If they believe inflation is coming and rates are to shoot up, why not? They’re stuck between a rock and a hard place anyway and getting VIPs on their side will surely earn them some brownie points.

And when inflation hits, it’s usually the first ones with the money who win… they’ll definitely be the 1st ones with the money.

http://www.ft.com/cms/s/0/b3e99880-1991-11de-9d34-0000779fd2ac.html

Toxic assets plan a robbery: Stiglitz

25/03/2009

The US government plan to rid banks of toxic assets will rob American taxpayers by exposing them to too much risk and is unlikely to work as long as the economy remains weak, according to Nobel Prize-winning economist Joseph Stiglitz.
“The Geithner plan is very badly flawed,” Stiglitz said on the sidelines of a Credit Suisse Asian investment conference in Hong Kong yesterday.

US Treasury Secretary Timothy Geithner’s plan to wipe up to US$1 trillion (HK$7.8 trillion) in bad debt off banks’ balance sheets, unveiled on Monday, offered “perverse incentives,” Stiglitz said. Washington is basically using the taxpayer to guarantee against downside risk on the value of these assets, while giving the upside to private investors, he said.

“Quite frankly, this amounts to robbery of the American people. I don’t think it’s going to work because I think there’ll be a lot of anger about putting the losses so much on the shoulder of the American taxpayer.”

Even if the plan clears banks of massive toxic debt, worries about the economic outlook mean banks could still be unwilling to make fresh loans, while the prospect of a higher tax burden to pay for various government stimulus plans could further undermine US consumers, he said.

Some Republican lawmakers have also expressed concern over the incentives offered by the government, which could end up providing private investors with more than 90 percent of the funds to buy the troubled assets. But President Barack Obama has said the plan was critical to economic recovery.

Barclays Capital, meanwhile, says the success of the Geithner plan depends on a recovery in house prices.

For the plan to work, house prices need to stop declining, said Chotaro Morita

Until now.

Too bad for them that it has completely failed this time. Humpty Dumpty is in tatters. The global financial system is hopelessly insolvent, and I’m afraid that even the Fed and Treasury aren’t bigger than the universe.

Never liked the tune but I guess we’re all “Turnin japanese, We’re Turnin japanese”.
We’ll be bloggin about this shape-shiftin mess…and bloggin about our slew-footed ‘dollar-short’ response s, from 2007-2017. We’ll likely cycle thru a bunch of presidents too while we’re at it.

I keep hearing they are going to do a dutch auction, how much would that juice the market bidding this stuff all the way to this .80 + example.

The basic problem is that Tim wants to do the deal worse than the buyers or the sellers, it’s obvious to all and they’re going to take advantage of the US without remorse. The US has been weak since day #2 (Day #1 Paulson John Wayne’d us deeper into this mess).

The vultures have paid about 7%-30% for this kind of trash and the banks figure it’s worth 50-80% so Tim has to make up the difference in a convoluted enough way so the taxpayers don’t know that it’s Johnny Wadd behind them with his hands on their shoulders until it’s too late.

Read today where Lewis is being sued for deceiving board members/shareholders about ML acq.

Should prove interesting.

Yes, This would be a good name for a company from the Flinstone era. PimRock could be a neighboring town to Bedrock USA.

PPIP is a misnomer. We must do our patriotic duty and give it a more honorable name like we did with TARP.
Geithner’s Welfare for the Uber-Rich Scheme (GWUR) mightbe more appropiate