Dear Secretary of the Treasury Timothy Geithner,
It is my understanding that Team Obama has reached a crossroads. I recently came across an article laying out the key problem you good folks face in solving the banking conundrum.
"The problem comes down to how to deal with the banks' "toxic assets"--distressed mortgage bonds and mortgage-related derivatives, mostly--which have been festering on their balance sheets for nearly two years. Summers and Geithner favor letting the banks function on their own, pumping more money into them, and relieving them of their toxic assets. This is hard to do without rewarding shareholders and bank executives, overpaying for bad assets, and infuriating the public, but Geithner believes that he has found a way around these challenges. Under his proposal, the government will team up with hedge funds, buyout firms, and other Wall Street operators to buy the distressed mortgage assets. Meanwhile, about twenty big banks are being forced to undergo "stress tests," to see if they need more capital," New Yorker 3/16/09
It's a dilly of a financial pickle, that's for sure, Mr. Secretary. One that I fear will find you damned if you do, damned when you do, or damned if you don't. According to "Tim Geithner's Black Hole," we could be looking at another $2 trillion in taxpayer bucks.
Between you and I sir, people are really going to hate that idea.
The more expensive it gets, the less you'll have the people on your side.
Pardon my French, Mr. Geithner, but you're humped coming and going.
The way I see it, the banking big shots don't want the government taking them over, and it doesn't appear that you Team Obama folks are keen on becoming Citibank tellers anyway. Meanwhile, the vox populist populi is at a fever pitch screaming about the billionaire bailouts. Angry folks are practically calling for a public guillotining of a Wall St. fat cat or two. Ironically, and I'm just spitballing here, that bloody spectacle would do boffo business on pay-per-view and easily cover the next TARP giveaway...So c'mon down hedge fund managers and financial CEOs, you've won The Lottery, Shirley Jackson style!
In all seriousness, human sacrifice still feels like it's a year away, but the problem remains: The banking system needs fixing, but people don't trust that the bailouts are doing anything but costing us all money and propping up the corporate weasels who got us in this mess. Resentment is building. The system is crumbling. Trust in the free market is waning. And nobody has the answer on how to make it all better with a plan that satisfies everybody.
Mr. Geithner, I would like to offer a humble solution to our nation's banking crisis.
Mr. Secretary, please instruct the federal government--in partnership with hedge fund managers and forward-thinking investors--to relieve me of my toxic assets.
Let's face it. You gave the big lending institutions their shot; they blew it. Getting rid of my toxic assets is the just the type of bold American can-do action that helped us defeat Hitler, put a man on the moon, and conquer the Denny's Beer Barrel Pub Belly Buster Burger Challenge.
My plan is efficient and effective. Eliminating the toxic assets of each and every American citizen will jump-start the economy without handing over trillions to the bankers, in turn solving the bigger pictures woes, and turning you into a national monetary hero the likes of Alexander Hamilton. Mr. Geithner, follow my advice and you will become the next Treasury man to get his face on U.S. currency.
I understand your apprehension about diving in en masse, which is why I am offering myself up as the government's toxic asset guinea pig. I will be the stand-in for the silent majority to show that the skeletal structure of your plan can easily be scaled down to a one-to-one basis.
Right away, we'll cut down on wasteful spending. There is no need to "stress test" here. Let's just cut to the infusion of capital, shall we? The way I see it Mr. Geithner, there are five key components to relieve me of my toxic assets:
The Rent Reimbursement Program: A quick calculation of my New York City rent paid out over the last ten years is...carry the seven...$166,000. People used to scoff sir, but you know what I haven't heard in quite some time: You're wasting your money on rent. I feel that those among us who didn't purchase a home at inflated prices we couldn't afford should be rewarded for sensible fiscal discipline. Rents haven't dropped much in Manhattan, but you see I signed a long-term lease before the housing bubble burst and the city collapsed. I'm a renter, so it's not my fault. Right now, I can get a much better deal in Queens. I think a bailout of my lease is a great start; the remaining months are toxic. I figure I'll pro-rate 2007 and the first half of 2008, that seems only fair. I'm going to need the other 21 months up front though, U-Haul costs and whatnot. I think 20-cents on the dollar is reasonable, so say $10,000? Don't worry about the terms of the lease, Mr. Geithner. It's not like my landlord has the resources to go after the United States government. He won't even fix the washing machines.
The Credit Card Bailout: We all know credit cards are the next big debt-ridden shoe to drop. Personally, I think I'll have a softer landing if you simply pay mine off. I only owe in the low four-figures, so the asset isn't even all that toxic. Let's just call it a day at $5,000. Think of the economic upside, sir. Once that debt is wiped out, I will make sure and get my credit market moving again. I'm a little short on disposable income at the moment, so this will get me back to spending money patriotically and willy-nilly like in the glorious tax-free shopping months following 9/11.
The School Loan Reparation Program: Here's the thing about the student loan machine, Mr. Geithner. It's broken. In the decades following World War II, the basic principles of the system made it a winner. The federal government will help you pay for college, and then you reimburse them after getting settled with a solid decent-paying job. Not sure if you've heard, but solid decent-paying jobs no longer exist. And frankly, college is too expensive. I received a degree in professional writing, but right now, I'm strictly an amateur. I feel that the sheepskin isn't living up to its end of the bargain, so neither should I. This asset is a bit more poisonous, somewhere in the $50,000 neighborhood, but there is a silver lining Mr. Geithner. Treasury is only the hook for $500 a month, until 2018.
The March Madness Gambling Rebate Holiday: We won't be able to put this part of the plan into action...sweet sweet action...until Thursday March 19, start date for the round of 64 in the NCAA tournament. Normally, by this time of year, I've set aside at least a grand for various March Madness pools. And this year.... a measly $25 clams! Now, if the government were willing to subsidize my gaming dollars for a 50-50 split, then I would kick it up to $2,000, maybe even $4,000. The beauty is these assets won't end up being toxic; It's a lock that you'll be seeing a nice return, Mr. Geithner. Well, assuming Marquette rounds back into form and Jerel McNeal plays like the best all-around player in the country again. Whatever happens, isn't it worth the risk that the government get half my gambling winnings, even if it has to eat all of my losses? Yes it is, because did I mention my stone cold system? After 20 years of tweaking it, my TARP initiative is foolproof (that's Turnovers + Assists/Rebound % over Personal Fouls.)
The Freelance-Writer-Credit-Default Swap: This is the most complicated part of my proposal, a financial tool so abstruse that the best financial minds can't wrap their heads around it. Let me try to explain it in layman's analogy, "I will gladly pay you with an trifling humor piece on a serious economic crisis Tuesday, for a hamburger today."
Seriously Secretary Geithner, I'm starving.
I eagerly await your response.
Patrick J. Sauer