Terry --Believe it would have had better chance of working--had GW implemented it.
IMO the biggest hurdle it has now- is it needs privite investors to buy in--and what firm wants to partner up with a gov that is subject to tax the hell out of any profits they may make--even CNN questioning it--
http://ac360.blogs.cnn.com/2009/03/23/will-the-geithner-plan-work/
What we do know is that the Obama administration is offering extremely favorable terms to the potential investors. The government, as The New York Times reported this morning, would lend private investors nearly 95 percent of the money for an investment. (Here?s an irony: at the very moment we are trying to deleverage the economy, the government is now using the principle of leverage to revive it). Moreover, if the investment goes bad, the private investor is only on the hook for the small portion it put in originally ? not for the full amount of the purchase. Yes, the government will share in profits, but if the toxic assets go up sharply in value ? as the government hopes ? the private investor could make piles and piles of money.
Two questions immediately arise. The first is that raised by Paul Krugman, the Nobel-prize winning economist who has been slamming this plan unmercifully because he believes that Geithner has way too rosy a view of the underlying value of the assets. He thinks that investors, realizing that these assets aren?t really worth very much, won?t want to invest at the prices that the banks will insist on and the whole plan will ultimately fail. Instead, argues Krugman, the nation will waste incredibly valuable time on a flawed plan, allowing the economy to deteriorate still further, while instead we should be moving swiftly toward a government takeover of the banks, which he believes would stabilize the economy. We shall see who is right ? Geithner or Krugman.
But there is a second question lurking that really only the President and Congress can answer: that is, whether private investors can have confidence that if they do invest, the lynch mob mentality we saw last week in Washington won?t come and plague them in the future.
As the managing director of a major hedge fund told me recently, if this plan is good enough, our firm stands to make money. But then why should we invest if Washington is then going to get mad, take 90% of our profits from us retroactively and if I may be hauled up before Congress and vilified? Good question.
--regardless its a short term fix--its the debt that will be the dagger through the heart.Also alluded too area of buying our own debt--discussed earlier.
Judd Gregg had good interview on Fox last night--
http://www.foxnews.com/story/0,2933,510257,00.html
