The Bailout’s Next Chapter

[cal04]

http://www.nytimes.com/2009/02/11/opinion/11wed1.html?ref=opinion

Someone should have told Treasury Secretary Timothy Geithner that the one thing to avoid at a time of uncertainty is raising more questions.

When he announced the Obama administration’s new-and-improved bank bailout plan on Tuesday, Mr. Geithner certainly seemed to have digested some of the flaws in the Bush administration’s rescue attempt — especially the lack of accountability and transparency in how taxpayers’ dollars were spent. Unfortunately, the rest of his speech invited, at best, healthy skepticism from the markets, the public and lawmakers — and at worst, more mistrust.

First, there was no new bailout plan and no firm timeline for a plan. There were only outlines. One outline calls for a new public-private investment fund that would ultimately buy up some $500 billion to $1 trillion of the bad assets that are clogging banks’ balance sheets.

But Mr. Geithner did not say how the Treasury Department would operate the fund. He also did not address the extent of any taxpayer subsidies or other government guarantees that may be used to entice private investors to participate. Also left unanswered was the devilish question that undermined Bush officials’ attempts to buy up those same assets: how much should be paid for them? A fact sheet released by the Treasury Department implied that private investors would value the assets correctly.

(snip)
Mr. Geithner offered no sense that bank rescues would be linked in a meaningful way with foreclosure relief. He pledged to use $50 billion to stanch foreclosures “in the coming weeks.” With nearly 10,000 families facing foreclosure each day, that could well fall short.

The disconnected foreclosure aid is all the more disappointing coming a day after President Obama spoke at a town-hall meeting in Indiana and said that he supported allowing bankrupt homeowners to work out their mortgages under court protection, but at some later date. After more than a year of rising defaults and inexorable house-price declines, such relief is as central as direct aid to stabilizing the banks. The further house prices fall, the higher the default rate on banks’ mortgage-backed assets.

[terisan]

1. The foreclosure problem needed to be dealt with first. The failed banks need to

go through the appropriate legal process.


I found this paragraph indicates the New York times may finally realize that the accountability buck has to reach the president's desk:

The disconnected foreclosure aid is all the more disappointing coming a day after President Obama spoke at a town-hall meeting in Indiana and said that he supported allowing bankrupt homeowners to work out their mortgages under court protection, but at some later date. After more than a year of rising defaults and inexorable house-price declines, such relief is as central as direct aid to stabilizing the banks. The further house prices fall, the higher the default rate on banks’ mortgage-backed assets.