Monday, March 23, 2009

FAUXBAMA'S MONEY MAN UNVEILS HIS "PLAN" TODAY

So at some point today, Timmy "The Bagman" Geithner will roll out the "details" of the latest plan to shift trillions of dollars to the world's wealthiest and most powerful. You and I and our descendants are so generous.

By the end of the day, all the "specifics" will be available to make fun of, and folks who know a lot more than I do will have opined. Most of them -- and likely all of them who aren't beholden to The Insiders -- will rip the plan to shreds. Nevertheless, it won't surprise me if the market goes up. After all, this plan is for the benefit of the largest institutions; I suspect they'll be very pleased.

Anyhow, it looks like the basics of the plan will be a combination of Treasury and FDIC donations, low-interest loans, and guarantees for any private actor reckless/greedy/connected enough to step in and buy the worthless garbage that our government brokers the sale of. The key flaw is that the banks that own the garbage assets stay in business and receive money in exchange for their balance sheet bullshit. The other flaw is that if the garbage assets ever end up being worth anything, they'll be in private hands to a significant degree.

Our money. Our loans. Our guarantees. The bank's benefit: cleaned up balance sheets. The private "purchaser's" benefit: no-risk investments, whereby they at a steep discount for assets that they will own if the value goes up. Our benefit: not sure that's part of the plan.

And, of course, two other things to remember:

One, if no private buyer opts to buy this garbage, the government will end up buying all of it. That's another bailout. Explain to me the difference between giving money to a cancer victim, and buying the cancer and putting it inside of your own body.

Two, the Federal Reserve ultimately backs up the maneuverings of the Treasury and the FDIC, so this is another step in the direction of the complete destruction of the dollar through currency debasement. The end game is becoming clear: unless Fauxbama hears the mob coming with pitchforks and turns into the Obama that the American people and the world want, the Insiders will loot every penny they can get their hands on, and it won't stop until there's nothing left. When either the Treasury is completely insolvent and/or the dollar is so debased, so essentially valueless, that it ceases to be the world's reserve currency.

Whatever specifics Timmy gives us today, remember this: unless his "plan" involves the U.S. government taking complete control of the banks -- kicking their officers, directors, shareholders, and 99% of their creditors to the curb in the process -- it's yet another step in The Looting. So long as the banks remain in private hands, every dollar we give them is just another bailout.

Don't let Timmy's fancy alphabet soup program titles and disembling semantics get in the way of the facts. Ownership is ownership and bailouts are bailouts. Today's plan will be one but not the other.

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11 Comments:

Blogger Mr Furious said...

"At my signal... unleash hell."

Seriously. Geithner's plan needs to be met with maximum violence and volume. There needs to be a public and pundit outcry the likes of which Obama cannot ignore.

9:52 AM  
Blogger Mr Furious said...

Explain to me the difference between giving money to a cancer victim, and buying the cancer and putting it inside of your own body.

That'd be a pretty easy choice for me...

The other key flaw in this plan is the auction aspect. The whole problem with this mess is no one knows what anything is worth!

Banks will offer their worst garbage first, at a reserve that is certain to equal the price they paid for it—which is exponentially more than they are truly worth now. Geithner then treats any bidding that goes on above that as a feature, not a bug...

Bank purchases assets for, say, $100,000.

That toxic shit is now worth $13,000—if that.

Even if the bank offers asset to Timmy's auction with a reserve of half what they paid—$50,000—it's still more than three times what it's worth.

Somehow private investors bidding up this shit to $75,000 is supposed to "protect the taxpayer?" The taxpayer is on the hook for up to 97% of any potential loss, while the investor is in for a minimum of 20% of any gain.

The only way this plan isnt a complete rip-off is if Treasury sets the reserve—and sets it fucking low. Banks should be happy to get whatever they can to clear their books, and the government shouldn't be chipping in at all.

10:21 AM  
Blogger fridge said...

Fauxbama?

12:24 PM  
Blogger steves said...

Seriously. Geithner's plan needs to be met with maximum violence and volume.

I agree, but Obama seems unwilling to even consider firing Geithner. Did anyone catch the interview on 60 minutes? I came away with the impression that Geithner had the complete confidence of Obama. I realize that it wouldn't look good to be unsure, but c'mon. I seriously hope there is a plan B.

