Geithner’s Bank Fix Plan Is Plain Taxpayer Robbery

Columbia professor Joseph Stiglitz is the latest to dismiss the idea that Geithner’s banking fix is a “win-win-win.” Instead, he describes it as a “win-win-lose”: Banks win. Investors win. Taxpayers lose.

As I’ve previously discussed under the Geithner plan as under the earlier Paulson plan the real sticking point is the evaluation of the crappy bank assets that Geithner and I’m sure the bankers want to get off the bank’s books. The objective is to find a way to pass the largely worthless assets along to taxpayers without the taxpayers realizing that they have been once again been raped.

Geithner’s plan would accomplish this magical act by setting up an auction system whereby private investors would partner with the government and bid on the banks toxic probably nearly worthless assets. Investors would have to put up very little of their own capital, about 7.5%, and the government would provide the balance as well as provide guarantees that would protect the investors from substantial losses.

What is really going on here is that the Geithner plan would create an artificially high price for the crap assets as the investors would have very little of their own funds at risk and might take a flyer on the possibility that some day in some way the crap assets take on a shine and can be sold for more than they paid for them.

So who is the loser here? Why the American taxpayer, silly, yes again. As with the AIG funding disaster the “save the worthless insolvent banks” crowd, led by Tim Geithner, is saying that one day the taxpayer will make a profit on these deals. That will be the same day that elephants take over the skies.

As stated in the BusinessInsider “The Obama administration still claims to care about ideas, however–to weigh counter-arguments carefully every time it develops a policy decision. So now that not one but two Nobel prize-winning economists have come out in the pages of a liberal publication to condemn the administration’s plan as a gargantuan, disguised theft, will the administration finally at least explain why it thinks Messrs. Stiglitz and Paul Krugman are wrong?”

Joseph Stiglitz and Paul Krugman both say that the Geithner plan is just plain robbery. Once again under the guise of a bailout plan a back door operation will be put into operation that will transfer billions of taxpayer dollars to Wall Street and the favored big banks. Tim Geithner and President Obama should be careful.

At some point the public is going to catch on to all of this robbery and not wait for elections to make their displeasure known. The prospect of violence and civil disorder in America is growing with every bailout plan.