A Trillion Dollars for the Banks: How About a Second Opinion?

by Dean Baker

Treasury Secretary Timothy Geithner wants to have the government lend up to a trillion dollars to hedge funds, private equity, funds and the banks themselves to clear their books of toxic assets. The plan implies a substantial subsidy to the banks. It is likely to result in the disposal of these assets at far above market value, with the government picking up the losses.

As much as we all want to help out the Wall Street bankers in their hour of need, taxpayers may reasonably ask whether this is the best use of our money. After all, the $1 trillion that is being set aside for this latest TARP variation is equal to 300 million SCHIP kid years. Congress has had heated debates over sums that were a small fraction of this size. To give another useful measuring stick, the Geithner plan could fund 1 million of the Woodstock museums that were the main prop of Senator McCain's presidential campaign.