The Geithner plan has now been leaked in detail. It’s exactly the plan that was widely analyzed — and found wanting — a couple of weeks ago. The zombie ideas have won.
The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system — that what we’re facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved.
To this end the plan proposes to create funds in which private investors put in a small amount of their own money, and in return get large, non-recourse loans from the taxpayer, with which to buy bad — I mean misunderstood — assets. This is supposed to lead to fair prices because the funds will engage in competitive bidding.
But it’s immediately obvious, if you think about it, that these funds will have skewed incentives. In effect, Treasury will be creating — deliberately! — the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem.
Or to put it another way, Treasury has decided that what we have is nothing but a confidence problem, which it proposes to cure by creating massive moral hazard.
This plan will produce big gains for banks that didn’t actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And I fear that when the plan fails, as it almost surely will, the administration will have shot its bolt: it won’t be able to come back to Congress for a plan that might actually work.
What an awful mess.
Sunday, March 22, 2009
Monday, March 9, 2009
Itzhak Winer, a 34-year-old Torah scribe turned Judaica seller, considered the item a nice find, but just one of the 30 or more Torahs he buys and sells in a year. From his Jerusalem dealer, he learned that the Torah had been owned by a family in Morocco and was in excellent condition.
“He knew that it’s old, but he didn’t really know — and neither did I — how special it was,” said Mr. Winer, who works out of his home in Willowbrook, Staten Island.
Curious about the item’s origins, Mr. Winer took it to a Lower East Side rabbi named Yitzchok Reisman, an expert in identifying antique Torahs, the scrolls containing the first five books of the Hebrew Scriptures.
Rabbi Reisman, born in 1938 in Flatbush, Brooklyn, found himself drawn as a teenager to the scribes who congregated on the Lower East Side. They shared their craft with him, passing down stories and lore of ancient scrolls.
Rabbi Reisman also became attracted to the buying and selling of Torahs.
“There were 400 congregations that were declining, closing up and selling off the Torahs and the assets,” he said. As Torahs from the Lower East Side migrated to the suburbs and across the continent, the sellers, he saw, “helped transfer the Torah scrolls on to the rest of America.”
Today, Rabbi Reisman restores Torahs using handmade ink and carved turkey feathers at his workshop on Grand Street. Heaps of wooden rollers and antique furniture obscure treasures like the gleaming copper case of a 300-year-old Yemenite Torah and an elaborately woven Torah cover from Iraq.
Rabbi Reisman quickly realized that Mr. Winer’s Torah was unique. The materials and calligraphic style identified it as Spanish, which meant that it was written before 1492, when the Jews were expelled from Spain. In addition, the strong swirls on the top of certain letters matched the style favored in kabbalah, the Jewish mystical movement.
“There are very, very few manuscripts and pieces of manuscripts that are older than the 1400s,” Rabbi Reisman said on a recent day in his ramshackle office as Mr. Winer looked on. And the kabbalistic flourishes, the rabbi added, make it “the only Spanish Torah known done in that way.”
These special markings are “like thorns that appear in certain letters that only show up in a small window of time,” Rabbi Reisman said.
“No!” Mr. Winer interrupted. “A few hundred years.”
“That’s a small window,” Rabbi Reisman retorted.
As they bickered gently over nearly every detail, the two men also said that their research suggested that the Torah was created between 1272 and 1302, and that it could be connected to a famous Spanish scribe, Shem-Tob ben Abraham ibn Gaon.But they did seem to agree on who should get the Torah. “We’re hoping to get somebody or some community or some organization that wants to preserve the Spanish kabbalistic tradition,” Mr. Winer said, “and it’s important to them to give it the respect it deserves.”