12:50 PM  
Anonymous Applesaucer said...

Here's what I think might make headlines down the road: banks who sell into this program will find a way to buy the same assets coming out.

They will transform a 100% risk position into a sliver of a risk position.

But they retain some upside. Moreover, it gives Wall St. something to do and a new way to make money..OFF OF THEIR OWN GARBAGE!

Plus, it seems to me that the Fed is offering loans against this kind of stuff as collateral, with a small haircut.

What this means is that Bank GS could sell this crap into the entity, buy it back from the entity utilizing a special purpose vehicle, bring the crap to the Fed and get a loan.

If the assets go bust, almost all of the risk is laid off with the entity and the Fed. If the assets actually appreciate, you get the upside just by going through this charade.

Already, you see stories leaking that the "populist" anger over AIG could imperil this program by scaring off private capital.

I suspect that this is positioning for the scam I outline above.

Anyone complaining about this will be accused of more "AIG populist muckraking."

No doubt I'm getting important details wrong; but I think the general scam I laid out will happen.

Applesaucer

12:52 PM  
Anonymous Applesaucer said...

"I seriously hope there is a plan B."

Here is my opinion Steves: do you remember the runnup to the Iraq War? The weapons inspections, Colin Powell's UN Testimony; the Security Council votes?

It was all a charade. Bush was going to take the US into Iraq, NO MATTER WHAT.

The situation is the same here: the plan is to divert as much money into bankster hands as possible until...well, I really don't know. We're broke? The dollar implodes?

I think Mike alluded to it.

Now I cheered Mike on yesterday, since it seems as if some of the media is on to this...if not wholly cognizant of the ultimate theme.

But since I have no other reason but to believe that Obama -- or as Mike so aptly names him, "Fauxbama" -- is the White House pointman on this plan, I really don't know how much hope there really is in debating this or that plan. It's all the same.

Applesaucer

1:08 PM  
Blogger steves said...

Applesaucer, I was afraid of that. If there is enough of a stink, do you think Obama could be "forced" to try a different route? What about the mid-term elections?

7:09 PM  
Blogger Edwardo said...

You are on the right track about the awfulness of this so called "public-private partnership" and the lethal effect on the currency, Mike, but you have the following backwards,

"Two, the Federal Reserve ultimately backs up the maneuverings of the Treasury and the FDIC, so this is another step in the direction of the complete destruction of the dollar through currency debasement. "

It is the Treasury, they who raise taxes and float bonds, that back up the Fed, not the other way around.

7:39 PM  
Blogger Agi said...

Change we can believe in.

9:57 PM  
Anonymous Applesaucer said...

I really don't know what would force Obama's hand, steves. He seems to be determined to protect the big banks' interests, whatever the consequence.

On the rare ocassion when it looks like the public is going hold his feet to the fire, Obama says how pissed he is and how he's gonna do something about it. And then he turns around and defangs any sort of legislation that attempts to do so.

Now, I'm not sure that this retroactive AIG bonus tax legislation was the best way to go about addressing the issue, but even if I had thought it was sound, I said to myself: the White House will torpedo this somehow. And that is precisely what they went about doing this past weekend.

So, like I said, I think that Obama is very beholden to Wall St. He'll try to appear angry with them in public, but he'll save their asses at the last second. Every time.

Applesaucer

10:23 PM  
Blogger Mike said...

Banks should be happy to get whatever they can to clear their books, and the government shouldn't be chipping in at all.

Exactly.

Fauxbama?

From Merriam-Webster on-line:

Faux
Pronunciation: \ˈfō\
Function: adjective
Etymology: French,false
Imitation, Ersatz

I think it's pretty clear. He promised change. he's delivering business as usual. He's a fake imitation of what he said he'd be.

It is the Treasury, they who raise taxes and float bonds, that back up the Fed, not the other way around.

I suspect we're getting hung up on semantics here. I meant merely that because all transactions, public and private, are conducted in dollars, so the Fed "backs up" everything. The debasement of the dollar affects everything.

I'm sure my terminology is imprecise if not outright wrong.

Change we can believe in.

Believe it.

6:21 AM  

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