Geithner Releases Public/Private Investment Partnership, Dow Soars 497

Feels like springtime in Obamaland today! Markets worldwide responded favorably to the Tim Geithner's Public/Private Investment Partnership to restore solvency in America's too-big-to-fail banks. But will his plan, in its author's words, get "our financial system back to the business of providing credit to working families and viable businesses, and help prevent future crises?" Here's a running list of responses PRO, CON and NEUTRAL

John Authers asks an underlieing question about bank solvency (3/23)

Bill Gross buys in (3/23 CNBC video)

Paul Krugman all but despairs over the Geithner plan (3/23)

Clive Crook asks Krugman to think twice (3/23)

Tim Geithner argues that his plan is "part of an overall strategy to resolve the crisis as quickly and effectively as possible at least cost to the taxpayer. " (3/23)

Yves Smith, riffing off a WSJ editorial, talks about Fed rescue plan exit strategies (3/23)

Mike Whitney protests the Geithner plan's 5%/95% public/private investor ratio (3/23)

Felix Salmon warns that the plan is yet another "thing-that-has-to-go right in order . . . to work." (3/23)

Wall Street Journal says the plan "isn't the worst idea the federal government has ever had" (3/24)

"NYT "Opinionator" quotes from five mainstream media takes on the plan (3/24)

NYT "Room For Debate" compares responses to the Geithner plan of Krugman, Simon Johnson, Brad DeLong, Mark Thoma (3/24)

Mike Hudson takes a broad 3,000 year view to today's financial crisis in this 10 minute video (2/20). Here's his indispensable 2006 Harper's cover story, "The New Road to Serfdom: an Illustrated Guide to the Coming Real Estate Collapse"

New York Times voices doubts about the Geithner plan (3/24)

Joseph Stiglitz says the plan robs the taxpayer (3/24)

Martin Wolf says an adequate rescue plan is still far away (3/24)

Czech President of the European Union calls the plan "A way to hell". Also, Financial Times (3/25)

Rick Santelli of CNBC asks protests "two years" of government neglect of Nouriel Roubini's warnings about dangers of government exacerbation/funding of the credit bubble. (Go to 7:30 of this 10 minute February Durable Goods Report (Alt. link: http://www.cnbc.com/id/15840232?video=1072009974&play=1. s ) (3/25)

London Economist sits on the fence (3/25)

Nouriel Roubini, "Dr. Doom," sees POSITIVES in the plan! (3/25)

Lee Brodie, of CNBC's Fast Money crew, says Geithner may have rescued America (3/25)

New York Post reporter Mark DeCambre says Geithner plan lets City and B of A "buy back laundered loans at lower rates" (3/25)

Yves Smith, finance blogger, approves Willem Buiter of F.T. taking "Fed and Treasury to Task" (3/26)

Steve Waldman, finance writer, critique New Yorker finance writer James Surowiecki (scroll down to 3/25)

Investor's Business Daily, citing Friedrich Hayek, warns against government (bureaucrat) control of the economy (3/27)

Nouriel Roubini in this 20 min. Bloomberg TV interview says the plan "won't stop bank nationalizations" (3/28)

Newsweek article says Treasury Secretary Geithner is "hitting his stride" (3/28)

Newsweek Cover Story says the White House is ignoring Paul Krugman's criticisms of the Geithner plan (3/28)

Jeffrey Sachs, Yale economist, asks "Will Geithner and Summers Succeed in Raiding the FDIC and Fed?"

Mike Whitney, finance writer, citing DeCambre, Sachs and Stiglitz says "the country will undergo the greatest period of bank consolidation in its 230 year history."

