Are we going to get ripped off?

Geithner wants to give the BANKS a break (4.00 / 1)

Part of the problem with valuation and a public-private partnership is that it encourages a higher price since "we've" got the deep pockets.  Are we splitting the profits when they do materialize or will the private capital get all the profits and we get all the junk?  Just another of the unanswered questions.

I still believe that it would have been better (and would be better NOW) to have taken ALL the subprime ($600 billion or so) and "nationalized" it.  Fannie or Freddie could service it, we could reduce the interest rates, and make money on the good stuff (probably even convert a sizable amount to prime mortgages).  Then, declaring all the CDSs as paid off because they didn't default would unwind these "weapons of mass financial destruction."

If we're putting in literally trillions (between before and now), we could also nationalize the municipal bond and credit card markets as well.  If the banks don't want to handle it, then we take the good with the bad and make the profits that would come about while restoring "confidence" to the markets.  Later on, when things get back to "normal," we can sell pieces.

*full disclosure:  I have a subprime mortgage for less than 80% of my home's value that I am current on.

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by: Creed Pogue @ Wed Feb 11, 2009 at 21:11:28 PM UTC

"Got Kids Plan" Wins the Day (0.00 / 0)

Sorry for the shameless plug but I honestly think I called this one months ago.

I propose what Geithner's Toxic Asset Plan announcement and the precipitious drop in the market proves is that Trial Balloons in times of economic crisis are not comforting. Next time we will be sure to get the porige Juuuuuust Right!

Best regards.

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by: Got Kids @ Thu Feb 12, 2009 at 05:05:24 AM UTC

I Screwed Up! (0.00 / 0)

I screwed up my link but it is working properly now. Sorry for the inconvenience.

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by: Got Kids @ Thu Feb 12, 2009 at 15:31:38 PM UTC

[ Parent ]

actually (hate to bust your bubble) (0.00 / 0)

but the crux of the whole issue is whether buying the toxic assets is the way to go and for what price.

If you buy at the banks's valuation, then you are certainly overpaying with taxpayer dollars and avoiding any penalty for the banks.

If you buy at the market's valuation, then a lot of banks are going to be underwater.  It may be better to rip the scab off, but it is going to hurt.

If you "nationalize" a whole class of debt, then you do get the good with the "bad."  This is the model with the S&L crisis.

Simply putting capital in the banks (unless you have the will to put in rigorous conditions) doesn't get you very far.

None of these are perfect, but Obama deserves credit for moving forward.

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by: Creed Pogue @ Thu Feb 12, 2009 at 17:05:38 PM UTC

[ Parent ]

Correct me if I'm wrong (0.00 / 0)

But listing the debt on a separate exchange does not mean we buy them coming out of the barn. (I'll have to confirm this comports with the plan) We may need to buy the Truly Toxic assests, but again we will know who SOLD them and from whom to get our MONEY BACK.

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by: Got Kids @ Thu Feb 12, 2009 at 17:10:24 PM UTC

[ Parent ]

Shoot! (0.00 / 0)

Also, the founding father of Hedge Funds has already volunteerd (there is that curiuos word again) to "pull" the pools of securitizations apart.

Too bad his offer to serve has fallen on deaf ears.

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by: Got Kids @ Thu Feb 12, 2009 at 17:15:46 PM UTC

[ Parent ]

unless you can prove fraud (0.00 / 0)

which is VERY different from "a stupid deal that a fifth grader wouldn't have done" you aren't going to get any money back from anybody.

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by: Creed Pogue @ Thu Feb 12, 2009 at 18:34:43 PM UTC

[ Parent ]

The Devil is in the Code. (0.00 / 0)

The programs that processed mortgage applications and spit out the results in 30 min's or less is where I would start.

Don't be surprised if Bank of America, Ken Lewis, Countrywide Financial and Greg Mozilla is where we End.

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by: Got Kids @ Thu Feb 12, 2009 at 19:07:48 PM UTC

[ Parent ]

I'll ask the stupid question (0.00 / 0)

Exactly what conduct do you believe violated which federal statute?

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by: Creed Pogue @ Thu Feb 12, 2009 at 20:29:57 PM UTC

[ Parent ]