Obama Plan Seeks Buyers for High-Risk Assets
I actually hope this isn't as bad a plan as I (and Atrios, and Paul Krugman and numerous other economic bloggers -- Brad DeLong is in a distinct minority here) think it is. I really do, because the alternative is too upsetting to contemplate:
WASHINGTON — The Obama administration formally presented the latest step in its financial rescue package on Monday, an attempt to draw private investors into partnership with a new federal entity that could eventually buy up to $1 trillion in troubled assets that are weighing down the nation’s banks and clogging up the credit markets.
At least partly in anticipation of the program, which has been widely publicized, Asian and European markets were sharply higher. Index futures on Wall Street were also significantly higher.
Initially, a new Public-Private Investment Program will provide financing for $500 billion in purchasing power to buy those troubled or toxic assets — which the government refers to more diplomatically as legacy assets — with the potential of expanding later to as much as $1 trillion, according to a fact sheet issued by the Treasury Department.
At the core of the financing package will be $75 billion to $100 billion in capital from the existing financial bailout known as TARP, the Troubled Assets Relief Program, along with the share provided by private investors, which the government hopes will come to 5 percent or more. By leveraging this program through the Federal Deposit Insurance Corporation and the Federal Reserve, huge amounts of bad loans can be acquired.
The private investors would be subsidized, but could stand to lose their investments, while the taxpayers could share in prospective profits as the assets are eventually sold, the Treasury said. The administration said that it expected participation from pension funds to insurance companies and other long-term investors.
At least Obama's confident in it. For whatever that proves to be worth.
I haven't scoured the details of this plan, and I'm all for anything to right the ship, but it seems to me that the purchase of mortgages en masse is what precipitated this mess in the first place.
This isn't like the consumer collections industry, where agencies buy debt for pennies on the dollar, and cajole/plead/harass the debtors into payment. Frankly, it seems to me that the federal government's first order of business should be to identify and secure the bad debt, keeping it from further contaminating any institutions. Why you would want to market this debt, where we (must) assume investors are willing to take the same kinds of (dumb) risks that landed us in the dilemma, seems odd to me.
It might make sense short-term to get these assets off the government's books, but it seems that we're just spreading the problem around, and perhaps laying the foundation for another wave of financial institution failures. I'd rather it in one pile, where we can see it, analyze it, and address it.
The problem isn't whether the debt is good or bad necessarily. The problem is what is it being valued at? If bad debt is being valued as good debt, that's a disaster. But if it's valued at some reasonable rate, then you don't have a problem.
The real question is - do you think that the housing market will go up or down? If it goes up, then we still lose, but we lose less. If it goes down, then yes, you still have a problem, but theoretically it won't create a crisis if there's transparency, and people KNOW what it's worth.
Step right up and drop your risk on the taxpayers!
I'll buy some of those mortgages. but I only want these ones:
1. loans that are at least $500k, no money down interest only loans given to hebephrenic crackheads who were signed up by greedy post adolescent loan officers who were playing Halo in their mommy's basement 5 years ago.
2. loans that are at least $500k 1% for 5 years, then lock into 24% for 30, and were sold to illiterate unemployed denizens of the most dire ghettos by sharks working for exurban Randian douchebags.
3. loans that are at least $500k, zero down, no payments for three years, but jump to 25% for 20 years and were sold to broken down unemployed alkies lying in pools of someone else's vomit and were sold by some greasy dumbass from Perth Amboy NJ sporting a fauxhawk and smells like a mix of AX body spray and poo.
I'll give you $10 for each loan like the above. sounds fair to me...
It's called the American Dream because you have to be asleep to believe it.
-George Carlin
I don't understand this (twists of the twists of the world of theft and chicks for free), but doesn't this mean debt sold for pennies on the dollar go to aggressive collections against the jobless and downsized?
Is this not another turn-around and slam vulnerable americans?