New York Times charges Congress with "bipartisan resistance to a thorough investigation of what caused the collapse" (3/29)

Richard Posner, U.C. Law and jurist, says the Geithner plan "will simplify the banks' balance sheets by removing assets of uncertain value and replacing them with cash (3/29)

Gary Becker, U.C economist and Nobelist, says "it is a strange program indeed where banks get subsidized in proportion to how many 'bad' assets they hold." (3/31)

Joseph Stiglitz, Nobelist, says government overleveraging replicates the bank overleveraging that caused the meltdown.(4/1)

Jonathan Weil , Bloomberg, "Obama Stakes His Fortunes on Failed Banksters" (4/9)

Mike Whitney examines the recent report on the Geithner bank rescue plan released by the Congressional Oversight Committee chaired by Elizabeth Warren.(4/11)

Jeff Cox at CNBC.com says "Flood of US Debt Threatens To 'Crowd Out' Other Borrowers" (4/13)

Financial Times Tarp investigator seeks evidence of book fiddling (4/13)

Nouriel Roubini coming on strong for the first time in several weeks, says "Testing the Stress Test Scenarios: Actual Macro Data Are Already Worse than the More Adverse Scenario for 2009 in the Stress Tests. So the Stress Tests Fail the Basic Criterion of Reality Check Even Before They Are Concluded" (4/13)

Elizabeth Warren, Harvard Professor and Chair of the Congressional Oversight Committee, is interviewed by John Daley at Comedy Central (4/15)

Simon Johnson, MIT economist and former chief economist for the International Monetary Fund, argues in the Atlantic Monthly that "the financial industry has effectively captured our government" and that "recovery will fail unless we break the financial oligarchy that is blocking essential reform" (5/09)

Geithner Testimony arguing for bank stability sparks Wall Street rally (4/21).

Finance Models for Long and Short Term Futures

Let's get down to it (as Donnie Hathaway says at the beginning of "Everything is Everything"). Let NO ONE say we aren't looking for the best answers to the toughest questions! Though this post isn't much at the moment, it will as time permits expand to include interesting answers to these questions from all corners. Civic media, after all, is a problem-solving media. Iremove ideological barriers and partisan walls - left|center|right - by seating ALL parties at the same table - call it the table of What's Best for America.

But I myself have a bias that should be obvious to readers. I beg my readers to correct it.

I feel that some experts (Paul Krugman, Nouriel Roubini, Charles R. Morris, Steve Waldman, Mike Hudson, Paul Kasriel, Mike Whitney and Jim Willie) coming from the left wing were RIGHT and that other experts (Larry Kudlow, Larry Summers, Glenn Becker, Robert Rubin, Ben Bernanke and Hank Paulson) coming from center or center-right were WRONG in their assessments of the health of Amercan and global economies in recent years. And when it comes to resolving the crisis, it seems that the guys who were wrong are closer to Barack Obama at the moment than the guys who correctly predicted the global meltdown two, three or even four years ago.

So this post and this site needs input from center and right ring orientations. Specifically, who from these orientations saw the credit crisis coming?

OK, here we go. The crisis is being resolved in two phases, short and long term. We are now in the midst of a short term triage to stabilize the economy. This will lead to some kind of long term cure to restore American and global economies to maximum health.

But there's a danger: that of stabilizing the economy today in ways that ensure future repetitions of the credit crisis. Perhaps there's no alternative to such crises: perhaps financial bubbles are inherent to the so-called virtuous and vicious phases of the business cycle, as economist Hyman Minsky argued. And perhaps none exists on the spectrum of economic options that runs from total communistic/socialistic state command economies on the far left to pure unregulated free-market consumer capitalism on the far right.

Is it necessary, then, or even possible, for professional economists and central planners to think outside the box of this spectrum? It certainly won't be easy, for this spectrum seems to have contained all economic thought since the days of David Ricardo, Adam Smith, Karl Marx, Friedrich Hayek, Joseph Schumpeter, John Maynard Keynes, Milton Friedman and of course Hyman Minsky.

SHORT TERM Getting out of the mess we're in now (weathering the storm). Stabilizing American and global economies and financial systems within the next 12 to 24 months. Getting existing credit systems to work (assuming they can work) even as Paulson, Bernanke and central bankers worldwide take extreme and untested steps to do so.

• A Path to Economic Recovery Column by Charles R Morris
• What Should Be Done? Link to a 30 min. audio presentation by James K. Galbraith
• Bernanke's plan to clean up banks
  
• Martin Wolf critiques the Obama Recovery Plan (1/14)
  

LONG TERM Designing sustainable economic futures for the United States and the world of which it is now an integral part (mastering the weather). Some of the more astute predicters of the global credit bubble argue that modern consumer capitalism is cracked beyond repair, and that something new must be invented. It means developing the production, trade, currency and governance mechanisms adequate to ensuring the functionality of these new systems.

