http://www.alternet.org/workplace/126354/Economist James K. Galbraith told me that the government is simply in denial if it thinks it can ever recoup the losses it will inevitably take by paying insurance for those "toxic" assets. Instead of trying to sell them off in an attempt to hide the depth of the banks' losses, Galbraith says that the government should instead acknowledge that they are insolvent.
"If someone within the Government Accountability Office does their due diligence on these assets, they'll find that they're not marketable for a reason," he told me. "Many of these securities were backed by mortgages that had sloppy and inadequate documentation."
Another problem with Geithner's plan is that it leaves bank executives and shareholders relatively unscathed. If government dollars are used to prop up bad asset values and thus protect shareholders from being wiped out, then future banks will have more incentive to invest in risky assets, safe in the knowledge that the government will help pick up the tab and leave their executives intact when the next bubble pops.
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
