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Because the banks are insolvent, Obama's TARP will also fail

12 points by quoderat 18y ago

biohacker42 18y ago
That article makes some good points, but boy is it chuck full of over the top drama. No it is not in any way reasonable that the Obama presidency has already failed. The announced plan isn't much of a plan, it's more of plan for a plan. The end result could succeed or fail, we don't know yet. The plan that's being speculated on, will most likely not work, because as stated there's just not enough willing and available capital to save the banks. But the administration's eventual plan might work. It feels to me like they are stalling for time. Who knows their plan A might work, and if it doesn't there's still plan B, a.k.a. what Sweden did. No one should be surprised that the president isn't whipping out the Swedish solution within weeks of taking office. Surprise socialism, does not make for a good start of a presidency, not in America. But bank nationalization might very well still happen.
- Retric 18y ago
  I would like to point out that as long as the situation is stable over time time, it will heal. Banks have "bad debt" that they can't value or sell. It's not the value of their assets are zero they just don't know what that value is so they can't sell it our use it as collateral. However, in time they will either be paid back or they will not and the uncertainty is going to become known. As the risks drop off the financial system will start to recover on it's own. And it's not like we need to wait 30 years for the loans to be paid back or fail, in 5 years inflation will tend to increase home prices and reduce the value of that bad debt. I think having home prices drop and credit dry up is probably really good for the economy and suspect stimulus money spent on useful infrastructure is a much better use of taxpayers money, but I don't know. PS: The banking sector was over valued in 2005, assuming it needs to go back to those prices before it's healthy is a mistake.

12 points by quoderat 18y ago

That article makes some good points, but boy is it chuck full of over the top drama. No it is not in any way reasonable that the Obama presidency has already failed. The announced plan isn't much of a plan, it's more of plan for a plan. The end result could succeed or fail, we don't know yet. The plan that's being speculated on, will most likely not work, because as stated there's just not enough willing and available capital to save the banks. But the administration's eventual plan might work. It feels to me like they are stalling for time. Who knows their plan A might work, and if it doesn't there's still plan B, a.k.a. what Sweden did. No one should be surprised that the president isn't whipping out the Swedish solution within weeks of taking office. Surprise socialism, does not make for a good start of a presidency, not in America. But bank nationalization might very well still happen.

Retric 18y ago
I would like to point out that as long as the situation is stable over time time, it will heal. Banks have "bad debt" that they can't value or sell. It's not the value of their assets are zero they just don't know what that value is so they can't sell it our use it as collateral. However, in time they will either be paid back or they will not and the uncertainty is going to become known. As the risks drop off the financial system will start to recover on it's own. And it's not like we need to wait 30 years for the loans to be paid back or fail, in 5 years inflation will tend to increase home prices and reduce the value of that bad debt. I think having home prices drop and credit dry up is probably really good for the economy and suspect stimulus money spent on useful infrastructure is a much better use of taxpayers money, but I don't know. PS: The banking sector was over valued in 2005, assuming it needs to go back to those prices before it's healthy is a mistake.