Isn't this what is really happening or am I wrong?
n/t
No, I don't think so. If a debt is bought for pennies on the dollar, then the buyer is in a position to restructure the loan massively downwards and still make a profit. He doesn't profit if he restructures the loan that the debtor can't pay and is left with a property he can't sell. On the other hand, if the debt stays in the hands of a bank who'e massively overvalued it in order to fudge their books and look solvent when they're not, then they're not in a position to restructure, but will be more likely to turn to a collections agency.
Is this not the plan that has been thrown down the well, drowned, burned after drying, mass spectrometered to find the true components, shelved, ignored, revived, terminated and now being propped up as something new in recombinant DNA progress?
This plan is one that will kill 95% of us folks. We pay for their losses. We gain nothing according to the plan. It is spelled out quite clearly that there is no gain for the taxpayer at all. And to protect hedge funds? They are worse than insurance companies. Insurance companies worry when there are disasters because they have to pay up. Hedge funds don't pay off for anything. They are the rich's gamble that everything will be screwed and so let's hedge our bet and buy this piece of crap because it just can't go bad.
It is gambling with a rigged wheel, in a bought town, with a sheriff that is on the take in a paranormal state. And we are forced to put our money down?
No thanks.
You're in, whether you like it or not...
Just who gets these sweetheart deals? Tons of cash, that doesn't need to be repaid, that will be run through the same swindle machines that got us here in the first place?
C'mon. Are we really that stupid?
Corruption favors the wealthy.
n/t
yeppers aplenty!
the problem for financial institutions isn't the assets they own, it's the liabilities (CDS) they have, which are incredibly larger.
The Obama-Geithner plan to deal with "legacy" assets does not touch the liabilities.
IOW, waste of taxpayer money.
Thanks. Mr. President.
n/t
It turns out the word "Change" does not mean what Mr. Obama thinks it means...
http://www.democracynow.org/2009/3/23/the_zom...
It's not a pretty picture, this Zombie Idea of Geitner's based on the Bush plan, and aimed at preserving a rotten system. They're trying to find the easy way out.
This is not it.
me-oww!
...is that much "simpler, cheaper" solutions were still possible as recently as last October, but the Bush Administration, already with half a foot out the door, was unwilling to start any major program their last days in office.
* There are two types of Republicans: millionaires and suckers.
"Mugsy's Rap Sheet": Recording history for those who seek to rewrite it.
Obama is peeling back his mask to reveal something green, scaley and cold blooded. Him and hims friends are turning the dogs loose on us.
I miss Aaron Russo so bad.
getting out of hands-in-our-pants big banks (until they figure a way into banks like the following temp alternative to the mattress):
http://commongoodbank.com/different.html
Although I'd like to ask them what guarantee we have to keep the gov't out of their business and ours. Trust nothing but yourself.
weren't you guys just scolding Rick Santelli for saying the exact same thing, just a few weeks ago?
I have NO DESIRE to pay off, a bunch of "losers" mortgages. or credit card debt. I got my own damn bills to worry about. thats not a partisan comment... thats a common sense comment!
LET AIG, JP Morgan, Chase, Merrill Lynch, et al - LET them FAIL!
Obama is turning out to be a monstrous disappointment. Kucinich vs Paul would have been such a phenomenally better election.
No, that is not what Rick Santelli was saying.
But thanks for all the strawmen and the fish...
It's a common sense comment if by common sense you mean completely ignorant. (Which is what people usually do mean).
You can't let banks fail. That's like saying let a nuclear bomb go off because you're pissed at the people who dropped it.
are now buying garbage from rich people, for millions of dollars, because the rich people do not want to suffer the financial loss of paying for garbage collection.
Vote GOP and move forward to the 18th Century.
or anything so Twentieth Century.
Cuz Obama and Geithner just sold all that down the river to cover the asses of their buddies (and paymasters) in the banks.
would be a very smart time for any corporation, municipality or other organization with large or underfunded pension liabilities to snap up some of these assets. If the assets are undervalued they'll make a pile when the economy recovers and if they aren't the federal government will cover the loss.
