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Politics : Formerly About Advanced Micro Devices
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To: Alighieri who wrote (465567)3/22/2009 11:49:28 AM
From: Road Walker  Read Replies (5) of 1573844
 
So the plan is riskless for private investors because, if it fails, the taxpayer guarantees the assets...and I suppose that if there was excessive risk to private investors, they would not participate. I am still trying to understand why he believes that the plan will fail. Wouldn't you have to have details on how these assets will be sured up to avoid having them default once more in private hands?

My thoughts on their priorities (thinking):

1. Make the banks balance sheets healthy; if that doesn't happen all is lost.
2. Bide time; hopefully if the banks are sound then capital will start moving again, and coupled with the stimulus the economy will revive. If that happens then base asset values will bottom and some will start to increase... and the 'toxic' assets will become more valuable (and we'll all start to get a bit more wealthy instead of a lot less wealthy).
3. Guarantees against third party loss are a lot better than the feds putting up the money themselves and exacerbating the deficit. The downside, if asset values continue to decline is the same... we're stuck holding the bag. But if the government nationalized these assets then (I think they think) it would compound the problem with a lower $ value and higher interest rates. They might not be able to sell the bonds to fund the bailout/stimulus.

IMHO it's very complex and dangerous... but the other options are also very dangerous. This is a middle ground between nationalization (throwing in the towel with all the political and economic ramifications) and doing nothing (and accepting a long deep recession or more probably a depression).

Who knows? There are no good choices. People can and will second guess all day long but it doesn't help. "My bad choice" is better than "your bad choice" is a dead end debate... nobody knows which "bad choice" will work out the best.
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