Thursday, March 26, 2009

Treasury Plan is Old Dog Attempting New Tricks, Duke Economist Says

The U.S. Treasury’s financial rescue plan presented today (Monday) does not differ significantly from a previous one announced in September by the Bush administration and shouldn’t be expected to perform much differently, says a Duke University economist.

“This is the same dog that didn’t hunt a few months ago, the last time it was proposed,” said Connel Fullenkamp, a Duke associate professor of the practice in economics.

“It's going to be a cherry-picking exercise for investors with ready cash,” Fullenkamp said. “This won’t really ease the crunch that much, but a lucky few will be able to buy the least-troubled assets at good prices and make a lot of money from them.”

The new plan aims to get private investors to partner with a new federal entity to buy up troubled assets from banks.

“What I'd really like to know from Treasury Secretary Geithner is what has changed in the financial markets that will make firms that were previously unwilling to make a market for these assets suddenly make a market now,” he said.

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