The Question Geithner Refuses To Answer [View All]

[girl gone mad]

The Question Geithner Refuses To Answer
http://www.businessinsider.com/henry-blodget-the-elephant-in-the-bailout-room-2009-3">The Business Insider

Tim Geithner did a good job on the Sunday talk-show circuit. He has survived his near-death experience of two weeks ago, and the betting odds that he'll be ousted by June have fallen back to 10%.

But there's one question he still refuses to answer. Why is he bailing out the people who lent trillions of dollars to our now-insolvent banks?

Each of the bailed-out institutions has tens or hundreds of billions of dollars that could be used to cover losses before the taxpayer had to cough up a dime. And with the exception of Lehman Brothers (and, now, General Motors), these gigantic pools of money have been protected to the tune of 100 cents on the dollar.

Who are these people?

The bondholders.

In any fair world, the bondholders would lose everything before any taxpayer money was put on the line. Ever since Lehman Brothers, however, Tim Geithner & Co. have been so afraid of a Lehman-repeat that they refuse to even publicly discuss the possibility of making bondholders share the pain. Whenever anyone suggests this idea, moreover, Geithner & Co. immediately dismiss it by saying it would lead to another Lehman.

At best, this is wrong. At worst, it's disingenuous.

The folks who lent money to AIG, Citi, etc., knew exactly what risks they were taking. It's time to at least discuss the possibility that they should have to answer for this.