Gaming the Geithner Plan, a video tutorial

By Reuters Staff
March 28, 2009

The tutorial below is from Salman Khan.  It walks through one reason—outlined in OA’s pop quiz earlier this week—that the Geithner plan is such a disaster: because of the huge incentive it gives banks to buy their own assets in order to transfer the risk of further writedowns from themselves to taxpayers.

BTW, Khan Academy has literally hundreds of fascinating tutorials just like this one.  I highly recommend it.

One quibble: it’s FDIC, not the Federal Reserve, providing the non-recourse loans that make his example transaction possible.

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