Geithner 5: A better solution

[bjmorris64]

You could have saved a whole bunch of time and edited all of the videos down to the 20 seconds of the last one. BTW. I really enjoy your take on things. Even those I don't agree with because I think your main objective is an honest and open society. Thank you.

[paulceltics]

thanks

[sleepyhead7391]

"in the last couple of videos, i've been dumping on the geithner plan"

[littlebluemagic]

This sorts of begs the question, what if the transparency really shows that that the banks really should fail. Is there a way to minimize the impact of all these large banks going bankrupt at once?

[yaimavol]

Here's what is missing in your calculation: fractional reserve derivatives. In other words, they took a mortgage worth 300K and sliced it into derivatives worth $ 1 million. This is the next shoe to drop. Pension funds have demanded more information about the derivatives they are holding, and banks either can't or won't tell them. This is the biggest financial fraud in history, and it is moving into it's 2nd phase of destruction.

[asbytec]

I actually like the Lone Star deal for a couple of reasons. First, it removed a distressed asset from the balance sheet and parked it in an affiliate of Lone Star. Second, The distressed asset was replaced by a loan asset of higher value on the original bank's books. Lastly, it left the government out of the mess to facilitate such deals with interest rates. This is free market capitalism fixing itself.

[matt92649]

Would you please make a video explains the Paulson plan that bailed out AIG 100 cent for the dollar by taxpayers money including all the toxic assets they have. Thank you.

[upliftspirits]

Until the thieves go to prison for stealing from the baby boomers; nothing will ever change. Until Congress pass laws against stealing no banker ceo will ever go to prison.

[caffeinephreak]

The toxic asset website is a nice idea but big software projects are notoriously over-budget and fail to get completed.

[mallikai2009]

Sal,

You are over simplifying the process of adding transparency to these complex securities. Why would a bank open its books to the govt. and provide essential information to add more transparency? Secondly, who the govt. can employ to do the meticulous job of auditing the assets and verifying the facts? What is the incentive for the auditor or the bank to embark on this plan?

The insolvent banks should go bankrupt or nationalized.

[Mediasia]

While I totally agree with you, Sal, on your way to solve this problem, I'm actually going to behave in my day trading like the person who lets those hedge funds have the free put. I think that politics and flimsy thinking are taking us that way anyway.

Transparently, I invested in five of the top ten troubled banks before this mass media hysteria about the legacy assets plan came into being, and my portfolio is only down .86%. That tells me all I need to know.

Good luck, sir. I applaud you!

[emilianopickett]

Please address the politics behind Geitner, the bank and hedge fund owners!!

[Lukeeeeo]

gr8 videos - please keep them coming sal!!!! i saw youon cn too, you were gr8

[elieone]

thank you so much

[hipbas]

To charliebrown1000, The whole problem is the systemic failure of the derivatives market and these fraudulant casino type financial instruments. As Warren Buffet called them, "Instruments of Mass Destruction". They need to be written-off and eliminated, not re-created. We need transparency and regulatory oversight . We need to repeal things like the Commodity Futures Modernization Act of 2000 that took away Government oversight and re-introduce a broader version of the Glass-Steagall Act .

[charlybrown1000]

sal,

I think that your idea would work if there were an opportunity for the assets to rise (fron whatever the price starts from). And they would rise depending on the Real state (real) demand and price.

But the problem is that RS prices wont grow because the mess have to end. And the mes wont get in orther till the prices of the (real) real State rise.

I think that a solution would be to create a whole new CDO market (not toxic) in the rest of the world that would help to give a fair price.

[hipbas]

The sad truth is that the people involved within the Treasury Department concocting these fraudulent schemes(Geithner, Summers, Volcker etc) know exactly what their doing, these are not incompetent people.Their corporate past represents total conflict of interest with their current positions. They are loyalists to the financial oligarchs. Unfortunately they do not serve the interests of the people and will leave them on the hook for trillions of dollars and for generations to come.

[ampelmaennchen72]

Hi Khan, as always, a great video but....

...don't you thing that the problem with letting these major banks go bankrupt (like they should) it would trigger an avalanche of CDS's which would totally bankrupt the whole financial system? 700 billion won't be able to cover that, because it's estimated that the CDS sector has become a multi-TRILLION Dollar industry.

[wmacorlando]

"The reality is that if these banks are bankrupt, then let them go bankrupt" I LOVE IT!

[anolmec]

khan...your plan considers toxic assets and how to rewrite the books in order to make the bank solvent. We are now hearing about legacy assets, which one might suspect to be loans used to build the plethora of empty strip malls, home depots, Lowes, etc. scattered about the place. In a slowing economy these legacy assets may (will)go toxic as well. So in your future presentations you may want to graphically depict the banks as a hole rather than a box. Actually a black hole would be best.

[dubbleplusgood]

@anolmec, you make want to look into what legacy assets are. Toxic assets was renamed to Legacy assets to make them sound better.

@sal, you need to go back on Rachel Maddow with this video and get this Geithner plan stopped. Excellent series, thank you.

[draggeddownthehole]

But the government seems to prefer writing blank checks to the banks than exposing their lies and doing what's good good for the country.

[collegeboy477]

They are not going to do this because it makes too much sense

[ampelmaennchen72]

Yup, you've summed it up very nicely!

They (= bankers and politicians) don't want transparency AND they would rather have the taxpayers pay for all the mess they have created AND try to make a few bucks if (!) the whole thing rebounds.

Of course it won't rebound (just as those MBS's and CDO's weren't a good investment in the first place), or at least not for the next 10-15 years, but hey, that mess is for future generations to sort out. :(

[anolmec]

I am begining to think the reason the toxic assets are so opaque is that for the most part they are worth 0. How would one ever calculate the vaulue of a synthetic CDO?

Geitner should be replace by Maddoff.....at least Madoff KNOWS how to run a ponzi. How many years did Bernie run an insolvent investment firm,,,,free bernie madoff

Your solution is brilliant. If implemented it would prove what you said at the very begining of this debacle...

SINCE DAY ONE FUND NEW BANKS

[personkid20]

even more interesting are really the solutions for the auto industry. thee is a great solution in which both canada the the states will not only benifit reatly, but also taxpayers, bond olders and equity holders....the real juicy tidbit is the most underrepresented and under valued segment that already have solutions for them, although not politicallyexpedient, it's a case cutting off the nose to spite the face concerning this administration, this solution is so obvious....take a guess(3 tries)

[personkid20]

that's the beauty of it within the etf all what it derives of will be listed as well as tradable volume, risk, etc....

even more appealing is the fact that like other etfs' options on them will provide additional liquidity as well as international exposire in which the international treasury holders will also have participitation and interest in them, thus not in a rush for "fear" holding treasuries....i.e. when skin in the game and risk is transparently securitized it helps

[personkid20]

also for the tax payer this will help reimberse them as long as no "creative" deratives(i.e. dark pools back room trading) presents itself....another upside are for those rebalancing 401k's and mutual funds who ma see upside potential. andde to the possibility ofstsabilizing the banks credit market stresses will promote growth and borrowing(which is more of a problem than lending).

this will also help some of the damage that was brought on by the monoline debacles

[personkid20]

why not package them as etf's in terms of risk and levels of default risk actualities and float them on the exchange

[khanacademy]

that would be perfect. They would still need to give some transparency as to what is in the toxic securities.

[mouljran7]

as usual..amazing video...

[lvecsey]

This is scary stuff, Khan. Not your solutions that is, but the stories on the financial networks about the "Mobster" mentality, with the idea of business people that show integrity on the front but really are deceitful on the back end.

[4rcane]

whats put options