Duude

America's New Stimulus Package: Looks Good, But Is It Enough?

Frankly, I don't believe any amount will be enough to stimulate the economy out of this recession. Its not that I'm that negative, its that this method of priming the pump just doesn't work. I believe in the free market economy. For the economy to work, any time near term, banks need to be in a position to lend. They aren't in a position to lend till they are not collapsing under the wait of bad asset investments they made previously. The first part of the tarp only provided them with enough to ward of the ratings agencies from downgrading them to a point where the downgrading would snowball into a loss of more capitalization thus breaking loan covenants and end facing bankruptcy. in a perfect world, we would hold fast to a strongest shall survive which helps cure the future of bank shenanigans. But we're now too deep. Nationalizing anymore than we have already isn't a perfect solution either because we know they'll only be coming back for more. Freeing these corporations of these bad assets sounds good but far too expensive and ripe with moral hazard. The best solution seems to be to drop mark to market for a set period of time, say 5 years. These banks now would have time enough to find liquidity for these assets. Additionally, the treasury would need to work aggressively in setting up markets for these assets. I really hate the idea of dropping mark to market but it might be the fastest and cheapest solution to the troubles that we face now.