Hasa Diga Eebowai
...this were really up to President Obama anyway. I love the way everybody talks like if they were in his position they would do any better. I'm not even taking his side. If anything I am taking poster woody's side: we're fucked, we always were, and the fix has been in for ages.
The fucked thing about this kind of thinking is that I am leaving a window open for everybody to excuse Bush of every bit of numbnuttery and malfeasance he committed over the last 8 years. Actually, I'd still be perfectly happy to lay the bulk of this mess right in his administration's collective lap and take the viewpoint that they left this massive, economic IED in the sand for all of us and the new administration is trying to detonate it with as little damage as possible (which is still a lot of damage to most of us little people). It is becoming increasingly clear that there is no good way out of this mess and the repugs will be overjoyed to blame President Obama and the Dems for all of it in 2010. Just thinking off the top of my layman head here whilst I coffee-up.
Fuck it, Dude. Let's go bowling.
I'm just superstitious enough to hedge my bets.
The "chosen ones" are just to smart for us.Or is to cold blooded for us?
stopping them that's why.
We're still reeling repeated sucker-punching for 8 years. Looks to me O's people are holding us upright from behind so they can work As One punching our lights out.
To "burnt at 12:08", because if we had a real human being like Kucinich, who was the first to be bumped off the list with that threat to his senate seat, he would have been Eliminated another way if you catch my drift. Then again, we no longer have Real Candidates or Real Elections anyway.
As soon as we stop playing the game the sooner Washington's spawn dry up and die.
The audicity of hope, indeed.
Two party system, my ass.
We are America Incorporated and have been for quite some time.
Time to run for the northern border.
Canada is being zionized as we speak
Guess I'll have to build a viking ship and head off to the Nordic countries.
wuz about to say.
When I hear the old tired Torches and Pitchforks sounds cool nothingness it's almost as bad as,
Time to do this or Time to do that.
The Time has run out.
Americans have already begun non-compliance...because they can't.
Choiceless choice is just a natural result. No muss, no fuss.
How about home of the craven peasants.
Or home of the brainwashed consumer/debtor living under King Neo-Conitus.
I feel pretty fucking betrayed.
I have been in law enforcement for 13 years and no one is talking about the real danger. As the economy continues its downward spiral the crime rate is on a massive upswing. I know this for a fact because I and my brothers in blue are about 4 or 5 times a busy as we where a year ago, not as much time for doughnuts. All joking aside if this mess is not fixed soon things are going to get bad really bad. after all this is what those who want America to fail have been waiting on, and if you don’t think they will do all they can to stop us when we do start to recover, just hide and watch. Another chief concern of mine is when one of these anti American nut jobs gets the idea in their head that they or their group needs to take out the prez. Not because we won’t have a leader but because I remember the LA riots and well if a crack head can cause that much chaos what happens when they blame a white guy for killing an actually important black man. Wake up people ask questions a get ready for what’s coming i have dealt with criminals and fought for my nation in the deserts of hell I don’t want the dollar to be the death of us all.
rousing "anti-american nutjobs" is the MSM fanning the flames in the hopes of exactly that. For some anti-american nutjob to do their dirty work for them. Has it ever happened some other way? Has the corsage ever been pinned on the actual criminal? We know full well who they are.
Americans are resourceful in times of financial crisis which is why people are preparing all over the place, and Burpee Seeds of Maine can't keep up with orders this year. (and why that skeletal hank of hair mated to Monsanto is trying to legislate against people being able to grow their own food).
We'll be resourceful even as Schwartenegger turns geniune violent criminals loose on the streets of CA.
It won't be the dollar that is the death of us.
I'm going to show my ignorance here.
What would they actually be "out of pocket" if they "lose their investments"? Am I misunderstanding? Will the money they'll invest be insured? Does the following quote mean that in addition to being subsidized by the government, private investors would also be covered by FDIC insurance provisions? And to what extent?
