Friday, April 03, 2009

JUST A BIT MORE ON THIEVERY, OLIGARCHY, AND ALL THAT GOOD STUFF

Been working my booty off this week, so too tired to offer any thoughts of my own. Bringing corporate malfeasors to their knees (for justice, fun, and profit!) is a never-ending task. Nonetheless, Yves has a solid takedown of the Public-Private Boondoggle Of The Century, or whatever the hell they're calling the latest version of federal alphabet soup. Some highlights:
Despite bank and Administration smoke-blowing to the contrary, the problem with the so-called toxic assets on bank balance sheets is NOT that they cannot be priced, but that banks do not like the prices on offer from willing buyers. We have read anecdotes suggesting that the gap is as big as bank valuation 90-95 cents on the dollar versus market prices of 30 cents, but the typical example is bank holding price of 80 cents versus market of 30 cents. So let us repeat, the purpose of this program is NOT price discovery, and any claim along those lines is a lie. The purpose is to keep the banks from recognizing losses that already exist, by reversing them via unloading the paper at a fictitious high price and dumping the loss on the taxpayer.

* * *
The broader point is that private investors have higher return expectations than Uncle Sam, who is generally happy to get out whole (meaning you tell the public you took no loss, but it would be nice if the government recovered its cost of funding). Merely providing them with non-recourse debt is not sufficient if their investment is still expected to produce a loss. And given their high return expectations, it is more costly to subsidize their participation rather than have the government bear the full cost.

We now see the absurdity of this program and the Treasury's position. the program is by design a gimmie to the banks, who can dump their dodgy paper on to Uncle Sam. In fact, they are now pretty ham-handedly trying to game the system. And rather than condemning their actions, the Treasury is lamely trying to defend them.

* * *
The Treasury can and bloody well ought to rein in this kind of thing, but instead it will fob its duty to make sure the program works as promised (ie gets bad assets off the balance sheets of banks that NOW own them, as opposed to those who decide to load up on them for fun and profit). But no, they pretend this isn't a problem of due to their negligence. More important, it show very clearly that their first and only loyalties are to the banking industry. The public is a mere goose to be plucked.

* * *
[T]he very biggest lie is that this is merely "rearranging" the counters within the moneyed classes. This is massive dumping of losses from the investing class onto taxpayers, many of whom have little in the way of retirement savings. The costs the average taxpayer is absorbing is well in excess of what his bank related investments.

The dishonesty of this crowd is just breathtaking. The Bushies were blatantly high handed, while Team Obama prefers the Big Lie and assumes we are all too dumb to see through it.
Check out the whole piece, it's pretty short and easily understood. Sorry to be slack in offering my own thoughts, but as I said, I'm exhausted and I have to keep my grey matter ready to fire on the fraudsters who've already gotten into trouble. Lemme tell you, it's never been so damn rewarding being a securities law class action plaintiff attorney as it is now! Let me at 'em!

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4 Comments:

Blogger DED said...

I'm exhausted and I have to keep my grey matter ready to fire on the fraudsters who've already gotten into trouble. Lemme tell you, it's never been so damn rewarding being a securities law class action plaintiff attorney as it is now!

Assuming that isn't sarcasm, this is probably the first thing you've written in some time that offers this reader some measure of hope in this debacle.

If it is sarcasm, then I'll just go crawl back under my rock.

11:27 AM  
Blogger George said...

I want to vote for it not being sarcasm. Don't bust that bubble too, please.

1:23 PM  
Blogger Mike said...

No sarcasm, fellas. That's really what I do for a living.

It's a job, I'm not a crusader. But recently I've had cause to pause occasionally and realize that I'm truly getting to go after some of the bad guys.

If only we could sue Geithner, Bernanke, Paulson, Summers, Greenspan, Obama, Bush, Cheney, Frank . . .

7:28 PM  
Blogger hestika said...

This is wonderful news...

10:42 AM  

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