Thread: The "Geithner Put": Time to break up big banks

The "Geithner Put": It's time to break up the big banks

Dumping $1 trillion of toxic assets onto US taxpayers


by Mike Whitney
Global Research, February 25, 2009


Timothy Geithner is putting the finishing touches on a plan that will dump $1 trillion of toxic assets onto the US taxpayer. The plan, which goes by the opaque moniker the "Public-Private Investment Fund" (PPIF), is designed to provide lavish incentives to hedge funds and private equity firms to purchase bad assets from failing banks. It is a sweetheart deal that provides government financing and guarantees for illiquid mortgage-backed junk for which there is no active market. As one might expect, the charismatic President Obama has been called in to generate public support for this latest addition to the TARP bailout. In this week's address to Congress he said:

"This administration is moving swiftly and aggressively to restore confidence, and re-start lending.
We will do so in several ways. First, we are creating a new lending fund that represents the largest effort ever to help provide auto loans, college loans, and small business loans to the consumers and entrepreneurs who keep this economy running."

The Obama administration is clearly afraid to use the unpopular Geithner to sell this boondoggle to the American people. Geithner's last performance set off a political firestorm and put the equities markets into a swan-dive. No one wants to see that again.

Details of the plan remain sketchy, but the PPIF will work in concert with the Fed's new lending facility, the Term Asset-Backed Securities Loan Facility, or TALF, which will start operating in March and will provide up to $1 trillion of financing for buyers of new securities backed by credit card, auto and small-business loans. Geithner's financial rescue "partnership" will also focus on cleaning up banks balance sheets by purging mortgage-backed securities. (MBS)

In Monday's New york Times, Paul Krugman summed up the Geithner plan like this:

"Now the administration is talking about a “public-private partnershipâ€

If any lending instituitions are to get government funds it should be banks and credit unions who played by the rules and remain solvent.

Give them the bailout money so they can make loans and to hell with AIG,Citi,BOA and the other greedy lenders who have helped wreck our economy.