Speaking of continuity with the Bush Administration, the Obama administration’s plan to buy toxic assets from banks will be back in the headlines tomorrow. It seems that details of how the plan will be implemented and who will participate in it will be announced tomorrow.
Charlie Gasparino at CNBC broke the news that the administration would have details on the plan tomorrow. Yesterday The Wall Street Journal reported how this much heralded “public private investment program” had lost steam, squeezed between the unwillingness of potential buyers to get into bed with a salary capping, cram-down happy administration and the hesitancy of the banks–freshly flush with new capital–to sell their assets at anywhere close to levels that would attract buyers.
The program was put forth early in the Obama administration, although it was largely just a more detailed of the initial concept behind the TARP. It’s been plagued by so many problems, including attempts by banks to game the system by using government money to buy assets from themselves, that it still hasn’t got off the ground.
But the real question we should be asking is not why this is taking so long but why is the problem still viewed as necessary? The entire point of the program was always either a secret recapitalization–injecting taxpayer money into banks by overpaying for assets–or an investor an attempt to make it easier for banks to raise capital by removing providing them with more plausible balance sheets. Now that so many banks have enjoyed success raising private capital, shouldn’t the whole thing be shelved?
Or is it just impossible to stop this train now that we’ve set off down the tracks?
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