Here We Go Again: Another U.S. Bad Bank Plan

Here we go again. (Sigh)

Another weekend, and another attempt by the authorities to bolster sentiment, restore confidence, and support equities. This time, it's the US bad bank plan. The authorities are so excited about this one that they made a special announcement over the weekend to tell us that...err...they are making an announcement today. Hurrah!

You can hardly blame the Federales, though. The market still bites at the holographic carrots offered up by the Fed and the Treasury; S&P futures have traded up more than 3% at one point this morning.

But if this program is going to make a important contribution towards solving the crisis, it will have to be a bit better than the hints that Geithner drops in today's WSJ. Heavy on platitudes and light on details, Macro Man can see nothing there to suggest that the PPIP will be any more successful than the TALF (after a 2.35% take-up, the latter has changed its name to "That's Another Laughable Failure").

One of the problems with Congress' excise tax solution to the AIG bonus scandal is that it renders the private sector a little, ahem, nervous about going in to partnership with the government. After all, what would stop the Feds from going after the profits that firms made in the PPIP (PIMCO, Blackrock, and GS excepted, natch)?

Perhaps Geithner may wish to ask Londoners how well their version of a Public-Private Partnership has worked, both financially and service wise. (Hint: it rhymes with "not very.")

So there you have it. The US Treasury has come up with a plan similar in spirit (or at least name) to one foisted upon London by the wretched "Red Ken" Livingstone. Why does Macro Man have the feeling that after this plan is launched, equities will tank and we'll all be saying "here we go again..."?

Comments

[CautiousInvestor]

We have been assured that Timmy is doing a great job but if he fails to deliver today he may need to start looking for a great job. The market is up and is discounting in ALL of the details.

2009 Mar 23 07:03 AM

[SJ42]

If the market rallies after this "announcement" or "revelation" by Timmy, I'll slap my mama.

2009 Mar 23 08:00 AM

[daniel3582]

Interestingly enough, this news has pushed SKF to it's support levels at right around $100/share. This will be a short-lived drop. Now would be a good time to load up on this stock and watch it rocket back to $200 like it has 4 times over the last year.

2009 Mar 23 08:02 AM

[J. D. Swampfox]

"holographic carrots" and "That's Another Laughable Failure"...you're on a roll Macro man.

New proposed MTM rules increase the spread between what banks are willing to take and what other investors are willing to pay...

While tending to narrow this spread, federal financing of private/public partnerships increases the risk that Congress will expropriate (er... tax) private profits from participation in the program...

What are the odds that someone will ask Timid Tim if he is going to resign as he makes the formal announcement about his new "program"?

2009 Mar 23 08:37 AM

[speculari]

Ahhh! Poor Tim! I still would not trust this "kid" with my car keys.

2009 Mar 23 08:57 AM

[prudentinvestor]

Poor taxpayers!


On Mar 23 08:57 AM speculari wrote:

> Ahhh! Poor Tim! I still would not trust this "kid" with my car keys.

2009 Mar 23 09:20 AM

[tunaman4u2]

Taxpayers are getting hit very hard 2 ends. Giving the banks all we got & pending inflation printing money to give more.
Wages will not go up enough to compensate for either taxes or inflation. Neither will job creation.
So in the long run (buy & hold)... Americans are worse off.

2009 Mar 23 09:28 AM

[trader1138]

United forever in friendship and labour,
Our mighty republics will ever endure.
The great Obamiet Union will live through the ages.
The dream of a people their fortress secure.

Long live our Obama Motherland, built by the people's mighty hand.
Long live our People, united and free.
Strong in our friendship tried by fire. Long may our crimson flag inspire,
Shining in glory for all men to see.
Through days dark and stormy where Great Bama led us
Our eyes saw the bright sun of freedom above
and Bama our Leader with faith in the People,
Inspired us to build up the land that we love.

Long live our Obama Motherland, built by the people's mighty hand.
Long live our People, united and free.
Strong in our friendship tried by fire. Long may our crimson flag inspire,
Shining in glory for all men to see.
We fought for the future, destroyed the invader,
and brought to our homeland the Laurels of Fame.
Our glory will live in the memory of nations
and all generations will honour her name.