What about taxes on the loss? Even if private investors are not covered by insurance, isn't a lost investment tax-deductible?
Liason reports to the King in his castle:
"Sir! Sir! The peasants are revolting!"
Little King replies:
"They sure are."
what are the "toxic assets" worth? that seems to me to be the dilemma. some on wallStreet appear to be
pleased with obama/Geithner's private/public approach.
They're worth what people will pay for them. Which right now is almost nothing. If the economy picks up, the housing market picks up, the credit markets pick up - i.e. if we get through this crisis - they may be worth a lot more.
Translation= The American Taxpayer is about to take it up the As_
Again. Thanks Obama.
NOt if multi-millions jobless and homeless without access to credit.
How exactly and for how long can they collect on said taxes and debts and from whom.
Turning toxic debt over to capitalists and aggressive collections is releasing the lions on the public. That's what they're doing.
we must NOT forget to thank henry paulson and the BUSH administration for handing this to obama.
is denying that fact.
said to also thank henry paulson and the BUSH administration. geez
the whining "populist" rage of ignorance!
no, Einsteins, don't you understand? the "getting fucked" already happened! IT HAS ALREADY BEEN DONE. Geithner, Krugman and a bunch of silly bloggers who think they know what they're talking about, are arguing about the best way to clean up Bush's mess. but the mess has already been made! the money is going into these banks ONE WAY OR THE OTHER, you're all just unnecessarily pissed off about the WAY in which the money is being handed over. someone in the reality based community PLEASE step up to the plate and be honest about this issue, puuhhhleeease.
this is all about how people don't understand and for that matter don't want to understand what is being done and why in relation to the banks and insolvent financial institutions. the Treasury sends money via AIG to foreign banks, there's an outcry. "They're stealing our money" (the South Park 'They Stole Our Jobs! episode comes to mind) first of all it is NOT "your money", its "our money", 300,000,000 of us. your share is a few bucks, shut up for gods sake your embarrassing. and not everyone is in favor of burning the house down in order to save it. be honest.
do any of you have any idea how much money America, via its 80% purchase of AIG, now owes all around the world due to their bad deals? any idea at all?? we'll be paying this shit back forever. NOT because Obama is "fucking" you (to all you special people who think this way), you insignificant blurb, but because we owe a god damn shitload of money all around the world by way of this company that our government purchased! do people realize that this is what they are asking for when they demand nationalization? clue-less-ness abounds.
yes, it gives you profits (where there are any, and right now there are NONE), but it also means you take on the debts. Barack Obama is paying the massive debts wracked up under Bush while he and his crew of sociopaths looked the other way while the whole world got financially raped in the ear.
I have had it up to HERE with you ignoramuses and everyone whining about how Obama is now Satan and in league with the corporations to screw us all over. for gods sake stop embarrassing yourself and those who want to side with you. you have no idea whether this will help or work or not or partly at all so just STFU and feel free to comment on it when something actually happens!
It appears you believe yourself to possess special knowledge that the rest of us peon ignoramouses don't. Gosh! Heavens to Betsy and Mergatroid! Are you actually telling us that the Cheney junta fucked the world up the arse? And that Obama was left with a gigantic mess to sort through? NO WAY DUDE. I never knew. *snark
Give me a break.
Since you said nothing that explains any of the special reality-based knowledge that you have, I'd sure appreciate if if you would deign to try and take a deep breath and explain things to us in a way we stupid idiots can understand, oh great sage.
Oh, and be specific about how the corporate tools don't own our sorry asses.
That you would take that rant personally. I was wondering who would. For one thing, in the grand scheme you are a blurb. I'M a blurb. HE'S a blurb. He's right. You don't have the answers, he doesn't have them, and I don't have them. And no offense to anyone on this board, but very few posters here have any better ideas, either. This isn't to say that collectively we don't have a voice, but the way everybody lays every ounce of a bad situation on Obama because we don't have Bush to beat up anymore (and trust me, I have plenty of ire left for that wet sack of turds) is really tiresome.
