This one’s multiple choice, and before you take it you may want to read Tim Duy’s handy summary of the moves that Geithner is expected to make. “I can just see how this program evolved,” Duy writes at his Fed Watch blog. “Fed and Treasury officials meet with Wall Street titans looking for methods to unglue the financial system. The answer: Create programs that guarantee risk-free double digit returns for wealthy investors. In the meantime, I am trying to explain to aging Rotarians nearing retirement that they are simply screwed; the risk-free rate for them and the other 99.9 percent of the population is pushing at zero.”
Now for the quiz…
a) He’s very polite.
“With Congress wrangling over the details of the $800 billion-plus stimulus package, the Treasury Department said on Sunday that it would cede the political stage to those negotiations and delay until Tuesday the rollout of the Obama administration’s multibillion dollar plan to assist the nation’s troubled banking system.” (NYT)
b) Officials have yet to decide what they’re announcing.
“Still outstanding is the issue Geithner’s predecessor failed to address: the illiquid assets that have caused the credit freeze. Officials continue to consider a so-called bad bank to buy them, perhaps in cooperation with private investors, such as hedge funds and private equity. It’s unclear how big a role there’ll be for federal guarantees of securities that remain on banks’ balance sheets.” (Bloomberg)
c) The administration wants to get the stimulus package passed before it reveals the new bailout numbers.
“[G]et ready for some really horrifying bailout numbers. Goldman Sachs–not one to exaggerate the overall problem–recently estimated the total value of troubled U.S. bank assets to be $5.7 trillion. Hence, do not be surprised if the next stage of the bank bailout dwarfs the cost of the stimulus package. My guess is that’s reason the administration wants the stimulus bill approved before it fully unveils the price tag of the next bank bailout.” (Robert Reich’s Blog)