Long live our Obama Motherland, built by the people's mighty hand.
Long live our People, united and free.
Strong in our friendship tried by fire. Long may our crimson flag inspire,
Shining in glory for all men to see.

2009 Mar 23 09:28 AM

[manya05]

Yes, the latest approach by the Administration and the Fed seems to be to appear upbeat and cheerlead their way out of it...just rah! rah! and keep the markets from tanking. Speaking of cheerleaders, maybe that is what Tim needs to do, just appoint a squad of cheerleaders to fill up all those empty positions at Treasury, Congress should go for that, pom-poms and mini-skirts is about their level.

2009 Mar 23 09:28 AM

[j_remington]

The markets are being squeezed. Nothing genuine about the bank bailout.

2009 Mar 23 10:02 AM

[Silk32]

This market is a mirage. The only thing keeping are announcements from the government - fed buying bonds which keep prices up and yields low, a good bank, bank plan, more goverment assistance to the financial sector, potential bail outs to the insurance industry. Government intervention has become like a drug but the fundamentals will not justify a market run up for a few more quarters. To learn more go to www.newyorkshockexchan.../

2009 Mar 23 10:02 AM

[TeresaE]

Until the 2005 banking laws are repealed, and a form of Glass-Steagall reinstated, all the money in the world (which is the administrations apparent intention) will not fix this mess.

We are throwing good money, after bad.

The banks are firing their best, paying, customers and all they will soon have left if government control and IOUs. But a select few will rape the system and line their vaults.

Jobs and policy change is what we need. Not more failed policies ON TOP of failed policies.

Congress needs to be fired for at least 6 months and maybe then we could start to see the mess our government creates.

Nah, they had nothing to do with the collapse and fraud to date. At least that it what they continue to espouse.

Good luck to us all.

2009 Mar 23 10:20 AM

[JCC]

On Mar 23 08:00 AM SJ42 wrote:

If the market rallies after this "announcement" or "revelation" by
Timmy, I'll slap my mama.
----------------------...
You had better start slapping, because the market is rallying big time!! HA HA

2009 Mar 23 10:24 AM

[pacman1947]

Macro Man,
Both you and most of us here agree that we are not receiving a good plan for fixing bad banks, but the reverse -- just another bad plan for fixing another bad banking practice using another trillion of our children's money.

Bring back Glass Steagall, you're right TeresaE!

Thanks for the article, Macro Man, you've made our day.

2009 Mar 23 11:23 AM

[Leftfield]

Suits get paid, make plans, get paid, change them, get paid, have meetings, get paid... During the years of ponzi runup they have been in their glory. Now they propose, dispose rapid-fire, tell us it would be worse otherwise.

Much pain is inevitable after decades of misallocation. Leaving good assets with the guilty, putting garbage to the taxpayers and hiring middlemen to run the black boxes doesn't eliminate the smell. The pain will really come after we've been completey wrung out.

2009 Mar 23 12:07 PM

[anarchist]

go easy on mama, it's not her fault.


On Mar 23 08:00 AM SJ42 wrote:

> If the market rallies after this "announcement" or "revelation" by
> Timmy, I'll slap my mama.

2009 Mar 23 12:25 PM

[anarchist]

trader1138 is that ditty taken from something once sung by the "youth for Hitler" groups? Motherland indeed.

2009 Mar 23 12:28 PM

[AndrewBaker]

The market rallys on a deal that says private individuals can partner the government on buying bad toxic assets, Wow, so we can spend our money, after taxes, on non-performing assets, and if they still don't perform, the government will cover a little of our loss by paying us back our own tax dollars. Something not right here, that's for sure. (Wonder if Madoff got in on the act somehow?)

2009 Mar 23 02:50 PM

[Stez]

This plan proves the old adage correct.

You can fool some of the people some of the time.
But it's better when you try to fool all of the people
all of the time.

2009 Mar 23 03:08 PM

[change is the only constant]

I am converted. This plan will make us have the Japan experience, not avoid it.

2009 Mar 25 08:05 PM