Not to start a food-fight with Duncan (I’ll probably see him later tonight and I don’t want to wrestle), but he didn’t address my points. I really made two points.
1. The Geithner Plan is going to buy up AAA (or formerly AAA) rated assets. So, that’s a subset of the total shitpile. While I acknowledged that the AAA-rating wasn’t worth a damn, it also means that we’re not auctioning off BBB-rated subprime crap that probably is truly worthless.
2. That one of the savviest investors in the mortgage-products business is already buying AAA-crap without all the government sweeteners because he thinks it is severely underpriced. (Of course, as SFHawkguy speculated, it could also be because he’s anticipating this government intervention that will jack up prices at least temporarily).
In response to these two points, Duncan insists:
…the issue is that they aren’t worth nearly as much as the financial institutions are pretending they’re worth.
In philosophy, that’s called begging the question. I’d like to see Duncan at least address the meat of my argument here.
That’s why this whole business is a no-win issue for Geithner (and Obama): at first (right now) the Outraged Ones are getting each other off howling that the taxpayer/private partners are scandalously overpaying . As soon as it becomes clear that is perhaps not so (say in two years time), the same Outraged Ones will get each other off howling that the private partners got a scandalously good deal. In fact, I may well underestimate both the joyful power of the circle-jerk and the collective capacity for cognitive dissonance: The Outraged Ones might well make these two diametrically opposed accusations together, and enjoy getting off twice as hard.
Kind of like Bush Libertarians …
“…the issue is that they aren’t worth nearly as much as the financial institutions are pretending they’re worth.”
Isn’t that one possible good outcome of this?
What I’m saying is this: One of the political(and I suppose legal) problems of taking over an institution that is claming solvency is that they claim their shit has more worth then it does. Maybe so, maybe not. No one knows for sure.
So, the gvt does stress tests according to mathmatical models. In addition, they have an auction.
If the shit is really as shitty as people claim it is, the banks will not want to participate because they will finally be forced to write down the loss on their books. The ruse is up for that institution and they are nationalized. If the shitpile isn’t as bad at another institution, they put up their shit and it sells below the banks stated value. They also have to write down their losses and the gvt also takes over that bank if they can’t make it based on finally getting a valuation for their best shit. Or, thirdly, they sell their shit and have a healthy enough balance that they can continue as a private, functioning, healthy bank.
In other words, I see this as possibly the Obama admin doing everything possible to find out the real worth of the banks in the most unambiguouse way possible so they can say, ‘hey we did everything we could, and this bank can not be returned to solvency, and i’m no freaking socialist but we have no choice but to take over this bank’.
Possible?
That certainly is a charitable explanation.
Treasury used an example of .84 on the dollar and evidently some banks are still valuing their book at .90-.95 on the dollar while the “free market” is much lower (funny how the not-socialists beg for government cheese to help the “free market” work correctly).
http://zerohedge.blogspot.com/2009/03/ridiculous-marks-of-toxic-assets.html
Another explanation is criminal. There is a fine line between unreasonable hope and fraud, but there is indeed a line. Maybe that’s why the results of these stress tests aren’t as transparent as promised. Maybe some people are better off pretending they don’t know how toxic this crap really is. But some of us will demand a line be enforced when we realize many trillions have already been spent on this (possibly criminal) enterprise of subsidizing Wall Street’s gambling losses. And now as the pain starts hitting more Americans for reals, all bets are off. For instance, the government has never bought such a dodgy asset before, right? It’s always bought more reliable assets on behalf of the American taxpayer. And we know there is a fine line between “buying” an asset and giving someone a gift–ask Ted Stevens. Making the financing and the subsidy more creative simply hides the fact that there is a government gift of money going on here. But really, are the players here walking a criminal line? I don’t know. And it gets complicated since it appears Obama and the other principals will be signing off on the scheme and I don’t know all the legal niceties. But I bet the brunt of any criminal investigation would fall on those actually engaging in the trading and not the political tokens from above that created the system. And, if I’m a politician trying to serve the people I find a prosecutor that will get to the bottom of it and push that line [special prosecutor Elliot Spitzer?].
And yet another explanation is that we have a fundamentally rotten political system wherein the players will go out of their way to put duct tape and bailing wire on this jalopy of an economy and sell it to us as a reliable vehicle. I’m starting to not trust these used car salesmen, you? Everyone is a huckster or a sucker as far as I can tell. And the real losers are the majority of Americans. They are the penultimate suckers.
Here’s the updated link: http://zerohedge.blogspot.com/2009/03/ridiculous-marks-of-toxic-assets-part-2.html
if you suppose that Geithner/Obama are under the control of or colluding with criminal financial interests, then don’t all plans reduce to covers for theft?
Why bother with the details?
I’m only bothering with the details because you not-socialists threw these details out there as a smokescreen to hide your true intent; you want to give trillions of dollars to bankers and are telling us it’s for our own good and that this lemon will be turned into lemonade someday.
As for discerning Obama’s intentions; that’s not high on my list right now. I know it will crush your fragile ego to be exposed to criticism of your Dear Leader but guess what; he appears to be Wall Street’s bitch.
But right now his motivations are irrelevant to me. He is simply the figurehead for a corrupted party. He’s a good politician and there’s still time for him to join his liberal brethren and sisters in standing up for the majority of Americans–or he can continue to serve the interests of Wall Street.
But arguments of the form plan X is a ripoff because its from Obama/Geither and they are bloodsucking corporate scum so of course the plan is a ripoff – lack a certain, I dunno, non-circularity.
Um, the original Bush plan was a ripoff and the second Bush plan was a ripoff and now Obama is coming out with a plan that is a ripoff.
I’m not the one that is responsible for submitting the same plan over and over: ripoff the American taxpayer and give it to the bankers. And in fact, a gun keeps getting put to my head and I keep hearing my conservative “friends” in the Democratic party telling me to hand the money over or else . . .
And I would never call Obama or Geithner “bloodsucking corporate scum”. I usually don’t go for the vampire imagery.
the plans are quite different.