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It has been six weeks since Treasury Secretary Timothy Geithner announced the outline of his plan to reliquify the financial system by buying so-called toxic assets from major banks. Now come the details of his Public-Private Investment Program. It was the lead item on each of the three newscasts and the Story of the Day. Curiously all three networks treated the PPIP primarily as a political story rather than an economic one. They each led with their White House correspondent, using money reporters as follow-ups. For the second time this month, ABC took a road trip with Charles Gibson anchoring this time from Houston.

NBC's Savannah Guthrie explained that most of the capital to buy the banks' assets would come from the federal government: "To buy $100 in bad loans, private investors would put up $7; the government would match it; and the remaining $86 would be covered by a government-backed loan." The reason for private capital, she explained, is that "the private market helps ensure a more accurate price." Calling that statement an "explanation" is generous. It is more like an article of faith. Guthrie offered no evidence that the pricing mechanism of the financial markets is functioning efficiently at present.

Why is the Treasury Department offering such a big subsidy? ABC's Jake Tapper used the word "entice" as its approach to private equity firms and hedge funds. In all, Treasury's TARP fund is willing to pony up $100bn in capital with $1tr in loan guarantees coming from elsewhere in the federal system. CBS' Chip Reid depicted the White House as "desperately" needing the participation of private capital. Reid picked up on President Barack Obama's endorsement of Secretary Geithner on his own network's 60 Minutes. What if Geithner offered to resign? "I would say: 'Sorry Buddy, you have still got the job.'"


Andrew Tyndall 3/24/09 10:46:21 pm

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