Browsing the archives for the new york times tag.



Why the Geithner Plan is Bad

Bailout, Economic Policy, Economy

Adam

Nobel Prize winning economist Joseph Stiglitz provides a solid and down to earth description of what will take place with the Geithner Plan in his NY Times editorial.

Its a worthwhile read and should help bring some clarity to the situation that will unfold.

I thought about running through the scenario for myself, but decided a comparison to a mortgage would be ridiculous. $12,000 on a $138,000 mortgage is a lot stronger than banks were accepting a couple of years ago. So I want to stay away from that comparison. Instead, lets say I am in Vegas and there is a heavyweight fight with 50/50 (never would happen, but lets imagine). Sure, I’ll put money down and see if I can double my money. But, what if there was a way for me to triple my money? Well, yeah of course I’ll take that. Even better, I can triple my money without taking on more risk. I just have to take a huge no risk loan out.

So, I take the loan, put up my 8% share along with the 92% loan and bet. If I win I can pay back the loan and take my tripled winnings.  If I lose, I lose the money I put up and forget about that l ever took out that loan.

Tough break on the guy who loaned me that money. Now, enough with betting on boxing, I’m off to the black jack table where the odds are REALLY in my favor…

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