This plan will produce big gains for banks that didn’t actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized.
Monday, 23 March 2009
There is a heated debate in the US blogosphere about whether Treasury Secretary Geithner's plan to, essentially, buy up toxic assets, is the best way forward to stabilise the banks (the alternative is roughly to guarantee bank debts). If you are to read one thing on this, it should be this article by Krugman which puts the issues over in a beautifully clear way. What he doesn't say in that post, but elsewhere in an earlier post however, is that the reason why he is so against the current plan to buy up the assets is that: