Tuesday, February 10, 2009

I want Henry Paulson back

I had grave misgivings over Geithner, even before he was revealed as a tax fraud. His dismal performance at the NY Fed would have led to decapitation during Ceaser's time. Today's kinder, gentler approach has shown nothing to recommend it so far.

He's been working on this issue now for over a year, and yet we have a "plan" which is either so hopelessly vague as to have no meaning at all, or is simply wrong. The Dow's down 4.6%, but remember, the markets also tanked before the Republicans voted down TARP 1, which they were blamed for, and they then passed, but then Paulson did something else, and the markets tanked some more. I have seen no apology to those who initially rejected TARP 1 for their wisdom and foresight.

"Too big to fail" is only a problem if the Government is unwilling to put the company in receivership, maintain operations, and wipe out shareholders and bond holders. It is not an operational problem, it's a problem of political will. There was no custodial receivership to support Lehman's counterparties when Paulson let that fail, which fueled the turmoil that followed. Sadly, the wrong lesson was learned and now all banks will be propped up indefinitely.

Paulson, for all his flaws (which were legion) was less of a soft touch that Geithner. He at least tried to wipe out equity and debt holders, even though he did not do it well. Geithner is simply shoveling money to Wall Street. A terrible pick by Obama.


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