An interesting array of editorial opinion on the subject.

Update: in yesterday's Financial Times Jeffrey Sachs did not like the plan:

The idea of “private sector price discovery” is therefore flim-flam. There would be price discovery if the government’s loan had to be repaid whether or not the asset paid off in full. In that case, the investor would bid $360,000. But under the Geithner-Summers plan the loan is precisely designed to be a one-way bet, for the purpose of overpricing the toxic asset in order to bail out the bank’s shareholders at hidden cost to the taxpayers.

The banks could be saved without saving their shareholders – a better deal for taxpayers and without the moral hazard of rescuing shareholders from the banks’ bad bets. Most simply, the government could provide loans to buy the toxic assets on a recourse basis, therefore without the hidden subsidy. Alternatively, the plan could give the taxpayers an equity stake in the banks in return for cleaning their balance sheets. In cases of insolvency, the government could take over the bank, the much dreaded nationalisation, albeit temporary. At the end of the Bush administration, Congress voted for the $700bn (€517bn, £479bn) troubled asset relief programme (Tarp) on the assurance the taxpayer would get fair value for money (for example, by taking equity stakes in the rescued banks). The new plan does not offer that.

Filed under: * Economics, Politics • Economy • Credit Markets • The 2009 Obama Administration Bank Bailout Plan • The Credit Freeze Crisis of Fall 2008/The Recession of 2007-- • The U.S. Government • Treasury Secretary Timothy Geithner • Politics in General • Office of the President • President Barack Obama

1. Dilbertnomore wrote: It depends on what toxic-asset bailout plan (TABP) is meant to accomplish. It certainly will not restore our financial system to the free market level we enjoyed and prospered with for many years. It may offer us a modicum of financial success in the short run, but against a massive intentional growth of national debt with no apparent plan to turn it around, there is no reason for optimism. (And I know Obama has said his budget will halve the deficit with several years, but when he has increased the deficit at least threefold, a halving isn’t progress by any definition I can accept.) Don’t lose track of Obama’s, Emanuel’s and H. Clinton’s bold assertions that crises are opportunities not to be wasted when the objective is to make big changes. We are being and will continue to be intentionally roiled by this Administration as they work feverishly to make us as socialist as they possibly can. March 27, 5:03 pm | [comment link]

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