Why Obama’s new Tarp will fail to rescue the banks


	Why Obama’s new Tarp will fail to rescue the banks

JICWyllie

2-11-2009 8:21 AM

145 views

tags:

economy, financial markets, i-bailout, i-policy, i-risks

JICWyllie says:

The writer is a heavy-weight FT analyst. In simple terms, Obama's TARP policy falls between the two proverbial stools. Giving up the Fed's monopoly on currency, allowing for the blooming of new local, people's currencies is the answer, as it was during the last depression.

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<div style="margin: 12px 0px; font-family: arial; color: #333333; background: #ffffff; border: solid 4px #e5e5e5; width: 100%; clear: left;"><div class="CM_CTB_Content_Wrap" style="margin: 0px; padding: 0px;background-color: #ffffff;"><div style="border-bottom: solid 1px #dcdcdc; white-space: nowrap; margin-bottom: 8px; background-color: #eeeeee ;background-image: url(http://clipmarks.com/images/source-bg.gif); background-repeat: repeat-x; height: 24px; line-height: 24px; vertical-align: middle; padding-bottom: 4px; color: #666666; font-size: 10px;" ><a href="http://clipmarks.com/clip-to-blog/" title="see clips that are hot right now"><img src="http://content.clipmarks.com/blog_embed/34e0606a-3ad9-413e-82df-668619337af3/B29C7006-4ADB-4854-B050-4A9B13F84169/" alt="" width="19" height="19" border="0" style="vertical-align: middle; margin: 0px 4px; display: inline; border: none; float:none;" /></a>clipped from <a title="http://www.ft.com/cms/s/0/9ebea1b8-f794-11dd-81f7-000077b07658.html" href="http://www.ft.com/cms/s/0/9ebea1b8-f794-11dd-81f7-000077b07658.html" style="font-size: 11px;">www.ft.com</a></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.ft.com/cms/s/0/9ebea1b8-f794-11dd-81f7-000077b07658.html"><div align="center"><img src="http://content9.clipmarks.com/blog_cache/www.ft.com/img/FAC97FA3-627E-463F-87FF-A25561FE6EDC" alt="op" /></div></blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.ft.com/cms/s/0/9ebea1b8-f794-11dd-81f7-000077b07658.html">Has Barack Obama’s presidency already failed?</blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.ft.com/cms/s/0/9ebea1b8-f794-11dd-81f7-000077b07658.html">The banking programme seems to be yet another child of the failed interventions of the past one and a half years: optimistic and indecisive. If this “progeny of the troubled asset relief programme” fails, Mr Obama’s credibility will be ruined.</blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.ft.com/cms/s/0/9ebea1b8-f794-11dd-81f7-000077b07658.html"> a sizeable proportion of financial institutions are insolvent: their assets are, under plausible assumptions, worth less than their liabilities. </blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.ft.com/cms/s/0/9ebea1b8-f794-11dd-81f7-000077b07658.html">The new plan seems to make sense if and only if the principal problem is illiquidity.</blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.ft.com/cms/s/0/9ebea1b8-f794-11dd-81f7-000077b07658.html">The correct advice remains the one the US gave the Japanese and others during the 1990s: admit reality, restructure banks and, above all, slay zombie institutions at once.</blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.ft.com/cms/s/0/9ebea1b8-f794-11dd-81f7-000077b07658.html">Why then is the administration making what appears to be a blunder? It may be that it is hoping for the best.</blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.ft.com/cms/s/0/9ebea1b8-f794-11dd-81f7-000077b07658.html">Yet why does a new administration, confronting a huge crisis, not try to change the terms of debate? This timidity is depressing.</blockquote></div><div style="margin: 0px 6px 6px 4px;"><table style="font-size: 11px;border-spacing: 0px;padding: 0px;" cellpadding="0" cellspacing="0" width="100%"><tr><td style="background:transparent;border-width:0px;padding:0px;">&nbsp;</td><td align="right" style="background:transparent;border-width:0px;padding:0px;width:107px" width="107"><a href="http://clipmarks.com/share/B29C7006-4ADB-4854-B050-4A9B13F84169/blog/" title="blog or email this clip"><img src="http://content6.clipmarks.com/images/c2b-foot.png" border="0" alt="blog it" width="107" height="17" style="border-width:0px;padding:0px;margin:0px;" /></a></td></tr></table></div></div>

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