• Economist Dean Baker proposes a tax on financial transactions (Bob Herbert op ed)
  

Hap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . py New Year!

This blog is the beginning of something. So are the four other civic media sites listed on the sidebar (I maintain the first two). Civic media, as I see it, is a dialogic and problem-solving use of media, not a kind of media. Its ongoing, problem-solving dialogs make citizens and government responsive and accountable to each other in defining and solving the problems (and maximizing the opportunities) confronting a community of any size: local, state, national and international.

Today a single problem confronts us all: the global financial crisis. Over at the sidebar you will find a library of 40 finance writers who throw light on it. Taken together, they show very clearly how the wizards of Wall Street made the world of finance go round and round for twenty years until last summer, when the entire system finally spun out of control, corrupted by Wall Street or overstressed by investor demand for higher yields.

Most of these 40 writers saw the spinout coming AT LEAST TWO YEARS before any of the Wall Street wizards - or most anyone in the central banks that manage (and manufacture) the world's money supply.

Not surprisingly, these writers have useful insights as to how the global financial crisis can best be resolved. Among the problem solvers are Jack Bogle (article and book), Charles R. Morris (articles and book) and the amazing Steve Waldman. (Additions to the library are welcome. Kevin Phillips? Joe Stiglitz? David Korten? Doug Henwood?)

I sell residential real estate for a living. The Realtors at my office are bright and honorable. In May of 2006 I showed them Mike Hudson's "The New Road to Serfdom: an Illustrated Guide to the Coming Real Estate Collapse" from Harper's Magazine (at Hudson's site, scroll down to find the title).

My fellow agents. I love 'em. But they just laughed.

How things have changed. Today the National Association of Realtors is talking about the bursting of the housing bubble and how real estate will get back on track. And not doing a very good a job of it, either. But let's not digress.

America's recovery from its deflating housing market and its deepening financial crisis calls for an unprecedented partnership of citizens and government (arms-length will do just fine.) And also (dare I say?) a similar partnership between people with money and people without.

A civic media can mediate these partnerships. Its problem-solving dialogs can convey ideas like those advanced in this library to all Americans, including the least educated. Its ongoing dialogs can give Americans the chance to talk back, for weeks and months on end, until the nation, newly informed, gives Presidential Obama the informed citizen input he needs in order to make decisions that serve the best interests of America and its people.

Does all this - a media that brings out the best in our democracy instead of the worst - sound odd or impossible? It should not. Didn't Barack Obama win the 2008 election by promising BOTH of these partnerships, or something very close to them? Doesn't America already have in place the interactive communications technologies needed to mediate these partnerships? And isn't the need for these partnerships entirely obvious? Had they been in place ten years ago, would an informed America have allowed Wall Street or uncreditworthy borrowers to put the nation and the world at risk as they have?

So these partnerships, then, are possible. Still, questions remain. Will President Obama keep his promise? Will America's print and electronic media do their part to keep citizens and government productively in touch with each other? And finally, will all Americans, rich and poor, do their part to advance these new partnerships as well?

2009 will likely give us the answers. It will be a very interesting year. Even more interesting than 2008. Think about it. For the first time in history, 300 million people are poised to think and act intelligently, as a people and as a nation, about a single problem that threatens its future and that of the rest of the world as well. Wow. The psychologist Jung talked about the collective unconscious. Here we are talking about a collective conscious, an informed and active public mind. Thomas Jefferson, Marshall McLuhan and W. Edwards Deming would be glad to be alive. Not to mention Gandhi and Martin Luther King. And Plato, who wrote dialogs. And Socrates, who never wrote, out of a mistrust of writing's ability to make foolish men appear to be wise. But perhaps not Aristotle, who wrote monologs, as if (like the quants of Wall Street) he possessed or owned the truth, which the Platonic Socrates spoke of entirely differently: as an ongoing search for something that lies ever beyond us all.

How will all this happen? Hey, it's already happening. And let us resolve here to do what we can to advance the civic dialogs that will help us weather the storm. With that,

Hap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . py New Year!

PS - I almost forgot: what should we talk about next here?