I feel as though I have been out of the loop for months or even years with all that’s gone on in the news recently. It’s funny how losing a job has actually made me more disconnected from what’s going on in the world. But such is the case.
While attempting to play catch-up on all of the stories that have blown by me in the last few weeks, I fell upon an interesting piece about the Geithner-Summers plan for the banking industry over at Huffingtonpost.
And while I’ll grant you that the first “bailout” plan, the one with absolutely no oversight whatsoever, was pretty terrible, this one could create issues all its own.
As mentioned in the article linked above, it appears that the Geithner-Summers plan leaves open a tremendous loophole that, barring some miraculous display of patriotism and moral fortitude on the part of banking executives, they will most assuredly take advantage of.
The “Toxic Assets” that are referred to are most likely the package-deal bundles of mortgages and debt that have been defaulted on, foreclosed, bankrupted, and so on (not to be confused with toxic assets such as my 401K plan, credit rating, etc.).
The gaping hole in the plan is such that it would allow the banks to set up essentially shell corporations that would bid full, face value on the toxic assets, opening the door for essentially free money from the treasury and Fed. Since the assets are, in fact, toxic to the point of having absolutely no worth on the open market, the shell corporation has no choice but to file bankruptcy, while the parent bank (in Sachs’ example, Citibank) effortlessly makes off with a large chunk of taxpayer change.
Who’s really picking up the tab for all of this? It would have to be the middle class, of course.
When you make just enough money to live comfortably, but not enough money to qualify for huge tax breaks, you’re in the middle class. And the check you’re cutting to Uncle Sam in just under a week could wind up going to one of these failed banks that gambled little Timmy’s college fund on a mortgage boom that anyone could see was make believe.
A lot of people in our nation’s capital simply shrug and ask, “what else can we do?”
Well, it just so happens that there are a few other suggestions floating around out there. Why not have a look?
For instance, the Congressional Oversight Panel has suggested a plan wherein the managers of these banks, the ones who squandered little Timmy’s college fund, would be fired, and the failed banks (or those very near failure) would be liquidated.
I don’t know about you, but if firing a few executives and selling off the desk chairs from WaMu is a viable alternative to financing our economic recovery on money we may or may not have in 40 years, I’m all for it.
I would offer another suggestion, one where we start calling in the tab on countries who owe us money. Whether it be for food we’ve given, or weapons we’ve provided, etc.
The problem with that option is two-fold:
- The recession is worldwide. So nobody’s got any money, and making the phone call as big bad bill collector is just gonna get us the answering machine,
- We’re already borrowing money from the other countries that have any left.
You know who “owns” a big fat chunk of this country right now? China. And of course the heavy, heavy investments from Saudi Arabia as well.
Guess which two countries we may have to play real nice with for a while…
If the Federal Reserve, the Treasury and Congress don’t come up with some sort of workable, effective plan soon, you’ll be seeing pieces from the Smithsonian up on eBay within a matter of months.
