While most media attention is focused this week on the Senate debate on the economic stimulus package, the Obama administration is preparing to roll out a new plan to bail out the banks, involving a trillion dollars or more in public assets.
Under the plan, which Treasury Secretary Timothy Geithner is expected to announce within the next two weeks, the government will buy up virtually worthless mortgage-backed securities and other “toxic” assets held by the banks and provide guarantees against future losses for much of their remaining assets. It will also continue to inject cash directly into the banks.
Indeed, one of the purposes of the stimulus package is to provide political cover, in the form of aid to “Main Street,” for the offloading of Wall Street’s losses onto the American people. Meanwhile, the stimulus plan, which does nothing to halt the destruction of jobs or the wave of home foreclosures, but includes lucrative tax write-offs for business and funnels government projects to private companies, is being weakened further at the behest of Wall Street and congressional Republicans. It is now reported that Obama has dropped a provision that would allow bankruptcy judges to lower the principal and ease mortgage terms for distressed homeowners.
The administration is mounting a public relations campaign—starting with Obama’s public wrist-slap of Wall Street executives for continuing to reward themselves with billions in bonuses—to give the impression that it is cracking the whip on executive compensation. But as the Washington Post reports, “[T]he administration is likely to refrain from imposing tough restrictions on executive compensation at most firms receiving government aid” because “harsh limits could discourage some firms from asking for aid.”
The new bank bailout, like every measure that has been devised in response to the financial meltdown, will be tailored entirely to the interests of the financial aristocracy. Under the terms of the plan, as outlined in various press reports, the bad assets accumulated through speculation and fraud will be transferred to a “bad bank” owned by the government. The government will buy these assets not at their actual market value, which is pennies on the dollar, but, according to the Financial Times, on the basis of a “valuation model,” guaranteeing premium prices for bank executives and big shareholders.
http://www.wsws.org/articles/2009/feb2009/pers-f03.shtml
June 18th, 2010 at 3:03 pm
Depression – right around the corner.
June 21st, 2010 at 7:09 am
This is another rip off. I was against the other bail out. It is time to let some of those big banks fail.
June 21st, 2010 at 11:21 am
ALL mortgages should be automatically recalculated at 4.5%, which would end many toxic loans.
Further, this doesn’t put artificial prices on homes, and the folks that were home “flippers” or otherwise paid more than they could afford do NOT get rewarded.
Further, re-adjusting the interest rates gives everyone a de facto monthly stimulus in the form of more money
June 22nd, 2010 at 3:47 pm
Incoming New Deal… Depression on its way
TAX CUTS to middle class, upper class and business would fix this…. Its so simple and so logical… You learn this is Macro Micro or even in High School…
Huckletard… Bush was a NEO-CON… Definition of a NEO-CON is a MODERATE/LIBERAL REP. that believes in a strong national defense, Big Government, High Taxes, Big Spending, and a few Conservative beliefs such as abortions, *** marriage. So take out the conservative beliefs and defense and you have Obama… Its the same economic policies… THE SAME…
June 24th, 2010 at 3:53 pm
The depression is coming and there is no way to avoid it. I think it’s noble that Obama is trying but the damage was done a long time ago.
He should hold onto those billions of dollars because he’s going to need it once the depression actually hits us. If he gives more of it to the banks, they will just steal it like they did the first time because even they know, there is no turning this thing around any time soon.
Brandon please don’t preach to anyone about micro and macro economics, you guys who want to be economists have been getting this thing wrong since 2004, there’s not one damn thing you have been able to economically predict correctly. If there’s onething we can all be certain of, that is the fix to this mess is far from simple!
June 25th, 2010 at 5:51 am
I would have to actually study the bill in order to give an accurate appraisal of it. I have no problem with the government giving more assistance to the banks if it will serve the purpose that it would be intended to serve. (To make credit more available to businesses and individuals to keep them from going under) That would save jobs. But as I said, I have not as of yet read it…so can’t judge at this point.
June 26th, 2010 at 8:05 am
This part right here: “is being weakened further at the behest of Wall Street and congressional Republicans.” I wish the Republicans would stay out of, it’s starting to look like something W. would do.
June 28th, 2010 at 2:27 pm
Hooray–I spent all my money and bought a mega-high flying-suped up computer and I’m just gonna spend the rest of my days playing Everquest2 since Obama will support me and pay all my bills. Hooray for socialism!!
July 1st, 2010 at 10:00 pm
If conventional mortgages were assumable, the banks wouldn’t have as many foreclosure properties in their portfolios, and wouldn’t need drastic bailouts.
Obama is so busy looking out for his supporters on the dole, he can’t see the sense in allowing stable wage earners assume defaulted loans.
July 4th, 2010 at 5:54 am
the first one didn’t work, the second did not work, the third, forth, fifth will not work. You think we could learn just a little from history.
July 6th, 2010 at 8:04 am
I think it’s time for Obama to be the “socialist” Limpd!ck accuses him of being and use our money to buy us huge chunks of those banks. After decades of trickle-up (more like torrent-up) privatization of what our taxes bought, it’s time for turnabout: publicization of privately abused assets.
July 7th, 2010 at 11:29 am
Obama is too busy trying to reward criminals with cabinet positions to really understand economics.
Bush’s cabinet were called into question years after he took office.
I guess the change is that Barack’s cabinet is known criminals coming in.