Hilson touted over Geithner

[koganbot]

While everyone's talking about the Keri Hilson album having leaked, it's worth noting that the administration's plan for fixing the financial system has also leaked. Early responses are less favorable to Geithner than to Hilson. I didn't understand the plan as reported by the NY Times, hence I don't have an informed opinion. Paul Krugman's reaction is despair (and more detailed despair). Yves Smith calls the plan an abortion and she also uses the words "crappy" (in regard to what will be bought under the terms of the plan) and "idiots" (the administration's perception or misperception of who constitutes the public). And this guy, who may not actually be an economist, puts concerns to music.

(The Hilson, by the way, is yet another interesting album (see Vanessa Hudgens', Ryan Leslie's, and The-Dream's) by someone with no presence or charisma as a singer. So far the bits of beauty and the mere gestures towards passion seem sufficient, somehow, or fairly likable half the time, anyway. Better than I'd expected, though my expectations were lower than some people's. See my reappraisal of "Turnin' Me On" here.)

EDIT: DeLong, on the other hand, seems fairly happy with it, unless I'm misreading his tone, which I may well be. Not that I understand his analysis either, obviously, but my guess is that some of you will, since he's laying things out pretty simply.

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[koganbot]

Joe Nocera (This Time, Geithner's Plan for Banks Makes Sense): "There is something called the leverage cycle," said John Geanakoplis, an economics professor at Yale. During the bubble, he continued, when the country was awash in debt, toxic assets rated AAA were leveraged at an outlandish 16-to-1 ratio. That leverage was the primary reason those assets made such big returns. Now we're in the opposite end of the cycle. There is no leverage at all available — yet without it, the return on these assets would simply be too small to make them interesting enough for investors to purchase. The only entity capable of injecting leverage in the system is the government.

...If the program works — that is, if the assets begin to make money for investors — it could draw more private lenders into the marketplace. Suddenly the market for these assets would become liquid again, and banks could mark the assets remaining on their books with some real confidence. Isn’t that what we want?

...

There are plenty of investors who would be happy to take bundles of, say, commercial real estate loans off the hands of the banks and work them out — but only if they can get them for a price that makes sense. Good money can be made both for the investors and for the government, which, lest we forget, will get 50 percent of the upside. But the banks are going to be extremely reluctant to give up those loans, because by doing so, they would have to acknowledge the losses on their books.

That is why it is so important that the F.D.I.C. is managing this program. However much banks may not want to sell into the program (and for all the government's insistence that the program is voluntary) it will be nearly impossible for a bank to resist the entreaties of its primary regulator. All indications are that Ms. Bair and her crew are going to use the program as a tool to force the banks to come clean on the health of their loans.