Geithner's Plan Is Dead
The toxic assets portion of Tim Geithner's Public Private Investment Program looks to be officially dead:
The Federal Deposit Insurance Corp. indefinitely postponed a central element of the Obama administration’s bank rescue plan Wednesday, acknowledging that it could not persuade enough banks to sell off their bad assets.
In a move that confirmed the suspicions of many analysts, the agency called off plans to start a $1 billion pilot program this month that was intended to help banks clean up their balance sheets and eventually sell off hundreds of billions of dollars worth of troubled mortgages and other loans.
Many banks have refused to sell their loans, in part because doing so would force them to mark down the value of those loans and book big losses. Even though the government was prepared to prop up prices by offering cheap financing to investors, the prices that banks were demanding have remained far higher than the prices that investors were willing to pay.
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...this is either a sign that all is right with the world or all is much worse than Geithner thought.
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If the toxic assets are still an anchor around the banks' neck, the banks will keep a freeze on lending, which will keep the recession lasting longer. If the banks bet that the value of the toxic assets will rise later and decided to hold onto them praying that their values rise, they banks will keep a freeze on lending, which will keep the recession lasting longer. We seem to be where we started in the first place.
Wonder what Geithner will try next?