If Liz were Queen

Dean Baker, a REAL economist, puts forth a reasonable question:  HOW ABOUT IF WE GET A SECOND OPINION?

QUEEN’S COMMENT:  I think that would be very wise advice indeed.  Let’s get a second opinion before following that of a known Goldman Sachs butt boy.

Secretary of Treasury Timothy Geithner waits for President Barack Obama. (Photo: Reuters Pictures)
Treasury Secretary Timothy Geithner wants to have the government lend up to a trillion dollars to hedge funds, private equity, funds and the banks themselves to clear their books of toxic assets. The plan implies a substantial subsidy to the banks. It is likely to result in the disposal of these assets at far above market value, with the government picking up the losses.

As much as we all want to help out the Wall Street bankers in their hour of need, taxpayers may reasonably ask whether this is the best use of our money. .  . The core problem is that many of our big banks are bankrupt. If they had to acknowledge the losses that they have incurred on their housing related loans (and increasing their loans in commercial real estate) Citigroup, Bank of America, and many other large banks would be insolvent. Thus far, they have avoided reality by keeping these loans on their books at inflated prices.

The Geithner plan is an effort to rescue the banks by using government funding to prop up the price of these bad loans to levels that will allow the banks to stay solvent.

There is an alternative. Rather than using government money to keep them alive, we could force the banks to go through a type of managed bankruptcy process like the one that is currently being proposed for General Motors and Chrysler. . . ”

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