There’s a lot of confusion out there, I found Brad Delong’s explanation easiest to understand. Worth reading the whole thing, but the very short version is that this is using the latter half of the TARP money, $350B, and trying to leverage it “via the FED and the private sector” to buy up as many of the toxic assets as possible. In addition the banks will be “stress tested” to determine which of them would still be insolvent after the $350B is used. The next step is not clearly delineated, but it doesn’t foreclose on the Swedish model, namely nationalization.
As a side note, this plan is being strongly associated with Geithner and not Obama. If it fails badly, Geithner may not be the one to implement the next step.
I personally would tend to prefer a more transparent approach, but I’ll withhold judgment for now and hope that Sec. Geithner has made the right call.
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