The economist Nouriel Rubini who predicted the current economic collapse co-wrote an op-ed with Matthew Richardson that praises Geithner's toxic asset plan.
This is how the article starts off:
For the economy to be viable, the financial system must be healthy. For this to occur, the system needs to be cleansed of its poorly performing loans and so-called toxic securities backed by loans. This way, once creditworthy institutions and individuals come to the market looking for capital to borrow, financial firms will be in a position to lend them money.
Secretary Timothy Geithner's new toxic asset plan is a serious step in the right direction in that it creates a public-private partnership to buy the troubled assets of financial firms - in other words, to do the necessary cleansing. Up until now, with all the government bailouts, the financial system has been barely treading water. With this plan, it will still be a hard swim, but, at least, there is a path to shore.
http://www.nydailynews.com/...
I am not an economist or an expert at banking. While I am certain there are risks in this plan, there is also a risk that doing nothing will result in a deep recession from frozen credit. We may find that indeed there are toxic banks rather than toxic assets as Paul Krugman says:
Perhaps, it's necessary to try the Geithner plan out to sort out what banks are truly toxic and which can get out of a rut by removing the toxic assets from their balance sheet. In short, I believe we need to have patience.