Mr. Geithner declined to provide any specific details or to address rising calls for the creation of a government institution to buy or guarantee the declining assets at several of the nation's largest banks. He discouraged speculation that the plan would include the nationalization of some banks.
"We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system," he said.
Shareholders will be rewarded, not punished. Because, you know, the government is now guaranteeing your stock investments and six figure salaries won't crash:
Moreover, as the excesses of Wall Street - from expensive corporate jets at Citigroup to huge bonuses and extravagant renovations at Merrill Lynch - ring through Capitol Hill, the idea of a large bailout that does not penalize shareholders and senior executives becomes a tough sell.
Most of the money will be used to purchase bad assets, aka the Shitpile (emphasis mine):
According to several Wall Street officials, senior administration members spent the weekend and the last few days reaching out to top bankers for their views on how a bad bank should be structured. Lawrence H. Summers, head of the White House's National Economic Council; Sheila C. Bair, the Federal Insurance Deposit Corporation chairwoman; and Mr. Geithner have been involved in the talks, the Wall Street officials said.
Federal policy makers are discussing how to use the second $350 billion portion of bailout funds. About $50 billion to $100 billion is expected to be allocated to stave off home foreclosures. That would leave up to $250 billion available for the banks, with the bulk going to buying troubled assets.
It's a bottomless well that makes the stimulus package quaint and cute (more in the extended entry):
On Wednesday, the head of the Congressional Budget Office told lawmakers that weakening banks would probably need hundreds of billions in additional funds beyond the Troubled Asset Relief Program, or TARP.
But administration officials believe that trillions of dollars more may be needed to buy the majority of bad assets from banks.
"The size of the problem is so large that no one knows if you just wiped out all the assets, how much it would cost," said Senator Charles E. Schumer, Democrat of New York and vice chairman of the Joint Economic Committee. He added that a number of officials estimate it may take up to $3 trillion to $4 trillion to buy the bad assets.
About the only ray of hope is that the plan is not final. Congress, which gave the money away, doesn't even know how it will be used:
Lawmakers have complained that the $350 billion already spent under TARP has failed to prevent institutions from continuing to decline. On Wednesday, several senior members of Congress, including Christopher J. Dodd, chairman of the Senate Banking Committee, and Barney Frank, chairman of the House Financial Services Committee, urged the administration to detail swiftly how it will run the assets program.
Banks about to go under because of bad assets should be nationalized by the government, and the stockholders wiped out. Once that is done, the banks should then resold to the private sector with vastly increased regulations. This is what we did in the 1980's during the S & L scandal, sans the increased regulation aspect. Instead, the Obama administration is moving toward bailing out the private stockholders by taking their own bad decisions off their hands with a quarter of a trillion in public money--possibly much more. We are close to using what little is left of our national wealth to take the losses off the hands of wealthy stockholders and bankers.
Please President Obama, don't do this. Don't hand our national wealth over to bank shareholders. Shareholders do not have a right to always make money. Further, the rest of us didn't cause this problem, and we deserve better.
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