When all you read is gloom, turn here for a much different perspective.

Monday, March 23, 2009

Expert Reactions to Geithner Plan: Net Positive

Yesterday you read one scenario for toxic asset appreciation over time. That would spell good news for big bank liquidity in the short term and good news for private investors and taxpayer equity gains in the long run.

You may have heard that not all economists agree on the efficacy of the plan. But there were surprisingly many positive comments on the the government's new roadmap:

From Mark Thoma in the Economist's View's article Which Bailout Plan is Best?, "I am willing to get behind this plan and to try to make it work. It wasn't my first choice... but like it or not this is the plan we are going with and the important thing now is to do the best that we can to try and make it work."

Scott Anderson, senior economist at Wells Fargo said, "My gut reaction is that this is an excellent plan. This plan will go a long way toward getting banks in better position to lend more aggressively and break the deleveraging feedback loop that is now in place."

From the Calculated Risk Blog (usually a quite negative read), "It is probably the best we can get in the current environment."

John Burns, real estate consultant, Irvine, "This plan is very smart. It will cause an economic rebound much sooner than would otherwise have occurred."

Jack Kyser, chief economist, Los Angeles County Economic Development Corp., "It should help get the [big] banks lending again, which is very important to our small-to-medium sized business community."

Mark Zandi of Moody's Economy.com, wrote in the Miami Herald that, "This plan has a good chance of success."

UC Berkeley's Brad DeLong wrote on his blog that the plan is a "positive step" that lets the government shoulder the risk. DeLong emphasizes that the US treasury is much more risk-tolerant than private firms.

John Gapper from The Financial Times offers, "Two cheers for Tim Geithner’s bad assets plan."

The plan to cleanse banks of toxic assets "has a good chance of succeeding," says A. Michael Spence, co-winner of the 2001 Nobel Prize in economics.

The plan obviously has its naysayers. And the mainstream media was parading them out yesterday. (You can read about them elsewhere). But it is quite interesting to note the overwhelming support to try to make this plan work -- even from many of the "perma gloomsters."

So with consumer confidence now spiking higher by the day, some additional good news on the housing market, and increased investor confidence in big bank future fundamentals, this first full week of spring just may be a positive precursor to a much warmer summer stock market.

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