We've been hugely critical of Treasury Secretary Tim Geithner, who we feel sold out the taxpayer last fall in his haste to save Wall Street.
We also think Tim Geithner's approach to the financial crisis has been warped from the beginning. We hate his decision to protect bondholders to the tune of 100 cents on the dollar and "invest" taxpayer money via preferred stock instead of senior debt--because these decisions made taxpayers pay for the stupidity and recklessness of people who should have known better and deserved to be held accountable for their idiocy.
We were also appalled last week when we read the Tim Geithner was getting ready to tee up the third bailout of GMAC and that his new financial reform plan was going to be paid for with an after-the-fact fee assessed on surviving financial institutions (Why should they pay for a competitor's stupidity? And why does Tim Geithner think that, in the middle of a financial crisis, other institutions will have enough cash in the bank to bail their idiot competitors out?)
But all that said...
MOST of the ideas in Tim Geithner's financial reform plan are actually good. Here, they are summarized by Kid Dynamite, who met with Treasury officials last week:
1) The government has to have the ability to resolve failing firms, with losses absorbed not by the taxpayers, but by the unsecured creditors and equity holders.
YES YES YES!
2) Firms who cannot survive without government support must face the consequences of that failure. The government would facilitate the "orderly demise" of the failing firms, not ensure its survival.
YES!
3) Taxpayers must not be on the hook - the government will recoup losses by assessing fees on industry peers
YES...AND NO. The taxpayers should absolutely not be on the hook. But neither should less stupid firms who didn't get themselves in trouble.
With the exception of that last bit, we agree wholeheartedly. The most important parts of any reform should be:
That's it. That's all you have to do.
Here's hoping Tim actually gets it done.
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You want to fix the banking system? First, kill the casino.
Cash-For-Clunkers is just the start. The government is manipulating markets in EVERYTHING.
Why are manhole covers round? If you can't answer that, you can't work at Google.
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