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Putting the ‘Toxic’ Back in Tarp

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Posted on Mar 22, 2009
Flickr / epicharmus

The Toxic Asset Relief Program was originally designed to save the banks from their bad bets by purchasing toxic assets, but has since evolved into something of a multipurpose slush fund. Now the Obama administration is getting back to the business of buying junk, elaborating on a plan that sent the Dow tumbling when it was first announced.

Update: The market turned out to love the plan, which is maybe a sign that Wall Street’s contortions aren’t the best measure of financial stability.

AP via Google:

The plan on toxic assets will use the resources of the $700 billion bank bailout fund, the Federal Reserve and the Federal Deposit Insurance Corp.

The initiative will seek to entice private investors, including big hedge funds, to participate by offering billions of dollars in low-interest loans to finance the purchases. The government will share the risks if the assets fall further in price.

When [Treasury Secretary Timothy] Geithner released the initial outlines of the administration’s overhaul of the bank rescue program on Feb. 10, the markets took a nosedive. The Dow Jones industrial average plunged by 380 points as investors expressed disappointment about a lack of details.

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By artie, March 23, 2009 at 9:15 am Link to this comment
(Unregistered commenter)

Simply,but accurately put- it’s the power elite vs the masses, the winners vs the losers, as fully described by Mills’ “The Power Elite”, 60 years ago, and still valid.

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By wildflower, March 22, 2009 at 11:27 pm Link to this comment

Sure hope Robert Kuttner’s source is wrong.  These guys Summers and Geithner are beginning to sound a lot like Dick Cheney to me, which is not good.  The last thing we need at the Whitehouse is a set of Cheney twins selling another “toxic” project to another U.S. President: 

“. . . If President Obama wants a second opinion, he could begin with Paul Volcker, nominally chairman of Obama’s own “Economic Recovery Advisory Board,” which so far is mainly window-dressing. According to my sources, Summers and Geithner seldom talk to Volcker because they don’t like Volcker’s criticisms of their plan.

The president could also consult with several people in the Federal Reserve System who have a different view, and also the FDIC leadership, and the Congressional Oversight Panel that was created by Congress as the precondition for appropriating the TARP money. The panel has the statutory right to get documents from the Treasury. But under Geithner as under Paulson before him, Treasury has been stonewalling. Legislators of both parties are increasingly viewing Geithner as part of the problem.”

http://www.huffingtonpost.com/robert-kuttner/lifting-the-tarp-will-pre_b_175149.html

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By Shift, March 22, 2009 at 10:12 pm Link to this comment

It’s just more trickle down economics. Bank collapse is just a scare tactic to get more free taxpayer money.  The banks are basically on strike and will not lend because there is no demand for loans.  This policy of bank bailouts is a fraud.  Allow the banks to declare bankruptcy.  The solvent banks will take up the slack if demand for bank loans returns. Just say no as loud as you can to Washington and Wall Street.  We can live with the results.

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By P. T., March 22, 2009 at 8:33 pm Link to this comment

The Geithner scam is to have the banks sell their junk to private investors.  The taxpayers will guarantee the private investors against loss on the junk.  When the junk goes bad, the taxpayers will pay the private investors.

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