Tuesday, March 24, 2009

More on the Banking Plan

Apparently Joseph Stiglitz likes the Geithner plan even less than I do.
U.S. Treasury Secretary Timothy Geithner's plan to wipe up to US$1 trillion in bad debt off banks' balance sheets, unveiled on Monday, offered "perverse incentives", Stiglitz said.

The U.S. government is basically using the taxpayer to guarantee against downside risk on the value of these assets, while giving the upside, or potential profits, to private investors, he said.

"Quite frankly, this amounts to robbery of the American people. I don't think it's going to work because I think there'll be a lot of anger about putting the losses so much on the shoulder of the American taxpayer."

Those of us familiar with Stiglitz's characteristic understatement shouldn't be too surprised by the tone of the critique.

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