You have been banned from commenting in BTD's threads and I earlier warned you that you would be banned from the site if you continue posting on his threads -- or abusing the comment rating system.

So what Krugman et al are doing here is not only saying the Obama plan won't work, they are hoping it doesn't. For if it doesn't then that makes them somewhat right in their eyes. And being right is more important than the economy actually recovering with the Obama plan. It is better in the eyes of Kurgman et al to send out bad vibes that the plan will fail than to send out good vibes in hopes that it will work even if it isn't their plan. In other words they are hoping against hope. Hoping that failure will vindicate them in some strange way. Sorry Paul but I just can't respect that. There is more at stake here than your fragile ego.

Now does Krugman et al explain why his plan will work? Never. Does he say why the Obama plan will not work? No. He just says it won't as if he is the final word on the subject. Silly man.

He does offer this as a reason although it is poorly thought out. Paul must have been working against a deadline again:

But the real problem with this plan is that it won't work. Yes, troubled assets may be somewhat undervalued. But the fact is that financial executives literally bet their banks on the belief that there was no housing bubble, and the related belief that unprecedented levels of household debt were no problem. They lost that bet. And no amount of financial hocus-pocus -- for that is what the Geithner plan amounts to -- will change that fact.

Well at least he is hedging and saying the assets are undervalued. Duh. But comparing financial executives relying on no housing bubble to a government plan for recovery is so detached, so obscure, that it makes one want to cry real tears for Paul. WTF does a market call by bank execs have to do with Obama and his plan to save the economy via the financial sector? NOTHING PAUL. Absolutely nothing.

It's on us ya'll...we let our country be stolen.  

firedoglake.com/2009/03/23/timothy-geithner-making-countrywide-executives-rich-again/

I am not sure this gets implemented at all after AIG.  If the banks who own the toxic assets are allowed to bid for them in the auction then this plan is nothing more than a government gauranty of 95 cents on the dollar to Wall Street.  Bank A buys Bank's B problems, Bank C buys Bank A's, etc., etc.  Or through the miracle of corporate structures Bank A takes 95 cents from Uncle Sam and buys its own troubled properties from itself.

There are two different programs for so-called Legacy Loans and Legacy Securities. These are the so-called toxic assets. The first will be pools of loans. The second will be securities.

For Legacy Loans, the FDIC will provide financing, i.e. loans, on a 6-1 debt to equity ratio basis. The private investors and Treasury will share equally in the equity (which will be 1/7 of the total amount available funds). These will be newly formed investment partnerships. The private investors will manage the partnership, including selecting the bid price and overseeing management of the assets. The FDIC will conduct the auction. The Legacy Loans will be selected by the banks with assistance from the regulators.

For Legacy Securities, the government will work with up to 5 asset managers. Treasury will invest the same amount of equity as the fund manager. Another government fund will loan the same amount invested by Treasury. The asset manager can also ask Treasury to lend up to the amount of equity Treasury has committed. Thus, the private investors will 50% of the equity, and will either have 1/3 or 1/4 of the total amount invested.

The asset/fund manager will have full authority over investment decisions. The general strategy will be to hold long term. "Eligible assets are expected to include certain non-agency residential mortgage backed securities (RMBS) that were originally rated AAA and outstanding commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS) that are rated AAA."

Here's a link to the Facts Sheet:

Bad option No. 1: let the toxic assets stay on the banks' balance sheets, "the kind of hands-off approach that has led to other countries having financial crises that lasted years and years as opposed to months and months."

Bad option No. 2: have a single public bank buy up all the toxic assets, an approach in which "the taxpayer would take all the risk instead of sharing the risk" and that could involve the public bank overpaying for the assets. :"

Two alternatives?  That is it?

It is clear that the private investment is merely a management fee for the toxic assets.  I too, do not see a downside for the investors and am highly sceptical of the taxpayer upside long term.

Indymac is already done and our losses were minimal comparatively.  

I simply do not get it.

2 years ago a commercial bldg was purchased at 900k, 100k was put down making the mortgage 800k.  Seller wants to dump bldg but the new appraisal is now 750k.  Despite putting 100k down the bldg is underwater.  Seller cannot move the building unless he commits to another 50k loss because the same banks appraiser is now estimating it at 150k less.  

Finding a buyer who can put down 20% which is 150k is difficult.  The owner is willing to lose the initial investment.  So what happens here?  The bldg will eventually be foreclosed on because the owner cannot continue to make the payments because their business has dried up and they don't have an additional 50k payout to bridge the difference.

The owner and buyer agreed 810k was a fair price but the appraisal is 50k short so no sale.  So basically the bank will not help the seller because their same appraiser valued the bldg 150k less and unless the buyer has 150k and you  have 50, no sale.  

Were the gov't not involved in giving them money, do you think the banks would move the bldg at 810k?  Want to prevent foreclosure and bankruptcy, give us another 50k for our troubles is basically what the bank is saying. (the buyer is pre-approved for 1 million loan)

Well, you know... it's those people in Washington (tilt head slightly and give a little smile).

Chases-like-catnip stuff from a guy who has strewn enough of it to leave every feline in the country flopping around, drooling and stoned out of its little kitty brain.

Anyone wanna play the Hopey Changey song?