Should We Really Be Marking to Market?

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Kevin still likes the idea in general, but Joseph Stiglitz doesn’t like it when it’s applied to Timothy Geithner’s public-private investment plan:

Paying fair market values for the assets will not work. Only by overpaying for the assets will the banks be adequately recapitalized. But overpaying for the assets simply shifts the losses to the government. In other words, the Geithner plan works only if and when the taxpayer loses big time.

I get the sense Geithner knows this, too. Last week I was speaking with a Congressional staffer who said quite bluntly that the big problem with marking these assets to market was that there was no market for them. So Geithner had to create that market, and the only way to make it worthwhile for the banks and investors is to allow banks to overvalue those assets, even if the banks are unloading their worst, most risky ones. If the asset tanks, the bank—and perhaps the economy in the long run—still wins, the private investor loses a little, and the taxpayer loses big.

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Fact:

In-depth journalism that investigates the powerful takes real money and is so damn important right now.But it doesn’t take a Mother Jones investigation to know that billionaires and corporations will never fund the type of reporting (like they do politicians) we do that exists to help bring about change. Instead, our mission-driven journalism is made possible by people power, and has been for 46 years now since our founding as a non-profit.

In “TITLE TK” Monica Bauerlein writes about the perilous moment we’re in, and why it’s so important that we raise $325,000 by the time November’s midterms are decided so we can be ready to throw everything we have at the big issues facing the nation no matter what happens. Please help MoJo’s people-powered journalism with a donation today.

$400,000 to go!

payment methods

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