(2009-03-24) Geithner Pppip Announced

Tim Geithner's PPPIP (Treasury Department Public Private Partnership Investment Program) was announced (for Credit Crisis 2008).

Fred Wilson has a review by Jeff Minch (JLM), plus a reading list of reactions from others.

Umair Haque hates it. So does Joseph Stiglitz.

Apr9 update: Umair Haque is also not impressed by the tweak to let taxpayers invest in the private scheme. And concludes that Barack Obama (a) knows nothing about economics, and (b) lets himself be kept in a George W Bush-like bubble by Summers and Geithner.

Update: the FDIC is insuring the program! This sounds like FannieMae all over again! The plan hinges on the unique, and somewhat perverse, way the F.D.I.C. values the loans. It considers their value not as the total obligation, but as "contingent liabilities" - meaning what it expects it could possibly lose. As the F.D.I.C's charter dictates: "The corporation shall value any contingent liability at its expected cost to the corporation." So how much does the F.D.I.C. think it might lose? "We project no losses," Sheila Bair, the chairwoman, told me in an interview. Zero? Really? "Our accountants have signed off on no net losses," she said... In a letter to the financial industry last month seeking an assessment that could be as much as $27 billion, Ms. Bair wrote, "Without these assessments, the deposit insurance fund could become insolvent this year."