The fact is that we are screwed, but in the end we will survive and make the best of it. Well, some will and some won't. Tale as old as time. I'm not giving up on my idealistic notion of what I think America should be, but neither am I blind to the fact that there a lot of powerful people (read: the godamned bankers) who don't give two shits about some Utopian society; not the way we do. They have spent a lot of time doing the math and putting the pieces in place for this money and power grab. There is only so much that a man who has been if office less than 3 months can do about it.
I'm not saying we shouldn't be pissed, only that jumping all over President Obama every time he doesn't do exactly what we think he should do, forgetting that he also president of a lot of people who don't think like us, is shortsighted.
I'm just superstitious enough to hedge my bets.
Congress cooperating with bush every step of the way and O issueing no criminal consequences they so richly deserve for this country to heal, and us not having a voice (only as non-entity blurbs as you put it), without Harvard degrees in Economics to offer solutions on a blog, to call us Utopian you probably kick your dog too.
We are responding to still greater burdens on our backs made by the man who announced this plan. Namely, Obama.
I do.
(And please, don't say,"you probably kick your dog too" to me. My first reaction is to blast you back and I don't want to do that. Especially because it is pointless to rant at some faceless person who is apparently just going to out-insult me behind the strength of anonymity)
But in my opinion, you aren't just responding to Obama. From my vantage point it sounds like you are dumping all over him. It's valid to bring some of it to him. Hell, he even said a few days ago to place it all on him: he claims to be ready and willing. ...*...
Actually...I had more to say on this, but it's pointless. President Obama (try typing it, just once, especially since you likely voted for him. Give the man his due) doesn't need me to stick up for him. All I was going to say beyond that was that I like reading everybody's opinions and that COLLECTIVELY (there! All-caps, so that you can't miss it a second time) we DO have a voice. Keep at it, I say, but I only think that being shrill is not helping.
I'm just superstitious enough to hedge my bets.
In my mind I am not dumping on Obama. This is what people like myself who have just taken a paycut, buys fewer groceries, bikes and walks, hears a collection agency ringing 6 times a day, can't afford a doctor, wonder which bills to pay without losing essentials and tries to stay cheered up for the kids say when they're...
doing without, afraid and helpless.
Yes I voted for Obama who is surrounding himself with people we know don't wish us well. I didn't trust him from the beginning and I have no reason to trust him now, since to date (yes it's early, yes he's not McCain) I haven't heard a thing coming from his administration to feel good about and we're having another war! Because Kucinich was taken out.
Nonetheless, suffering in this country escalates.
Shrill indeed.
Don't you dare judge me.
"Don't dare judge you"? That was shrill, whether you like it or not.
Wanna apologize for your lame "kick the dog" rhetoric? Thought not. Maybe I should sink to your level? Nah.
On second thought I will drop this pointless discussion with you by saying:
I wanted Kucinich, donated to his campaign, and had to vote for President Obama (who I like, to a degree; I am not going to just wilt on my conditional support for him) for fear of making my point by voting for K and risking that loser McCain eeking out a win. We are probably closer on this than either of us think, but we aren't going to get anywhere here. I am not going to spend the rest of the afternoon inadvertently hurting your feelings.
"Don't you dare judge me"....
Sheesh..
I'm just superstitious enough to hedge my bets.
vertible insult sandwich. You get the final piece of bread on top.
Even with the contingency of knowing you would bring up McCain and saying I did vote for Obama.
You did not hurt my feelings, yet you strangely haven't addressed any legitimate concerns raised here. It appears you yourself are pretty thin-skinned and shrill.
Infinity!
Still waiting for an apology.
Turning...blue.....ack...!
I'm just superstitious enough to hedge my bets.
