How Is Geithner Attempting To Correct Mistakes Made By His Predecessor? Essay
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How is Geithner attempting to correct mistakes made by his predecessor?
When Timothy Geithner became heir to Treasury Secretary Henry Paulson in January 2009, he was not enviable: Paulson’s Troubled Assets Relief Program (TARP) failed and if there hadn’t been a change in government anyway, this would probably have cost Paulson his job. It was now the thankless task of the new Treasury Secretary to solve the financial crisis and the stocking cash flow between the banks. No easy job, if one think about the momentary situation in the Treasury: of the 15 key Treasury Department positions that require Senate confirmation, only one has been filled. Geithner was practically alone on the job, working night and day to cope with the worst economic downturn in decades and I do not think there is need to say that expectations were high. So all eyes were focused on him, when he presented his new plan yesterday. After working closely together with Paulson and Bernanke on TARP, it is no surprise that Geithner set the same main goal for the new program than the one they agreed on at TARP: the elimination of the toxic assets from the banks’ balance sheets. However, after Paulson’s plan did not work out, Geithner had to find other ways to achieve this goal.
The idea is simple: By buying the toxic assets from banks, the government wants to increase confidence in the financial market. People would start again to invest in banks, and banks were no longer afraid of lending money to each other. But who is so insane to invest in a market that struggles, and one does not know if the bank, in which they invest today, still exists tomorrow? Even Paulson’s great plan of pumping money in the market to support banks was not much of a help. In this way he lavished half of the 700 billion US dollars, the congress approved for bailing out the banks, without anyone knowing where the money had