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Journalism of Courage
American Treasury Secretary Timothy Geithner has finally revealed what his government intends to do to fix the problem of fear about toxic assets,a fear that has frozen credit and imperils much of the worlds economic activity. It has done that in two ways: banks are scared that if they write down,or more reasonably value,their dangerous assets,they might appear near-insolvent or at best have to raise fresh capital; and no investor will buy those assets at the current,higher prices. How to get out of this problem?
Obamas administration intends a public-private investment plan,whereby private investors put in a bit of money to a couple of funds,the government puts in a lot,and the funds buy toxic assets. The catch for taxpayers: the public money is non-recourse in other words,the government is guaranteeing the downside: it will bear the brunt of losses,not the private investors.
really are which means that it doesnt actually leach toxicity from the system,and whether taxpayers get any money back depends on exactly how risk-loving private
investors are. And,more to the point,surely any recovery plan that relies on a combination of a money managers correctly evaluating risk when their downsides are protected,b the government subsidising Wall Street profits,and c no discernible exit strategy if it goes wrong,should have been considered politically unsustainable. Barack Obama and his treasury secretary must either be very,very confident theyve got it right or very,very confused about what they can do.
