Geithner’s Flawed, but not Larcenous, Bailout Plan
Conn Carroll /
Commenting on Treasury Secretary Timothy Geithner’s latest bank bailout plan, Nobel Prize-winning economist Joseph Stiglitz told Reuters:
Quite frankly, this amounts to robbery of the American people. I don’t think it’s going to work because I think there’ll be a lot of anger about putting the losses so much on the shoulder of the American taxpayer.
We think “robbery” is a little strong of a word, but Geithner’s “Public-Private Investment Program” (PPIP) is definitely flawed. Heritage analyst James Gattuso details why:
- Risk of uncertainty transferred, not eliminated. The main goal of the program is to discover the market price of these assets and to restart the market in them. The plan does a better job at this than prior proposals, using bidding by private investors to determine sale prices. However, much of the valuation will be affected by the government participation and guarantees against losses. In effect, a major portion of the uncertainty as to value is shifted to the taxpayer rather than eliminated.