Obama has described his plan for economic recovery as a stool with 3 legs. One of those legs is the banking system. And as we all know, the banking system will not be healthy until the “toxic assets” are purged from the system. Geithner’s plan for doing this was intentionally vague at first, but details are emerging.
More clarity came today, although the plan is far from complete. The crux of the plan is an embryonic “private-public partnership” that will buy the questionable mortgages (the “toxic assets”) from the bank.
Many commentators have been taking potshots at the plan, for good reason. Until the details are known and some reasonable consensus for success forms, Geithner is just whistling in the dark.
But, this story in the NY Times is hopeful. A group of investors have formed specifically to buy toxic assets.
(This group has) been buying up delinquent home mortgages that the government took over from other failed banks, sometimes for pennies on the dollar. They get a piece of what they can collect.
“It has been very successful – very strong…In fact, it’s off-the-charts good,” … even as the financial markets in New York were plunging.
So, the good news is that private entities are forming to do exactly what Geithner said they would, even without government assistance.
But, part of this story makes me somewhat ill. It turns out that this group has been formed by execs from Countrywide Financial. So, the same “entrepreneurs” who made themselves rich by getting us all into this mess are now figuring out how to make another fortune off our collective misfortune.
Who says crime does not pay?