Is Geithner Pandering to The Hedge Fundies?

[Dover]

Is Geithner trying to out-pander Paulson?
Feb 20th 2009 11:45AM by Peter Cohan


Treasury Secretary Hank Paulson made his bones pleasing his former colleagues on Wall Street by using a chunk of $350 billion taxpayers' TARP to pay $16 billion in bonuses to the bankers who got us into this mess. But let's face it, bankers only make tens of millions in bonuses. The really big bucks -- that is the annual earnings in excess of $1 billion -- go the the hedge fund and private equity runners. And that's where Paulson's replacement is upping the ante.

Rather than pandering to bankers who will now have their salaries capped at $500,000 if they take TARP money, Tim Geithner is going to make $1 trillion of taxpayer money available to those hedge fund honchos at the very pinnacle of the Wall Street food chain. To be fair, not all that $1 trillion will come from Treasury. In the initial phase, the Treasury will provide just $20 billion and the Fed will provide $180 billion -- but the Treasury could increase its commitment to $100 billion to allow the Fed to lend up to $1 trillion

What is Geithner proposing to do with that money? It will use the Term Asset-Backed Securities Loan Facility (TALF) to make loans to hedge funds and private equity funds which would then buy new asset-backed securities. To his credit, Geithner is trying to solve a problem here -- specifically the evaporation of the $1.6 trillion securitization industry which had financed about half of U.S borrowing. But in my estimation the securitization market should cease to exist -- which, given the virtual evaporation of demand -- is also the verdict of the "free market."...cont'd

http://www.bloggingstocks.com/2009/02/20/is-geithner-trying-to-out-pander-paulson/#continued

[MannyGoldstein]

1. Yes.

Marvelous.

[dixiegrrrrl]

2. That's what Denniger is saying.

http://market-ticker.denninger.net/archives/783-Obama-The-Market-Is-Issuing-You-A-WARNING.html