I don’t know how much we should expect government to protect people from themselves, but I do think government can and should provide enough oversite so that unscrupulous and just plain idiotic practices are discouraged.

This is an incredibly partisan approach to a situation that needs to be solved, not bickered over. The real reason that the plan wasn’t a hit yesterday is because it is written in language that is frustratingly vague … because the situation is frustratingly vague. When the administration delayed the announcement of the plan, the market assumed that they would release a plan that had structure and specifics … and it didn’t. It’s 6 1/2 pages to explain how the government intends to spend $1tn+ dollars (http://financialstability.gov/docs/fact-sheet.pdf). I think that’s the problem. We know that the big problem in the banks now is toxic assets. What we don’t know is how the government or the banks are going to identify or price them in order to take them off the books.

This is why TARP1 didn’t do what it was intended to do. First, how do you identify the toxic assets? The toxic loans are bundled with good loans, in surprisingly complicated derivatives that have passed through many hands since being created. None of these bundles are associated with real homeowners. Wall St isn’t looking at these derivatives and thinking to themselves: “Screw this family in Peoria, let’s have somebody foreclose on this house”.

Even if they can identify it, the next problem is figuring out how to price this stuff to take it off the books. Do you pay the 100% of the value of the toxic asset? Of course not, that would cost significantly more than the $500bn – 1tn. Do you pay 0%? Of course not, then the banks you are trying to save go bankrupt.

I don’t know what the answer is, but I do know that the proper question is not “how greedy is Wall St and how can we berate them more?”. We can play that game and ask those questions after disaster has been averted.

I understand the reluctance of many to make the government be ever more directly involved, as you allude to by rejecting nationalization. But one ongoing conundrum seems to be that banks that are stabilized with huge piles of fed cash seem reluctant to take on any new risk in the form of loans to consumers, which is what we need to get the econ rolling. They all seem more interested in buying up assets that they think are undervalued and letting someone else take on the risk of making loans. That’s a huge problem.

And if banks continue to be reluctant to place trust in new borrowers to get the economy rolling again, then they don’t deserve to be stablized, because they aren’t helping.

no one who has been paying attention trusts the lending process. Just which one of these umpteen forms am I signing that is going to result in my me losing my shirt in 18 months when some hidden half understood contract language jacks up my interest rate to 150 percent…when did the banks become loan sharks?

Ahh! 2 cups of ignorance and 3 tablespoons of paranoia. Just what we all need. Buying a home is the biggest investment most folks make, and anyone who goes into it without educating themselves on the entire process and having some sort of knowledgeable advisor on their side is a fool.

Like you Gerry, I have nothing but contempt for the folks who issued loans to people who lacked legitimate income to afford the amount they borrowed, especially if the loan was issued with conditions that were concealed. When I started to see stories about and ads for interest-only loans, and other loans with ballooning payment schedules, I got a bad feeling in my stomach. Because while I knew for sure you had to be naive and insane and foolish to agree to one, the fact of their growing prevalence was proof of an ample supply of crazy fools.

The exploitative practices of some lenders don’t let borrowers off the hook. It takes 2 to tango. Who borrows a quarter of a million dollars without making a serious and sustained effort to understand why and under what conditions the loan has been granted, and without being realistic about their ability to make the payments, instead of romantic and wishful? Seriously Gerry? Who?

The incontrovertible fact is that riskier loans are only granted under terms which allow lenders to enjoy higher profits for taking higher risks. Without that dynamic, people who are riskier to loan to don’t get any money.

We Americans all really ought to think long and hard about whether we believe home ownership is a right or a hard-earned privilege. Or at least where the balance must lie.

Banks will fail as we move into the future and the tax payer will be on the hook – not the fat cats. It’s Socialism for the very rich and Capitalism for everyone else. Let them fail I say, and put the money into re-mortgage funds at the local bank level. One of the often overlooked aspects of this drama is the fact that many/most of the smaller local banks are in pretty good shape. The large, multinational banks that lobbied hard for the repeal of the Glass-Spiegel act helped cause this, and they should be allowed to die by it along with their greedy and incompetent management structure. Geithner was chairman of the NY Federal Reserve, he knows how to fix this problem – I just wonder why he didn’t when he had the chance several years ago?

Geithner is at heart a Federal Reserve bench player who at his core believes in Milton Friedmanesque money supply manipulation.

A Treasury and Federal Reserve program where the US government chips in $1 and the Fed prints $9 out of thin air to finance consumer loans is inflationary and still doesn’t address the overwhelming problem of what consumers are feeling. It’s not just that they cannot get loans, it’s that no one feels comfortable taking out a loan. Not only is there too much uncertainty regarding the financial outlook on mainstreet, no one who has been paying attention trusts the lending process. Just which one of these umpteen forms am I signing that is going to result in my me losing my shirt in 18 months when some hidden half understood contract language jacks up my interest rate to 150 percent…when did the banks become loan sharks?

And then there is the toxic assets question…so Geithner proposes yet another new program, jointly run by the Treasury and the Federal Reserve, with financing from private investors, to buy up hard-to-sell assets to the tune of $250 billion to $500 billion. First, show me an investor who wants to buy up these bad assets,,,any takers? Heck no. And even if you could find investors who were willing, these are going to be high risk takers and these high risk takers are the guys who don’t have any money. The past 20 years of investing has been driven by paper assets–there wasn’t a lot of real wealth being created. When the stock market fell and the financial crisis hit over the last year all those paper assets dissolved into nothingness. Investors who delve in these kinds of things only play with house money–Geithner’s plan is asking them to play with their own. Won’t happen.

And even if you could find some suckers….er…I mean investors to take these bad assets off the hands of the banks and investment houses, there are no requirements that they make loans once the assets are gone…none.

Furthermore, even if there were, there has been no fallout other than Lehman Bros–the exact same idiots who got us into these problems are the same idiots we would be asking to get us out (and given Geithner’s history, he’s cut from the same cloth as these economic royalists).

We needed someone from outside the problem to take a look at things and come up with a better plan–this is just barely better than good old boy Hank Paulson’s 3-page memo.