Geithner’s Cherry Orchard

March/27/2009 23:25PM
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The only man who can fix the economy, a tax cheat, a liar who didn’t come clean on his part of the AIG bonus deal until caught red-handed, and a oratorically challenged speaker who can’t explain anything, went to congress this week to “hide the ball” again. Tim Geithner went to the woodshed ,so to speak. Except, it was all softballs, since the cross examiners were equally guilty of much of what they wanted to whip Geithner over. As they read their prepared questions, prepared by staff, it was apparent that few, if any, could have written the question, nor explain why the question was chosen. Nor, could few begin to understand the answer given to the question they didn’t write or understand. Is this a great country or what? It was once.

Let me try to explain the Geithner plan that sent the stock market up 500 points this week.

Let’s assume our government decided the cherry business was too big to fail in this country. So, the government bails out the cherry business. Now, we need to sort out the good orchards from the bad. So we invite in some investors. We say, put up your money and buy these orchards. If it’s a good deal you can have all the upside profit. If it’s a bad deal, we will buy back what you can’t sell for 94 cents on the dollar. What is likely to happen? Think about it. The investors will cherry pick the cherry orchards. In the package of trees they buy, there will be some big producers. They will sell those off and take the profits. When they get down to the dead trees and the marginal producers, they will give them back to the government. Not really to the government, but to you, the tax payer.

No one really knows how many good trees there are in all the orchards the government needs to sell. Experts say, not many. So, there is a good chance that all this will do is sell off the good trees and reward Geithner’s friends in Wall Street . You, the taxpayer, will be left holding orchards all over the country with trees that are dead or don’t produce. 

I had some experience in commercial real estate, selling retail properties. We forced buyers to buy a package, not cherry pick the best sites. If you wanted to buy 50 properties, you had to buy them all and assume the risk that you could make the dogs bark or sell them. No cherry picking. No returns. 

All the rejoicing over Geithner’s plan overlooks the obvious. We are going to cull out the winners and give them to fat cats who will return the dogs to us, the taxpayers. These will be assets that will need to be severely discounted and it will be harder to find investors who will take them once the non-toxic assets have been plucked out. 

Maybe this is how you handle things on Wall Street, but on Main Street if you wanted to sell residential real estate, the investor takes the risk, not the taxpayer. If it’s so bad you can’t get investors to do this, then you are either kidding yourself or you are once again rewarding your old friends on Wall Street at the expense of the taxpayer. 

And, before you sign up to try this deal make sure you have a few hundred million or you won’t qualify. The cherry business might not be so bad after all if you get to cherry pick the good stuff and walk away from the bad.

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