Alter on Target
EmailHearing that Newsweek columnist Jonathan Alter may be right in suggesting that Treasury is taking second look at the "Holmes Plan" for dealing with troubled banks.
Max Holmes is a hedge-fund manager from Connecticut who first outlined this plan in the New York Times in January. His plan is modeled on successful past bailouts of troubled regional banks.
The plan could be for America’s four mega-banks — Citigroup/Bank of America/JP Morgan/Wells Fargo – to each set up a "bad bank" for their toxic assets, which would have to be written off of the books of the "good bank" at December 2008 levels.
No final decision has been made.
But I’m wondering if this idea is gaining strength because hedge funds and other private investors aren’t ready to put enough cash into the "public-private partnership" approach that Geithner et al. appeared to have settled on last week.
–George Stephanopoulos
Santorum: Money Will Not Defeat Obama, Ideas Will 
Rick Santorum's Full Speech at CPAC 2012
Of course, private investors are not ready to step up and help buy toxic assets. Most of the “private investors” created the toxic assets to begin with. This is more trickle down economics under the guise of TARP. Force these banks to rewrite the bad mortgages with TARP funds. Then throw AIG in the pot and break them all up. Too big to fail is killing us.
Posted by: B. Bear | March 16, 2009, 7:17 pm 7:17 pm
I agree with the Holmes Plan. Take the toxic assets off the books.
Posted by: Jim Goyjer | March 16, 2009, 7:34 pm 7:34 pm
If only this could be done. If those mega TARP recipients had to write off all assets to Dec 08 levels, their capital would probably disappear.
A better solution: spin off banks into smaller subs – and have Feds – in a new agency – work off/sell/hold for an indeterminate time, the bad assets that are left. BTW, smaller banks mean the folks who built these edifices to ego won’t be able to immediately do the same things again….
Break ‘em up and increase competition in the financial world…one way to get the economy moving. But where will the sources of big campaign (commissions) come from? Hmmmm?
Posted by: Alton Cogert | March 16, 2009, 8:02 pm 8:02 pm
Perhaps McCain can answer why conservatives think tank organizations seem to have no interest in any collaborative efforts to effect change
Posted by: Doby Fleeman | March 16, 2009, 8:29 pm 8:29 pm
Why wouldn’t any private investor leap at the chance to by assets no one can establish a price for in a market no one knows the rules for. Doesn’t every investor want to take on totally unwarranted risk in the name of patriotism.
It reminds me of Romer saying Sunday that we should all go out and get loans and spend. In other words please resume the irresponsible behaviour we exhibited before this crisis.
Makes perfect sense to me. NOT.
Posted by: Terry Sams | March 16, 2009, 9:07 pm 9:07 pm
Is it just me, or does following the economic blueprint of a hedge fund superstar seem risky?
http://www.political-buzz.com
Posted by: Matt | March 16, 2009, 11:03 pm 11:03 pm
Interesting approach. Can I set up a “bad household” and dump my medical bills and mortgage payments then write them off? That would be a lot easier than having to cut my kids’ allowances out and skimp on groceries.
Posted by: Grace | March 17, 2009, 10:01 am 10:01 am
i’m not the smartest guy in the room but it seems to me this whole mess was brought on initially by the lenders who agreed to provide home loans to highly unqualified borrowers and then severely compounded by AIG through their credit default swaps with fanny and freddy and the mortgage industry.
Home values were over priced. People borrowed too much money to buy the over valued homes.
all of a sudden the real-estate market turned and you have people owing more money than their house is worth.
POOF! – all the money disappears and tax payers are left holding the bag
seems to me the logical place to start trying to re-stabilize our financial market is within the housing sector.
allow everyone to renegotiate their mortgage based on current home values and with reasonable non adjustable rates. Banks are going to lose money in the short term but we must right the ship if we are to move forward.
This is where the Government comes in. By creating a “bad bank” you in essence take a trillion dollars and make it disappear. It sucks but you have to do it if you want to reestablish the credibility of your financial system.
Well where did all the money come from and where did it all go?
seems to me that it never really existed in the first place as it was all based on inflated home values driven by and bad loans in a financial environment with little culpability and no regulation.
Posted by: Cason Gaither | March 17, 2009, 10:20 am 10:20 am
Paulson designed this ‘Ponzi’ scheme (TARP). We understand everyone wanting us to buy more stock in order to keep the market up…fix the system…then we’ll have ‘confidence’ to invest.
And that FIX is simple and oblivious, but everyone seems not to be addressing it directly…
- it’s ‘Corruption-Corruption-Corruption’.
ie. special interest groups, earmarks, lobbyist, elimination of rules and regulations, the financial sector having contributed over $5.2B to political campaigns, same people who got us in this mess are now tying to get us out (humanly impossible…they will, and have instead spent most of the time & money trying to cover-up the industry’s underlining behavior).
Corruption is the ‘root’ problem here…as it is everywhere. Until that gets fixed first…everything else is redundant…we’re just pouring $$$ into the abyss! Wall Street has always been Ponzi Street, and the Golden Rule always applies; ‘never invest $$$ you can’t afford to lose’.
Fix the ‘corruption’ – then we’ll have ‘confidence’.
The solution – ‘Transparency-Transparency-Transparency’.
How? Start now Restructuring (nationalize, fix, resell) all the zombie banks – the FIDC does this every day.
Posted by: vanron100 | March 18, 2009, 2:48 am 2:48 am
Now the troubled banks are in a hurry to reposses and foreclose! This way the troubled assets are off their books and in the so called “bad bank”! I think we should make the banks work through the deals with individuals and business! Every loan has a workout and should not be shoved off the books of creditors just so they can make their balance sheets look profitable!
Posted by: LN | March 18, 2009, 7:09 pm 7:09 pm
watch Simon Johnson, economist from MIT and former IMF chief economist interviewed on the banking crisis Feb 13, 2009…SCARY!
Cut and paste the link below (20 minutes) long:
“High noon: Geithner vs the american banking
http://www.pbs.org/moyers/journal/02132009/watch.html
The root of the banking-financial services crisis is the elephant in our ‘democratic’ room…..we are suffering from rule by an oligarchy, a few very powerful, rich and politically connected individuals….
Those posts above who suggest we take over the failed ‘too big to fail’ banks, fix/restructure/resell are exactly right. We need to update our antitrust laws as well…It’s been 100 years since Teddy Roosevelt busted the trusts like standard oil. It was the right thing to do, and what we need to demand our elected officials do today……without delay….or we’ll lose a decade like Japan did.
Posted by: mb65 | March 21, 2009, 5:53 pm 5:53 pm
I purchsed my home in Jan 2008 – and I lost my full-time job on Mar 27, 2008. My question is; Why aren’t I entitled to the $8,000 Tax Credit, that others are getting who purchase their homes in April, 2008? Why not give everyone who purchase their home in 2008, a Tax Credit for $8K? I have been surviving with several Part-time jobs I’ve been getting this year, but it is a struggle. Now I have pay IRS $1,000 because, I did not have them take taxes out of my unemployment distribution. Wall/Street and Banks get Bail-Out and Gratuties and I can’t get a TAX Break.
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