Paul Krugman:
What is in [the plan]:Megan McArdle:
1. Super-TALF: a big expansion of the Fed’s quantitative easing, with Treasury backing. I’m OK with that.
2. Private-public purchases of questionable assets; as I understand it, private investors would be the junior partners, so this is probably not a big giveaway (unless there’s huge public financing, in which case it amounts to ring-fencing after all). I also suspect it wouldn’t accomplish much, but no harm, no foul.
3. Stress test: everything depends on how this is actually implemented. What happens if, or more likely when, a major money center bank is stress-tested and found to have negative net worth? One possibility is that the auditors are told to come up with a different answer; that’s a big concern. The other is that the bank is effectively nationalized; as I read the language that could be achieved as part of the public capital injection.
So what is the plan? I really don’t know, at least based on what we’ve seen today. But maybe, maybe, it’s a Trojan horse that smuggles the right policy into place.
No details at all on the foreclosure program, and precious few beyond platitudes about the mechanisms for dealing with toxic assets. The only real new information is the amount: $1 trillion total, $500 billion to start. I don't envy Geithner his position. But he's known this was coming for months. I expected a little more than telling us that he wanted to spend a lot of money to help banks clean up their balance sheets. We knew that much already.Andrew Sullivan:
The lack of detail has spooked some. But isn't selling of bank stocks a good sign? I mean: the market has accepted that banks will face a reckoning. Which is what we need if we are to move beyond this.
...This is a process, and not a declaration. The stimulus package may not be perfect but it will surely help arrest a downward spiral in demand; the bank bailout will require pragmatic adjustment, just as we were forced into in the 1930s, but the goals are clear enough, and the means of accountability pretty open.
...This is a pragmatic president and people are hoping for total ideological clarity and swift, complete answers in the first few weeks. Well, when I say "people" I mean Washington. I get the sense that most Americans out there are ready to give him some time.
