Obama administration, voted to change the United States, actually extends the economic policy implemented by Paulson under the Bush administration. Paul Krugman is among the disappointed, who denounces scam giant new plan Geithner Management of toxic assets:
"Details of the plan by Timothy Geithner were revealed by the press. This is exactly the type of plan which had been widely analyzed a few weeks ago - and was poor. The logic of zombies prevailed.
Obama administration now endorsed the idea that there would be no fundamental problem in the financial system - than what we face is the equivalent of a bank run for an institution quite healthy. In the words of Tim Duy, there would be no bad assets, assets simply "misunderstood" mispriced. And if we could make it clear to investors that these assets are actually considered unreliable, ie provided with a value far beyond what anyone is willing to pay, all our problems would be solved.
To this end, the plan proposes to create funds in which private investors would provide a small amount of money and in return, would get large loans without taxpayer's personal liability [1], to put in bids for bad assets - sorry, I meant "misunderstood" . This assembly is supposed to lead to the true prices, insofar as funds are obtained through an auction system.
But it is immediately obvious, if you think about it, that these funds will create a market skewed. In fact, the Treasury is about to create - intentionally! - Functionally equivalent to the Texas Savings Bank in the 1980s: financial transactions conducted with very little capital, but with a large government-backed financing.
For private investors, it is neither more nor less than an invitation to gamble, "heads I win, tails taxpayers lose". So of course, investors will be willing to pay a high price for these toxic wastes. After all, these "widgets" might be worth something, and if this is not the case, it will be someone else's problem.
Or, to put it differently, the Treasury has decided that we were dealing only with a problem of trust, which aims to overcome the massive creation of moral hazard . [2]
This plan will provide great benefits to banks that do not really need help. But it will do little to reassure the public about the banks who are seriously undercapitalized.
And I fear that when that plan fails, it will almost certainly, the Obama administration has fired his last bullet: it will not be able to return to Congress to propose a plan that would have a chance of success.
What a terrible waste. "
[1] Krugman says" non-recourse. "This is a type of loan which, in case of default, the creditor is guaranteed only up to the value asset collateral. Here, in these loans, the collateral it is doubtful debts to banks redeemed. In case of default is therefore the State will assume all losses.
[2] This term refers to situations where an economic actor increases his risk-taking, compared to those where it would bear the full consequences its decisions.
[Source: Paul Krugman: "Despair over Financial Policy"]
[Translation and Notes: Counter Info ]
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Crisis for Dummies 
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