The administration unveiled a bank rescue plan yesterday that may cost more than $1 trillion and, according to one expert, ‘rob taxpayers.’
In an attempt to unfreeze the credit markets, the government has proposed using the $700 billion bank bailout to create the Public-Private Investment Program to help purchase ‘toxic’ assets, such as bad real estate loans and asset-backed securities weighing on banks’ balance sheets.
However, by the government’s own admission the program could eventually grow to as much as $1 trillion.
Today, Treasury Secretary Timothy Geithner and Fed Chairman Ben Bernanke appeared before the House Financial Services Committee and asked for greater regulatory authority over the financial system.
In response to the administration’s latest moves the Nobel Prize-winning economist Joseph Stiglitz said the plan will "rob American taxpayers" by exposing them to huge risk and is unlikely to work if the economy remains weak.
The plan is deeply flawed, he told Reuters at a conference in Hong Kong, and offers "perverse incentives" by potentially allowing a small number of private investors to profit while the taxpayers are unlikely to benefit.