700 billion financial rescue plan. Geithner said in order to get aid, banks would be subject to beefed up supervision or stress testing, especially big banks. Institutions that need additional capital will be able to access a new funding mechanism using money from the Treasury "as a bridge to private capital," Geithner said.

The renamed "Financial Stability Plan" rolled out by Geithner will also use at least $50 billion from last year's financial rescue law to help prevent home foreclosures. Details of that plan will be announced "in the next few weeks," Geithner said.

More here.

Like most sequels, TARP 2 clearly sucks. This isn't The Godfather Part II, it's Ghostbusters II.

Some more good news: In its first round of buying $350 billion in preferred shares of financial institutions, the government apparently overpaid by at least $78 billion. Your tax dollars (and your children's children's tax dollars) at work!

A laugh at bankers, courtesy of the Seinfeld episode in which Newman tries to get out of speeding ticket by having Kramer testify that he was suicidal after his dream of being a banker was crushed:

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • ||

    All right, a new public-private entity! This one will surely embody the best of both worlds!

  • ||

    In its first round of buying $350 billion in preferred shares of financial institutions, the government apparently overpaid by at least $78 billion.

    Didn't they tell you? That was the whole idea. They overpaid for assets, to dress up the banks' balance sheets. Then they "invested" in bank stock, for the same reason.

  • Reinmoose||

    Public-private entities are quickly becoming the new "bipartisanship." Since the public and private sector can get along well together, clearly that's good for the general population, right?

  • ||

    Remember now Geithner was uniquely qualified for this job. He was the only man for the job. Anyone who had a problem with him stealing money from the IMF and not paying his taxes was just being small and not being serious. Pay no attention to the fact that any reasonably intelligent college freshman who had taken a basic finance course could have come up with a better plan and explained it better than Geithner did.

    Don't you people ever forget that Obama has put together a team of all-stars here.

  • ||

    LOL, I dont think we will be seeing any stability anytime soon!

    RT
    www.anon-tools.us.tc

  • ||

    I can't wait until he comes for another trillion or two.

    In Florida they are running out of ammo. Stock up now.

  • Sandy||

    Like most sequels, TARP 2 clearly sucks. This isn't The Godfather Part II, it's Ghostbusters II.



    It's not as good as Ghostbusters II. It's more like Breakin' 2: Electric Boogaloo.

  • ||

    Stop insulting Breakin 2. It is more like Weekend at Bernie's 2 with the banks playing Bernie.

  • Kris||

    Geithner = Paulson with hair.

    Change you can believe in. Change we all can believe in!

  • Xeones||

    Anybody else have a constant low-level rage migraine these days?

  • ||

    The one good thing that might come out of this is that these shitheads might fuck up badly enough to get lynched. I'd like to see that.

  • ||

    Let me impart a lesson from pornography: If you tense up, it's just going to hurt more.

  • ||

    yo, fuck migraines...

  • ||

    The government will create a public-private entity that could buy $500 billion in toxic assets, and could be expanded to a trillion dollars. Treasury has not yet settled on a final design for the program. [italics added]



    Because Fannie and Freddie worked out so well.

  • Urkobold™||

    FOOLS! TARP II IS NOT GHOSTBUSTERS II, WEEKEND AT BERNIE'S II, OR BREAKIN' 2: ELECTRIC BOOGALOO. IT'S HIGHLANDER II: THE QUICKENING.

    THE HORROR. THE HORROR.

  • Citizen Nothing||

    When my wife was in elementary school, they showed Old Yeller (what a strange pick) at some kind of school movie day.
    Only they unknowingly showed the second reel first, followed by the first reel (back in the days of 16mm film, kids). She swears that for years she thought that Old Yeller died, only to come back at the end. I'm not sure how that relates to the current discussion, but it seems somehow appropriate.

  • ||

    Epi,

    I am starting to think they are going to bankrupt the government. If they do that, we will have to start all over with a new government that won't have the ability to borrow for at least a generation. Pretty hard to run a big liberal government under those conditions. These people are so stupid they don't even realize that whole parasite killing the host thing.

