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A few opinions on the Obama plan from numerous think tanks in the US.

Andres Martinez (New America): The markets are underwhelmed by Treasury Secretary Tim Geithner's plan. But the policy response to the nation's credit freeze and the need to "bail out" the overleveraged financial sector is precisely the kind of subject that gets our adrenaline flowing at think tanks. So what do we think? Any surprises here? Is the administration doing enough (or too much) to fix the problem? These aren't easy questions, and I'm still not entirely clear on the overriding narrative of Geithner's plan. I can explain the stimulus to my four-year-old son, but I'd be hard pressed to explain the financial rescue to him -- or anyone else.

Dan Mitchell (Cato Institute): Geithner's bailout proposal is very disappointing. The economy is in a ditch in large part because of misguided government intervention. The best option would be to allow markets to operate. Unfortunately, Geithner has decided to continue the failed Paulson policy of hindering markets. He wants to prop up bankrupt institutions. He wants to hinder the natural and necessary reallocation of resources out of weak sectors of the economy (in this case, housing and finance). And he wants to create a "public-private" enterprise that almost surely will be a vehicle for ongoing -- perhaps permanent -- interference in private markets.

John Irons (Economic Policy Institute): A couple interesting nuggets: I think the most intriguing part of the plan is the use of public-private partnerships to buy troubled assets. Looks like this may be an effort both to provide banks with capital support and to take various kinds of assets (including mortgage-backed securities) off the banks' books. Given that the private market does not think well of these assets, it's hard to predict what the treasury will have to do to lure private money back into the market -- and at what cost. I'm looking forward to seeing the details.

Andres Martinez (New America): I'm intrigued by your use of the word "intriguing" in characterizing the private-public partnership to buy up toxic assets. It would have been a lot tidier to create a government "bad bank" to cleanse the banks' balance sheets, no? Great if we taxpayers can lure private investors to invest in these toxic assets, but are we left with crippling uncertainty as we wait for that question to be answered?

Adam Posen (Peterson Institute for International Economics): Yes, we all want the toxic assets to be sold eventually to the private sector, and we all want the government directing bank loans as little as possible. Is it realistic, however, to think that bribing the private actors who currently cannot put a price on those assets to buy them, and giving more funding and guarantees to current bank management and shareholders, will lead to good results? Or is this a replay of Freddie/Fannie: gains go to the private interests, losses go to the taxpayers and the management plays with house money? The Japan and the U.S. Savings and Loan experiences suggest that's what will happen.

David John (Heritage Foundation): I agree about the public-private partnership. It will be very tricky to set up, and no matter what, will not have any real effect for some time. A guarantee (to limit the banks' ultimate losses) would be faster, easier, and make much more operational sense. My favorite part of Geithner's proposal is the idea of finally going into these $100-billion-plus asset banks and getting more information about their portfolios. That would provide a better basis for determining need than the emergency-based system used so far. However, explaining it to my child will be a challenge that I'll duck for now -- and mine is five!

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