Does Geithner actually expect people to buy "toxic assets" (=worthless)?
William K. Black on Geithner: "The Guy Has a Track Record of Failure Everywhere He's Gone"
So Geithner, the guy Obama's said he wouldn't fire even if he offered a resignation, has a plan to buy up "misunderstood" assets (toxic assets = worthless) from all these big banks. Since he can't pay for it thru Congress (they wouldn't approve), he'll pay for it with the help of FDIC and the Federal Reserve (Hybrid Corporate-Govt Entity, above which there is none...constitutional??). FDIC is backed by "the full faith and credit of THE UNITED STATES GOVERNMENT" (ALL CAPS because it's a legal fiction AKA hybrid corporate-govt. entity)
Any debts that need to be covered by FDIC will be done with the help of the Federal Reserve. Should the debts of FDIC FAR exceed the amount of actual money they have to pay for them, the Federal Reserve will just print more money as needed!!!!!!!!
But you can't do that, right? REMEMBER: No one is above the Federal Reserve. It is literally the financial king.
I think we're screwed...
Oil prices reach new high for 2009 as dollar falls (due to the Fed's proposed plan mentioned below).....as oil prices rise, so does the price of food.
"According to administration and industry officials, the plan would rely on the Federal Reserve and the Federal Deposit Insurance Corp. to supplement the government's $700 billion bailout fund. The uproar over the millions of dollars in bonuses for employees at troubled insurance giant American International Group Inc. has dimmed prospects for getting more bailout money from Congress.
The officials, who spoke on condition of anonymity because the details have not been announced, said Geithner's plan will have three major parts:
_a public-private partnership to back private investors' purchases of bad assets. The $700 billion bailout fund would provide the backing. The government would match private investors dollar for dollar **and share any profits equally**."
Here's a good column:
donovon........."Overtime, the value of the dollar is going to fall, no matter what. Why do you think everything is more expensive today than it was 80 years ago?"
You are incorrect. Inflation is directly related to the actions of the Federal Reserve (which is a little over 90 years old). If dollars have less purchasing power, prices will go up.
- Anonymous1 decade agoFavorite Answer
You misunderstand "toxic asset". They are not worthless as you say. One of the original plans to solve the financial crisis involved buying these toxic assets off the books of the banks. Toxic assets meaning collateralized debt obligations and mortgage backed securities. Within these assets, some are loans that are not going to be payed back. The percentage of which has not been determined. The original plan was scrapped in favor of just giving the banks more capital because no one could find a way to price these toxic assets.
The plan they have now is to auction them off basically, with risk being spread out between the parties. This way, they will be able to come up with the best price that they can to value the assets.
Since no one knows much these assets will turn out to be worth, its possible that a group makes money. For example say a hedge fund buys some of these assets at 90 cents on the dollar. In reality, the value of the asset should be 97 cents on the dollar, because less of the loans in these assets were bad. This hedge fund just made a profit. This is just a hypothetical example.
The government is willing to take some of the risk in order to achieve the main goal of taking these assets of the books of the banks, which will help return the financial system back to normal and put the economy back on track. Its not as if all the money that would be spent buying these assets would be lost, because they do have value, not everyone one of the loans is bad. This is just a way of pricing the assets the best way they could. Its probably not all good, but it probably needs to happen.
- 4 years ago
I don't see how it would work. We are seeing a continuation of the Bush Administration and Clinton Administration in which they are trying to do way too much and creating way too big of a government. This is similar to what happened in the USSR... The government was too massive and there was too much going on in all directions and eventually they just couldn't keep up with the spending so they had no choice but to re-organize everything fiscally and geographically--with a result that we saw. We are heading down that same path. I don't see how these people can be trusted to do anything right and am glad that I am going to be out of this country in less than a few months. I feel sorry for all of you honest people but you really need to wake up and see that you are digging your own grave if you actually think that the Republicans or Democrats will save the day. They are working for the Bank of the World and they have made it so obvious. I don't think that there is anything that you can do at this point. We have the Democrats floating on Cloud 9 because their crooked President won and the Republicans calling out the b.s. which just gives the Democrats more room for gloating. Everyone should be working together on a (legal) way to get the heads of the government out of there and vote in independent parties as the Democrats and Republicans BOTH at this point should not and can not be trusted to do anything but create a larger government, slip payments into their own bank accounts and screw everything up.
- Anonymous1 decade ago
Under the Federal Reserve interest rates on home loans have gone down to the lowest since 2007. You are bashing the Federal Reserve because....they are part of the government? Your logic fails. Overtime, the value of the dollar is going to fall, no matter what. Why do you think everything is more expensive today than it was 80 years ago? And oil prices aren't based off Government spending. Who brain washes you with this kind of information?
"You are incorrect. Inflation is directly related to the actions of the Federal Reserve (which is a little over 90 years old). If dollars have less purchasing power, prices will go up."
Based off of what evidence? The high oil prices right now have nothing to do with inflation. This is all a result of a high demand of foreign oil right now. This is nothing to do with government spending. Inflation only happens when aggregate demand falls sharply, as well as IRRESPONSIBLE spending. Don't you know basic economics? Just because the Federal Reserve is one of the biggest banks in America, doesn't mean everything is their fault. Tim Geithner's plan is not irresponsible.
- Anonymous1 decade ago
All RESPONSIBLE citizens who have struggled to do the right thing will pay for these toxic assets. Haven't you noticed how all the bailed out banks are penalizing us with higher interest rates to pay for those who defaulted on their mortgages and their credit card debts.
Everything thing this President and Pelosi's Congress has done thus far has been to gratify and satisfy those who HAVE NOT lived by the rules. Now we have Sharpton and the CEO of ALCRAP, oops, ALCORN running this government.
If you are still disillusioned that their agenda is anti American just wait and keep you eyes and ears open.
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- metyLv 51 decade ago
Of course he does, it's what the Federal Reserve does. It privatizes assets, nationalizes liabilities. The rich get richer, we get the bill.
A track record of failure has never stopped ANY politician, look at GWB.
He failed at every business he ever touched, messed up Texas horribly and went on to become president - twice.
- Kiran CLv 71 decade ago
The general public, no. Investors like Bill Gross and Warren Buffet, yes.
- IndigoLv 51 decade ago
What ??? That guy did not get fired yet?.....
Oh< I get it, Obama said Geithner was indispensable, and the only one he could trust to do the job?
What job....to give America the Deathblow, ?
By ruining us financially?
Words of Wisdom,, anyone who does not know how to do Turbo Tax, needs to take grade 2 math over again, and not be the Secretary of Finances in the US,
- Angela QLv 71 decade ago
There is no intention for "people" to buy toxic assets. The way the program is designed, banks which already hold these will set up subsidiaries for the purpose of bidding to buy them at face value (rather than their real value, which is $0.). The companies will put up a small amount and the government will pay the rest. For the taxpayers, it's a lose-lose situation. If I could get $100K of government money for anteing up a few thou, why shouldn't I be able to? I didn't destroy the economy. Why reward those who did?
The program is being seriously re-examined in a way that programs at this stage rarely are. ∠°)
- James LLv 71 decade ago
I want to know why I can't buy out my own mortgage for 7% of its value?
- Anonymous1 decade ago
Wait a minute. I thought that is what the TARP was supposed to do.