Geithner plan will create "AIG-style" compensation gains for some

Public outrage over AIG compensation is understandable, yet Treasury Secretary Tim Geithner’s public-private partnership approach to solving the banking sector’s “toxic asset problem” pretty much guarantees windfall profits to lots of people who are already very, very, wealthy.

Large private equity funds managed by some of the nation’s richest financiers are likely to participate in the Treasury’s plan to purchase assets with government (taxpayer) guarantees against losses. When these assets rise in price they will reap big gains and few among the general public will benefit.

So where is the outrage?

If Geithner insists on “fixing” the banking system using this approach, then the guarantees should be offered only to public and private pension funds and not hedge funds and private equity pools. At least that might help to repair some of the damage done to small investors whose savings, in part, reside in these vehicles.