There was an interesting illustration recently. It showed a burning building utterly consumed in flames. You can detect a bank's name on the burning edifice. Standing with fire hoses are the firemen with one little change. The hoses are not spouting water, they are spouting cash...
ZNET: The Geithner Plan: Billions More for Failed Banks
The main mechanism is a government guarantee that would allow investors to buy junk with a 12 to 1 leverage ratio, where they only risk the downside on their own investment, not the borrowed money.
Now these investors will have the opportunity to buy these assets with large subsidies from the government, allowing them to make substantial profits.
...recognizing that most of any potential loss will be born by the government. This route might prove especially attractive for one of the zombie banks, who would effectively have nothing to lose anyhow, since they are already bankrupt.
It is also worth noting that this is a situation that invites all manner of fraud since there are very large government subsidies that could be appropriated through clever schemes.
2 comments:
It's just another clever ruse to reward the same crowd that caused all this mess in the 1st place. When it comes up a crapper Obama will get egg on his face and and we'll watch as the failed banks fail anyway. Of course the managements will walk with billions , laughing all the way to their offshore or numbered Swiss bank account. It's really sad that Wall St. and the banks in essence own the political system. This is what Capitalism and politics has been reduced to in this country.
"It's just another clever ruse to reward the same crowd that caused all this mess in the 1st place." Couldn't agree more.
Yes I would agree that the same players are on Wall St and politics, although many stay out of politics because they make much more on Wall St.
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