The Geithner plan, the good and the bad.
Tim Geithner today was on Meet the Press selling to the public his plan to shore up the toxic assets and alleviate the bank's balance sheets. Right now the banks are crippled because they aer holding assets whose value nobody truly knows, some rough estimates suggest that the value of these mortgage based securities could be 50-70% lower than their original purchase price. At this point banks do not want to let go of these assets because they are partially hoping that prices will rebound and in part because they are waiting for government intervention. The latter is my speculative guess and their prudence certainly paid off given the Geithner plan. Tim's plan involves bringing in private moneys to offer them incentives to purchase these mortgage based securities. In other words, Tim thinks that private investors are going to use their own money to buy up assets whose true worth is impossible to evaluate at the moment. You are probably thinking, why would any private investo...