  • ||

    Aliens 2 was as good as the original. A totally different genre (action vs. suspense/horror) but done just as well.

  • ||

    Old Yeller II: I Was a Canine Zombie.

  • Xeones||

    She swears that for years she thought that Old Yeller died, only to come back at the end. I'm not sure how that relates to the current discussion, but it seems somehow appropriate.

    Old Yeller = Keynes

  • Pedantic Prick||

    There was no Aliens 2. There was Alien and Aliens.

  • ||

    The night I saw Aliens in the theater, I was 15 and my friends and I snuck a bunch of assorted warm beers in my over-sized pockets and drank it while eating a large tub of buttered popcorn. After the movie, we continued to drink warm beer at this older friend-of-a-friends apartment. When I started throwing up, I ran to vomit off the balcony. He had locked his screen door and I couldn't get it open. I sprayed beer and popcorn through the screen door, and the strained out popcorn fell back down into his apartment. I didn't drink beer for almost a year. And I still hate popcorn.

  • Citizen Nothing||

    Thanks for sharing, SF.

  • ||

    You'll miss me when I'm gone. Just admit it.

  • ||

    Anybody else have a constant low-level rage migraine these days?

    What? I can't hear very well,lately, what with this incessant ringing in my ears.

  • ||

    Aliens is one of the great sequels. An action movie as opposed to the original's suspense/horror genre, but great fun, anyway.

    When I saw it in college, one of my friends called Sigourney Weaver "Rambitch" as she came out with all the heavy weaponry. The whole theater broke into laughter.

    SugarFree,

    I got food poisoning from Chinese food (sweet-and-sour pork) when I was 19. It was five years before I went back. Give popcorn a chance.

  • ||

    SF,

    I arrived late to see the Blair Witch Project and had to sit on the front row. The jerky camera and sitting that close gave me motion sickness. I was in the bathroom puking up my cuts for the entire last 10 minutes. I to this day have no idea how that damn movie ended other than I assume the witch finally offed them all.

  • ||

    Aliens 2, Earthlings 0

  • Orange Line Destroyer||

    A trillion here, a trillion there and pretty soon you're talking pocket change, as long as its the democrats spending taxpayer money. And Obamie's cabinets doesn't pay taxes. No wonder why.

    Anyone willing to bet that the DOW will reach 9,000 in four years?


    Hope, change, gulags.

  • ||

    I got the nuro virus a few years ago. The last thing I ate before it hit was a Chick Fila sandwich. I can't even walk past one of those places now without my stomach turning. Don't listen to pro Suger Free. Once you have an experience like that, you can never go back.

  • Seward||

    John,

    Few times have I seen a mass of people more frightened than I did while watching the Blair Witch Project in the theater. It was one of the strangest things I've ever experienced.

  • ||

    "Anyone willing to bet that the DOW will reach 9,000 900 in four years?"

  • ||

    Ha! I returned first to Vietnamese food, branched into Thai, then took the Chinese cuisine plunge. Everything's fine. Mind over belly, man.

    Seward,

    To this day, my brother and I will--once in a blue moon--go stand in the corner to get a laugh. It was a freaky moment. My worst horror movie experience was Linda Blair's head turning all the way around. You have to be a kid to get that freaked out, I think, but I was.

  • ||

    Seward,

    I thought it was a pretty rivating movie. I was enjoying it. I wasn't happy to miss the end. I know it gets slammed on but it was a pretty good idea. Unlike most horror movies, I think it will stand up to time pretty well and not be laugh out loud funny in 20 years.

  • Reinmoose||

    At least the main stream news outlets aren't falling all over Geithner. I'm reading a WaPo opinion collumn slamming the plan.

  • ||

    I'm guessing the DOW will hit 90,000 in four years.

    The minimum wage will be $875/hour and Starbucks will sell lattes for $315.

    Kids will see re-runs of "Who Wants To Be A Millionaire" and think: who ISN'T a millionaire?

