Treasury Secretary Admits Being Wrong
Nov 12, 2008
Who would have seen it coming? The smart guy from Goldman Sachs was wrong? And he admits it?
It was, of course, an easy mistake to make. Who could have figured it out earlier? The author of the article says,
"Soon after he proposed the idea that the only way to save the financial system was to spend $700 billion in reverse auctions to buy toxic waste from financial institutions, I became convinced it would not work.
"Why? Because there was no way to put a solid price on those assets. If the Treasury bid more than they were worth to the bank, then the taxpayer would take a loss. [Go figure!] If the Treasury bid less than what the bank thought the assets were worth, then the bank would need to write off that loss against its capital. Since it would not be able to raise more capital, the bank would become a zombie."
I wonder how many brain cells it takes to come to those conclusions. Two or three, perhaps? It appears that the Treasury Secretary used all three of those brain cells in this case.