Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.
--C.S. Lewis--

Tuesday, March 24, 2009

Geithner's Bank Plan

Timothy Geithner announced his big banking rescue plan. I'm nowhere near qualified to make pronouncements on it, but that's never stopped me before has it? Believe it or not, I really want to like this plan. In fact, I DO like many of it's features. I think there are problems too, and I'm not sure it will work, but I'm definitely rooting for it.

So, what do I like and dislike about it? First of all, I like the free market elements. One of the biggest issues with TARP as it was originally proposed, was the ridiculous idea that the government was capable of intelligently pricing these housing assets, especially with their obviously conflicting priorities. The combination of private investors and government incentives might just allow the assets to be priced in a more meaningful way that would allow banks to salvage some of their investment while not propping up prices in too artificial a manner.

Secondly, this is the first Obama administration proposal that feels like it was created by grownups. The administration's first reaction to the crisis was a ridiculous stimulus bill that degenerated into a free-for-all spendathon with little thought to whether the spending was really stimulative. It was followed up by requesting the rest of the TARP money with, as far as I can tell, little to no consideration about whether the first half was used effectively. And of course, last week, the government decided to turn the printing presses up to maximum, a strategy that any 6 year old could tell you won't work without causing bigger problems down the road. Unlike these prior efforts, this one feels like adults sat down calmly and thought it through. That's obviously no guarantee that it is the right strategy, but it is reassuring nonetheless.

Lastly of course, one is known by their enemies, and Paul Krugman hates it.

On the other side of the ledger, I think Geithner has passed up on one of the most cost-effective things he could do to help banks out, suspending mark-to-market rules, which require banks to value their toxic assets at a big, fat, zero. Doing so would help free up their cash, while acknowledging the reality that these assets are illiquid, not truly worthless. I'm also obviously worried about the price tag. Obama's previous silliness combined with his budget has already put us several trillion deeper into the hole. How much longer is he going to insist that we dig our way out? I'd be much happier with this proposal if it wasn't stacked on top of too much spending already. And finally, I'm worried that Geithner doesn't have the manpower to handle this program. All the reporting says that Treasury is basically a big empty building that Tim is rattling around in all by himself. Would it hurt to get a few undersecretaries confirmed before we get going?

On a note completely unrelated to anything else, earlier today I had to Google Tim Geithner's name in order to get the link to his Wall Street Journal article. When I started to type it into the Google search engine, the auto complete feature suggested "Timothy Geithner Jewish" as the term I might be typing. Does that strike you as odd? What a random thing. I mean, if I started typing "Mitt Romney" and got "Mitt Romney Mormon" I could understand it. After all, there have been about a thousand articles written about how we crazy Bible-thumpers will never vote for a Mormon. But I've never heard word one about Geithner's religion. In fact, I went to Wikipedia, and their article lists no religious affiliation. The only mention religion gets in the article at all is that Geithner was married at his parents' home by a minister in the United Church of Christ. Is this one of those weird, "Jews control the world's money" things? Since he's in charge of the Treasury, he must be Jewish? Or did I miss a story?