If at first you don't succeed

by Scott Feldman

As I write this, the stock market is up 300 plus points. But who knows how the trading day will end. Wall Street's enthusiasm sparked by a new bank rescue initiative unveiled by the Obama administration this morning. In a nutshell, it's going to be offering financial incentives to private investors to buy up to a half-trillion dollars of bad bank assets to ease credit for consumers and businesses. It's the kind of thing that is hard to explain to the average Long Islander. But the majority of people I spoke with today say "let's give it a chance." Some Long Islanders, though, think the White House and Congress are taking us down the path to socialism. They'd just prefer to "let the chips fall where they may." In other words, let the system work itself out minus so much government involvement. For his part, Dowling College economist Irwin Kellner says he's not so sure that the same private investors the government has been so critical of, including passing what Kellner views as illegal retroactive taxes on bonuses, will be all that eager to partner with Washington.  The word today from Treasury Secretary Timothy Geithner is "patience."  As one Obama supporter told me at a local shopping center, "It took us eight to ten years to get into this situation.  It's going to take us a couple of years, at least, to get out of it."  I don't think anyone is under the illusion that there is any "quick fix" to this mess.

Comments

[John]

Do we have a choice other than "give it a chance"? I'm pretty sure that we all learned from the TARP that neither Congress nor the Treasury cares what we want. Remember the Representative who said that his constituents were flooding his office with calls split between "no" and "hell no"...?

But I really do question how this is supposed to work, even after reading the plan over. The assets are toxic because NOBODY WANTS THEM. They're too expensive. The prices are inflated. Spending extra money on them is only going to preserve the problem, rather than fix it.

The right solution is to tell the banks to sell them at whatever price the market will bear. But we obviously can't do that, because the banks are throwing a hissy fit until they get their way. Much better to tax us and devalue the dollar, I guess, as long as the banks are happy.