from SLATE: >The New York Times and Wall Street Journal lead with details of the >administration's anticipated plan (sketched out by the Los Angeles Times on >Monday) for a $1 trillion public-private partnership designed to coax >investors to rescue troubled assets from banks. ...
>The administration's toxic asset disposal plan, officially debuting next week, >has three main elements (unavoidable jargon alert!): the Treasury brings a >handful of investment firms on board to raise private capital on a >dollar-for-dollar matching basis with federal money, the Federal Deposit >Insurance Corporation sets up and largely funds investment partnerships to buy >the assets at auction, and more money is funneled through the Federal >Reserve-managed Term Asset-Backed Secure Lending Facility. All that is >supposed to then free up banks to resume normal lending, but the Journal takes >a skeptical investor's-eye view, noting that banker types are smarting from >the AIG bonus backlash and leery of the administration's demonstrated tendency >to change the rules on bailout deals. The paper also lands heavily on Treasury >Secretary Tim Geithner, saying this plan may be his last, best chance to make >an impact on the crisis.< Bringing in private firms to provide funds that the government guarantees will be paid back with interest (in order to "leverage scarce government funds") is economically equivalent to borrowing money from them (or close to it). It's pretty much the same as issuing bonds. In terms of law or accounting, this may be so, but in terms of economics it is. These guarantees do not show up as government borrowing in the government budget or the national income accounts and thus do not add to the official government debt, but they are legal mandates on the government. It's like covert borrowing. The only difference from standard borrowing is that if the program is really successful, as I understand it, the lenders get a return above the guaranteed one. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
