Geithner Plan Roundup

Phil Izzo:

Secondary Sources: Taxpayer Robbery, Corporate Taxes, Geithner Notes - Real Time Economics - WSJ: Taxpayer Robbery: Reuters reports that Joseph Stiglitz is very unhappy with the Geithner plan to buy troubled assets. “‘The Geithner plan is very badly flawed,’ Stiglitz told Reuters in an interview during a Credit Suisse Asian Investment Conference in Hong Kong. U.S. Treasury Secretary Timothy Geithner’s plan to wipe up to $1 trillion in bad debt off banks’ balance sheets, unveiled on Monday, offered “perverse incentives,” Stiglitz said. The U.S. government is basically using the taxpayer to guarantee against downside risk on the value of these assets, while giving the upside, or potential profits, to private investors, he said. ‘Quite frankly, this amounts to robbery of the American people. I don’t think it’s going to work because I think there’ll be a lot of anger about putting the losses so much on the shoulder of the American taxpayer.’” Separately, the New York Times has an interesting debate on the plan between Brad DeLong, Simon Johnson, Paul Krugman and Mark Thoma. Krugman is most critical, while DeLong is the most hopeful...

Jeffrey Frankel:

RGE - Reactions to Geithner’s Public-Private Investment Program: Many reactions to the plan that Secretary Tim Geithner announced today have been negative, both from the left and the right.  Paul Krugman is one, and he makes some good points.But the proposal has its defenders.  One is Brad DeLong, who also makes some good points.   The Geithner Plan is an improvement over the Paulson plan in that, when ”toxic assets,” now called “legacy assets,” are bought from the banks, their prices are set by private bidding (from hedge funds and private equity companies), rather than by an overworked Treasury official pulling a number out of the air and risking that the taxpayer grossly overpays for the assets.   It is true that we might end up with some form of temporary bank nationalization before we are done, but Alan Blinder  has pointed out some neglected counter-arguments to that course of action.My basic feeling is: let’s give the plan a chance.  I debated it on NPR’s On Point this morning...