Monday, March 23, 2009

Toxic Asset Plans

Geithner announced the governments public/private plan to buy off toxic assets from banks, using private investors as a mechanism to figure out the "right" prices.

This post has a nice example of what the situation looks like, told as a story about a car dealership that has a number of lemons in its stock of cars.  I think it gets you the idea of what the problems and potential solutions are.

The upshot - there is no plan that can "fix" the financial system without putting taxpayer money at risk.  If you do not want any taxpayer money at risk, then you have to wait for the financial system to fix itself.  That's a legitimate position - but you might want to ask the Japanese how that worked out for them over the last 10-12 years.

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