Tuesday, March 10, 2009

Tim Geithner's Black Hole

The Washington Post echoes what I've been saying for months now, the cost to bailout the nations banks is about $2 Trillion. I do think however there might be some way to avoid such a large bailout. In addition, just sinking $2 Trillion into banks does nothing but bring their capital levels in line with solvency. It doesn't solve the problem The problem is housing. Imagine if Congress spoon fed the banks $2 Trillion and they did nothing in terms of reducing principal on mortgages? Its a possibility.

Any plan that fails to deal with the securitization of mortgages and putting them back together, writing down the principal and then moving on will be doomed to failure. There also has to be some regulation about securitization.

Scott Dauenhauer CFP, MSFP, AIF