  • Xeones||

    The Blair Witch Project cold sucked, yo.

  • ||

    Like I said above it is especially irksome that the Senate and many in the media ignored the fact that this guy was a tax cheat on the basis that he was the only man for the job and to disqualify him over being a theif was not being serious. Are you kidding me? He looks and talks like some guy selling time shares.

  • ||

    Blair Witch is derivative shit that ripped off Cannibal Holocaust. The best of the modern "I'm filming while I die" movies is the Spanish film REC.

  • ||

    Yeah, all the horror geeks hate Blair Witch. Mostly because several people off the approved horror geek fan list paid to see the movie, a fact which makes me like it even more.

  • Citizen Nothing||

    Epi, I didn't know "I'm filming while I die" was an entire genre. I need to get out to the cinema more.

  • ||

    Blair Witch sucked ass. Don't bother seeing the ending. Seriously, waste of time.

  • TallDave||

    to induce the private sector to buy bad assets

    Uh, wasn't that the problem in the first place?

    Here's a crazy idea: let's discourage people from buying toxic assets by letting their businesses fail when they do so.

    It's a little scheme I like to call "the free market." Maybe it'll catch on!

  • ||

    All this talk about The Blair Witch Project (okay film, not great) reminds me of The Scooby-Doo Project, which I've posted over at Urkobold. I highly recommend viewing it when you have a spare ten minutes.

  • ||

    The shitty sequels list has to start with Major League 2. Jaws 2 is up there.

  • TallDave||

    In Florida they are running out of ammo. Stock up now.

    I wasn't worried when people stocked up on gold, because a lump of gold is intrinsically useless and thus indicative of a belief that a society which will trade that gold for useful stuff will persist.

    Now, though...

  • ||

    It's a little scheme I like to call "the free market." Maybe it'll catch on!

    Never happen. The trend line is accelerating in the other direction on all fronts.

  • ||

    The problem here is that people forget what really creates the value of mortgage for the lender.

    A mortgage is not really about the house. Instead, it is really a lien on the future income of the borrower. If borrowers do not have the income then the mortgage has no value. This true no matter how many different mortgages might be sequentially attached to any particular property. Lenders expect to pay back their depositors and investors with that lien on the future income of borrowers.

    Bank are insolvent because the borrowers do not have enough income to pay the banks back. People who loaned money to borrowers are not getting it back. Having the government buy up large tracts of overvalued property will not change this fact. They're trying to turn and twist in the wind to buy time for people's income to rise up to the point they can pay for the lenders back. This will not happen in the next decades and won't happen at all without a significant increase in productivity across the board.

    Zombie banks that have no assets beyond this exaggerated expectation need to be destroyed. Lenders need to loose money. We need to bite the bullet and go on.

  • Xeones||

    John, i'm no horror geek -- i'm not a fan of horror in general. Still, Blair Witch made me laugh out loud more than once, though that might have been because i was watching it with the only two people i've ever met who actually thought it was scary.

  • Xeones||

    This stimulus bullshit is scary enough.

  • ||

    We're all socialists, now.

  • Xeones||

    FUCK

  • TallDave||

    Shannon,

    That seems unlikely. Incomes haven't declined to the point that's really an issue.

    What's unexpectedly changed is valuations. A mortgage is supposed to be backed by a property worth more than a mortgage, but now suddenly many of them aren't. It's a collateralization problem.

    Along with the collateralization problem, a mortgagee who owes much more than the property is worth has a financial incentive to declare bankruptcy even if his income hasn't changed.

  • ||

    John, If you think Blair Witch is scary, rent REC, and compare. Or better yet, do Cannibal Holocaust. I guarantee you will have a different opinion of Blair after that.

    And as you can see, it isn't only "horror geeks" who dislike Blair Witch.

  • ||

    Epi, I didn't know "I'm filming while I die" was an entire genre. I need to get out to the cinema more.

    It's really shaky cam first person horror, which would include Cloverfield and Series 7 as well.

