10 Feb 2009WASHINGTON (Reuters) - U.S. Treasury chief Timothy Geithner on Tuesday unveiled a new bank rescue plan that would put $2 trillion to work mopping up bad assets and restoring credit, but stock markets plunged on fears it would not work.
The Dow Jones industrial average closed down more than 380 points or 4.6 percent in its biggest one-day percentage drop since December 1, while prices for U.S. government bonds climbed as investors sought safety. The KBW index of bank stocks fell almost 14 percent.
Geithner said lack of public confidence in prior rescue efforts had made it all the more difficult to stop "a dangerous dynamic" in which a lack of credit undercuts the economy and leads to more weakness among banks, worsening the recession.
Tue Feb 10, 2009 4:56pm EST
full article
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comments . . .
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11 Feb 2009
bobajob | I am concerned about Obama. He did start on a moral high ground. But is he now being ground down by internal divisions? I would have liked the stimulus bill to have had much more general accord from the senate, as it is a humungus amount of money.
I am hoping it will be spent wisely, and am dearly hoping it will work.
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11 Feb 2009
Jambo | Well first up I'm hugely hopeful about Obama reforming the structure of US politics, reading The Audacity of Hope at the moment and it's clearly something he's thought about a great deal and has some good ideas on.
HOWEVER, I do not think there is really anything Obama can actually DO about the current economic situation. There is the potential for punishing wrong do-ers, there is the potential for spreading the pain around... But the US WILL be going through a very painful period, there's really no way around it.
My hope for Obama is that he will implement changes such that in the future the US political system works better.
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11 Feb 2009
CoralBloom | Yes,
Nothing will be perfect, but he has made a start. We could learn from him. Today's news wouldn't be so hard on our PM if he'd followed a process exactly as Obama had done when searching for possible appointments. Not perfect, but it shows a determination to clean the place out.
I'm sure he' will leave the White House pretty ground down at the end of the day, but I'm sure he'll force though enough for his job to be labelled a pretty good start.
I'm now so disgusted I'm thinking of moving to Bhutan - they have a Gross Happiness Index, and not a Gross National Product!
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11 Feb 2009
John Bray | Is this two trillion for buying up dodgy assets on top of the 700 billion (or more) for the kickstart package and on top of what they've already spent bailing out banks?
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11 Feb 2009
Spin Doctor | Geithner's plan is very unclear. The ideas range from using $350 bn left over from the TARP to buy up bad assets - he hopes to do so by setting up a bad assets fund - in a public-private partnership. The idea being that this will establish a market price. The question of what a market price however is the big problem - at market prices (maybe 30c on the dollar) most banks will be insolvent. This is why the market was holding out for a bad bank from the government to be set up - so they buy them at above market price. Seems like this wont happen now. Anyway the problem is how will they get private investors to buy these assets - maybe a loan guarentee but that will swallow up more government money. An insurance scheme may still be on the cards but there are major problems here as well in terms of pricing the risk. There is also another $1 trillion earmarked for the liquidity window where securitised debt can be refinanced.
They seem to be unwilling to do what really needs to happen - nationalise the banks, wipe out the shareholders and then recapitalise the banks. Not great but the best option - taxpayers don't get completely screwed as they have some chance of recovering the money in the future.
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12 Feb 2009
OldNick666 | CoralBloom
I keep being haunted by your comment about Bhutan. It sounds a very good idea.
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12 Feb 2009
CoralBloom | That's because it is!
I decided over two years ago to step off this moving flight of stairs. I've had a fantastic time ever since. This chasing consumerism is not only stupid, it's a miserable oexperience.
I really do think that if this country doesn't sort itself out, I'm off to Buhtan or similar to live the rest of my life not only smiling but being surrounded by folk who do the same!
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