An Optimistic Take on TARP
If you read Tyler Cowen’s list of theories as to why the TARP/TARP II decision-making has been so murky you’ll see that one possibility that keeps coming up is that it’s deliberately being made confusing so as to confuse people. If you put that together with Obama’s remarks on Sweden and the fact that the plan Geithner announced yesterday does in fact leave open nationalization as a possibility, then I think we need to at least consider the possibility that Obama believes the banks will need to be nationalized but doesn’t believe it’s politically feasible to say this or get congress to agree to it. Thus, he’s unveiled a confusing “non-nationalization” plan that he does think he can put into place and that will, at the end of the day, permit bank nationalization as an option.
The main piece of support I could find for this theory is that in the ABC News interview Obama immediately leaps into a “Japan versus Sweden” discussion, implying that he in fact does believe the banks are insolvent and is merely pretending to have a policy based on a diagnosis of illiquidity.
21 Responses to “An Optimistic Take on TARP”
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February 11th, 2009 at 11:49 am
But isn’t part of the problem that we don’t have a diagnosis at all right now? A plan that assumes insolvency is making the same mistake as a plan that assumes banks are illiquid. The plan, as it stands, seems to leave the back door open for nationalization, but doesn’t commit to anything – which is good, because it would stupid to commit to a course of action based on what everyone suspects might be true.
February 11th, 2009 at 11:57 am
Jesus, man, I had that figured out a while back. Because of the craziness of the opposition to the idea, he has to go through this puppet show first before it becomes politically acceptable. It’s rope-a-dope again, the same way he’s operated for the last year. (And if one of the intermediate plans in the puppet show works before nationalization — doubtful but not crazy stupid — that’s acceptable too.)
Because half of our legislative branch is terrified of the other n-word, we might pay thirteen figures before we get it right. This is not surprising. Figure out the economic damage our terror about the original n-word cost us.
February 11th, 2009 at 12:00 pm
China’s imports down 43% in December.
If I am reading him correctly, Krugman says we will still be in deflation two years from today, under optimistic scenarios.
Better than 50/50 that six months from now all current analysis and policy will seem trivial and irrelevant. Maybe the world economy is going to take something like a $50+ trillion dollar hit. You won’t recognize the place.
Tea leaves haven’t even settled to the bottom of the cup yet.
Obama’s coasting, and starting to bore me.
February 11th, 2009 at 12:50 pm
I have the “hope” that one day Obama will just say what he really means instead of everyone else having to try and figure it out. These games of WORM are starting to become boring. Because when I listen to people who just say things cuz they sound pretty, it usually means they have absolutely no understanding of what they are talking about – and that kind of talk does not make a strong and good leader.
February 11th, 2009 at 1:03 pm
God Damn Republican giving away money to the Banks! Fuck Bush! Drrrrrrrr
February 11th, 2009 at 1:06 pm
I think Matt is right. The idea behind the “stress test” is to puch some banks over the edge, or propel them into some sort of structured reorganization in which private equity plus the gov’t get a controlling interest and dump current management and sell off parts. I think they really don’t klnow what will be necessary until they get inside some of these banks. And once soome assets are priced, then the domino effect will take its toll on other banks. But this does allow for a mix of reflation and forced reorganization, which is probably thge best we can do.
Remember Sweden is much smaller and its biggest banks didn’t have the global reach of ours. So our problems are more complex.
February 11th, 2009 at 1:22 pm
I disagree; I don’t think we will see any nationalization and I’m not convinced that is such a bad thing. As I read it (and yes Julene it would be nice if our leaders were less cryptic) the stress test will be used to determine which banks qualify for further “extraordinary assistance” beyond the scope of this new TANF plan. At the end of the day I don’t think nationalization is that much better than the Bush/Obama bailouts – in both cases the government takes on bad assets and pays out good ones; the only real difference is that shareholders would be wiped out under nationalization – but they’ve been mostly wiped out already.
February 11th, 2009 at 1:35 pm
Matthew is hilariously starting to sound like a Jewish American Commie circa 1939 trying to explain why Stalin’s rapport with Hitler is a good thing.
February 11th, 2009 at 2:11 pm
President Obama convincingly made the case for open and transparent government on the campaign trail. If he believes that nationalization is the correct course of action, which it is, than he should honestly explain to Congress and the American people what is he supports rather than govern by deception.
February 11th, 2009 at 7:29 pm
A simpler explanation is that Obama is pretty clueless about what to do, but at least he’s good at sounding like maybe he has a Secret Plan to fix everything. In contrast, Geithner is equally clueless, but isn’t good at sounding reassuring, so his speech yesterday was a disaster.
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