Tuesday, February 24, 2009

What I Hope to Hear from President Obama and Secretary Geithner this Week

"Making the simple complicated is commonplace; making the complicated simple, awesomely simple, that’s creativity." — Charles Mingus

This week, President Obama and Treasury Secretary Tim Geithner will be speaking again on the state of the economy and financial crisis. Hopefully, this time they will provide some specific plans and solutions to address the issue. I'm tired of hearing about how difficult, complicated and complex the problem is and how it will take two, no maybe three Presidential terms to deliver the solution.

Personally, I think the solution is straightforward. People have acknowledged that the overwhelming issue is the holding of toxic mortgage securities by financial institutions. Take those securities off the books of financial institutions, make them healthy once again and let them get back to the business of lending money. So the answer is: The U.S. government should buy the toxic mortgage securities and hold them to maturity. This would bring a quick end to the financial crisis and restore confidence.

OK, it's not my great idea. The solution of buying toxic assets was the basis for getting approval for $700 billion of TARP funds. Somehow, none to the money was used to buy toxic assets, because it was too difficult to do. In the meantime, the toxic assets deteriorated further, bringing the economy to its knees, and requiring an additional $787 billion stimulus package. And still the government is not buying the toxic securities.

No one has said that the government buying toxic securities won't work. Everyone has said that it's too hard to do. I hope that President Obama and Secretary Geithner will decide to do what's needed, instead of continuing the rhetoric of complexity, doom and gloom.

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This is not financial or economic policy advice. Please consult a professional advisor.

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