The US Government’s (Timothy Geithner’s) plan to structure a federally overseen “Bad Bank” is a terribly misguided notion. Taking toxic assets moving them from one place to another doesn’t change anything other than sustaining the careers of corrupt and greedy executives with $1400 wastepaper baskets.

The same goes with the GM bailout. I think Toyota would have been more than happy to swoop in and buy up the remaining assets in Detroit and turn that city around from wasting away completely. Its been a multi-decade slide that hasn’t been derailed, and now its just going to take another 1 or 2 years longer. But I digress…

Back to the Bad Bank issue. This is a shell game of epic proportions. Moving assets from one place to another does not negate their existence. It simply prolongs the lives of those companies that created those assets (or, liabilities these days). The Bad Bank will not allow banks to create liquidity that will liberate the markets. The bursting of the credit bubble can only result in massive and permanent de-leveraging that we may never see again. The securitization markets essentially fueled the credit bubble by allowing toxic assets to be created and trade in the markets. Since there is no appetite for these types of risks or products any longer, we will never see the same availability of credit again.

So what’s the point in wasting taxpayer’s money on a scheme that doesn’t change anything? Come on Timmy, you can do better than that hairbrained idea.