Just in case you want more information than anyone could possibly want about Tim Geithner’s latest plan to save the banks from themselves, here is the Treasury Department’s official news release on the plan and Geithner’s op-ed in the WSJ. Paul Krugman at the NYT is spitting mad because it isn’t socialist enouogh, while Brad DeLong is a little more optimistic. I talked with Alan Reynolds at Cato, who said it is a bit less-worse than most of the previous efforts, which tanked the stock market. Peter Wallison at AEI, who had sounded the alarm about Fannie and Freddie for years, thinks he has a plan for pricing the er, “legacy” assets, while Alex Pollack recommends a genuinely independent quasi-corporation along the lines of the Depression-era Reconstruction Finance Corp.
Seems to me that taxpayers assume a lot of risk, especially if they’re guaranteeing the private-sector investors Geithner hopes to lure into this scheme. But short of letting a few bad banks fail, which would have been the way to handle it if the Bushies hadn’t panicked back in September, this might work, at least for a while. Of course we’ll have to see how many private investors want a piece of the action considering Congress’s proclivity, as shown in the bonus-tax legislation in the House last week, for changing the rules midway through the game.