  • ||

    Epi,

    Maybe I will do that. Understand that I didn't fing Blair Witch that scary, I thought it was a good concept and made for an interesting film. The only movies that have ever scared me were the Exorcist and Alien. But I saw both of those when I was like 10. If they would scare me now I don't know.

    I like Blair Witch because at least I dind't laugh at it, which I do at nearly every horror movie I have ever seen. Most of them are just Evil Dead II or Sean of the Dead without the good humor.

    I will have to try the two you suggested.

  • ||

    If you really want to induce the private sector to buy bad assets, the first thing to do is get the government out of the market. I have no reason to accept your lowball bid if I think some blithering idiot with more dollars than sense is going to come along and throw money at me.

  • ||

    If they want people to buy bad assets, just purchase them at some nominal price and just give them away. They will eventually find their way to the person who values them most.

    The problem is that no one knows what these things are worth so they have an effective price of zero. The sollution is to liquidate the banks and give the assets to anyone who will take them. Some one will be willing to sort through the mess and make the best use of them, but only if the price is zero.

  • ||

    So, as socialists, what will we be wearing? Nehru jackets? Mao suits? Babushkas (the scarf, not the old lady)? Ushankas? I need to know--it's nearly the spring buying season!

    About buying bad assets. Back when I was in the lending business, our finance company was able to sell charged-off, subprime personal loans for around $0.05 on the dollar. These were unsecured loans, as well. If there was a market for that crap, there's a market for just about anything. There are more creative ways to pay, as well, so even if the price is uncertain, payment can be conditioned on certain metrics.

  • ||

    Blair Witch is a strange film. The plot is quite silly, and I guarantee that no one was scared by it on repeat viewing, but the first time through it's hard to come up with the presence of mind to wonder why they don't just follow the stream or use the sun to find a way out of the woods.

    I think a big determiner of whether it's scary is whether you've done a lot of camping in the woods before (especially if you've gotten lost). If you have, you picture yourself in that situation and it's hard to think objectively about it.

  • ||

    I will have to try the two you suggested.

    Fair warning: Cannibal Holocaust has REAL animal killings (several) and the human killings were so realistic that the director was brought to court in Italy to prove they weren't real. It is NOT for the faint of heart.

  • ||

    Popcorn took a second hit for me. I worked at a videostore where we made popcorn for all the customers. 6 months of smelling popcorn cooking put a large nail in the coffin.

    I like microwave and homemade, but those movie popcorn machine make me retch.

  • ||

    A mortgage is not really about the house.

    True enough, I guess.

    Instead, it is really a lien on the future income of the borrower.

    Well, no. The lien is on the house. In many states, mortgages are effectively no-recourse loans, meaning that the lender has no way to put a lien/garnishment order on the future income of the borrower.

    If borrowers do not have the income then the mortgage has no value.

    No, the mortgage has a reduced, maybe a greatly reduced value - the net proceeds of the foreclosure of the house.

    Bank are insolvent because the borrowers do not have enough income to pay the banks back.

    Maybe that contributes, as does the number of underwater mortgages, but what really tanked the banks was the destruction of perceived value in their MBS's, many of which are made up of perfectly good, performing loans.

  • ||

    That seems unlikely. Incomes haven't declined to the point that's really an issue.



    TallDave, but there are people who never had the incomes in the first place, and got no-doc loans or other such. Of course, you have a point that at root that's also a valuation issue-- they and the banks were betting on rising valuation of the property to cover the loan and provide the ability to refinance.

  • Warty||

    The one good thing that might come out of this is that these shitheads might fuck up badly enough to get lynched. I'd like to see that.

    Politicians have to badmouth Nathan Explosion to get lynched these days, Epi.


    Mannnnn, I love chips.

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online

  • Progressive Puritans: From e-cigs to sex classifieds, the once transgressive left wants to criminalize fun.
  • Port Authoritarians: Chris Christie’s Bridgegate scandal
  • The Menace of Secret Government: Obama’s proposed intelligence reforms don’t safeguard civil liberties

SUBSCRIBE

advertisement