Out of Desperation a Return to Capitalism

When All Else Fails Try the Private Sector

Out of desperation President Obama and Treasury Secretary Geithner have come to a bizarre full circle in their attempts to rescue the economy.  The plan unveiled today actually utilizes the private sector, hammered as they have been, all bankers are not idiots like government employees.  In desperation, in a last ditch effort,  team Obama may have some semblance of success since its new bail out program relies on giving banks the authority to buy toxic assets with loans from the government.  A free enterprise approach out of Obama, unbelievable!

We all know the first bank rescue plan was a major failure due to reliance on governments nationalizing approach with coupled with governments proclivity for incompetence.  Yes, it would be better for the banks to fail on their own and reorganize.  This Private-Public partnership plan is similar to what is happening now in the real estate market where entrepreneurs are purchasing homes in foreclosure from banks at auctions.  Auctions establish the market value of property, and this is what the Geithner plan is attempting to do with toxic securities.

The real problem with this program is that if asset values go down after  purchase, the bank investors can walk away from their debt, obviously if they go up go up, the investors and government profit.  The extent of investor participation on the down side is nil which leaves the taxpayers holding a bag of super toxic crap-assets.  At least someone with intelligence will be evaluating the value of the asset and has some financial stake in the process instead of a complete Nationalization of the Banking system as previously proposed.

With some semblance of private sector involvement even at just 3% investors are not going to throw good money away even if they are bidding on toxic garbage, private investors will do the due diligence necessary to find the gold nuggets in the bag.  These toxic assets like the foreclosed upon homes have value and there are teams of real estate investors now in the market place sucking these bargains up and turning them at a profit.  The same thing can be done with the foreclosed on mortgage assets.  Especially, when coupled with the trillion that Bernanke just recently put into the market place causing an immediate drop in the dollar’s value, the government will use inflation to make a profit.

Sure this is pure insanity, but with private sector involvement and free enterprise not government control, there is the first opportunity for success.  Other columnists like Krugman are knocking the plan, but from the perspective of the market place, for once the administration is using a plan that historically works.

When team Obama’s socialized welfare program gets underway America will never be as prosperous as we once were, we can always hope the Supreme Court will throw out some of his Marxist nonsense, and get back to a semblance of capitalism.