These “toxic” assets are causing the banks being unable to lend money to Americans in need of funds for small business owners, college tuitions, car loans and anything else one might need to borrow money for.
“Toxic” assets are largely sub prime mortgage loans that are not going to be repaid as the homeowners cannot meet the payments or the value of the homes has dropped below the value of the mortgage and credit card debt that is also going unpaid because of high interest rates and the difficult circumstances most Americans finds themselves in due to the global economic crisis.
Treasury Secretary Tim Geithner has announced today a new plan whereby the government partners with big investors to buy these “toxic” assets and get them off the bank’s books and get money moving again to Main Street.
This is a plan that wants to use $500 billion to buy these “toxic” assets from struggling banks and have private investors also buy into this plan. The upside for these investors would be to get assets cheap while at the moment not yielding a high return but in time with the return of a good economy would pay off handsomely. It is as question of having the money to invest and the time to be patient until things turn around financially.
This would be a good deal for anyone as there are many good deals available both privately and on the stock market.
Wall Street and the stock market obviously endorse Geithner’s plan as the market is up almost 300 points this morning.
A lot of people are quite understandably outraged at the AIG bonuses and various other TARP recipients awarding themselves large bonuses for a job hardly well done. This culture of greed has to be stopped and the plan Geithner has put forward will monitor carefully where the funds are going and how they are being used.
The Financial Services Roundtable, a trade group for the nation’s largest financial institutions, has given important approval to Geithner’s plan and said “the plan will help strengthen the economy”.
Tim Geithner has the full support of President Obama as reiterated on 60 Minutes last night and if we just let this man do his job without yelling for his head so soon into the piece I think there is light at the end of the tunnel.