No, I don't have the answers and I didn't say I did. My fear is that there isn't one because clearly this is a byzantine maze of corporate theft and thuggery that defies imagination. It didn't just suddenly start with the Bush administration. This has been long in the making. Yes, I do think we are totally screwed. Just as you stated you do.
My point IS about the "godamned bankers". And the Bush administration. As I stated above, Obama inherited this mess but I have every right to be critical about the disgusting state of current affairs.
Democrats are clearly no angels in this situation we find ourselves in, by the way.
Where did I state that Obama should have solved this mess in three months? You are putting words in my mouth.
I don't play the blind partisan game like some people. I am frustrated and disappointed and totally disillusioned as many people are.
I don't like a lot of Obama's appointments and I don't like a lot of the things he's doing.
This is a blog and I am just a blurb with an opinion.
Glad you can hold on to your faith though.
i didn't mean to put any words in your mouth. I was going a bit beyond your post with my own thoughts, that's all. We are having a discussion here.
Frustrated, disillusioned, disappointed? Right there with you.
Let me ratchet back my OWN reactionary post by saying that you and I, fellow "blurbs" (not my first choice in words. Peons; little people;prols...whatever) have every right to be pissed. Perhaps tearing away at each other is not the best way to go.
Btw, I am BARELY holding the faith. Trust me on that one.
I'm just superstitious enough to hedge my bets.
I wasn't trying to tear away at you at all, Bonkers.
I was a bit taken a back that you originally commented back to me under the title, "Figures" as if I'm the only one on here who is shouting at the television set so to speak.
I am very, very worried about the way things are going and because I love my country, I am crushed and MADDER THAN HELL we have ended up here.
Most Americans are very hard working and decent people.
The assholes who ran this nation into the ground AREN'T.
Health insurance, endless WAR, congress on the take, lobbyists, loopholes. Everything is just constant double-speak and lies. It's like death by a thousand cuts. You know?
Peace~~
Like I said, I reacted a bit, too. I think my original intent was to say, however inelegantly, that you needn't take his post as a personal shot (maybe you weren't. Apology in advance).
I also don't think I thought WE were tearing away at each other. I was talking more in the larger context, like all these people on this thread or me and crazytown upthread a bit.
Meh. You and I agree on everything else you just mentioned. I can't even remember what I was posting about in the first place and frankly have to get back to what I was doing.
Ha.
peace right back at you.
I'm just superstitious enough to hedge my bets.
.
... but questioning the policies favoring Big Finance seems to be a legitimate shot.
The Satan connection, though, is tenuous at best. When is the last time Obama and Cheney actually met? Was there cake?
Corruption favors the wealthy.
i feel so vindicated! of course its take it up the arse time!
as onceler sez, it's only a few bucks so shut up & take that dick wrapped in red wht & blue and do our part cust it's ALL OUR FAULT.
onceler, go fuck yourself.
can't delete, but I can edit.
Don't worry, crazytown; it wasn't that bad as I was just fooling around. But it still wasn't worth leaving it up.
I'm just superstitious enough to hedge my bets.
all the time. I'm not ashamed. Who's with me?
You judge and rant but all in all you are just venting the fact that it’s going down like it or don’t, and nothing anyone can do will stop it. Many of us know we owe the very heart and soul of America to other countries (mostly china) and what happens when we weaken enough that they decide it’s a good time to collect? Not to be so bold to say that any other super power would attack us but keep an eye on would news there is more hopping that just the Middle East.
I'm all for populist outrage, but let's get real here. The damage is done. One way or another we have to pay for this stuff, because the banks aren't solvent - they don't have enough money to pay their debts, let alone make loans. Their debts, by the way, are everybody's money.
You can't not have solvent banks and still have a complex society. It can't happen, OK? So saying "let the banks fail" is a psychotic statement, because, say you do let the banks fail - exactly what will replace them? It's like saying, let's get rid of our worldwide road system and wait for an entirely new one to be rebuilt. Yeah, and while we're waiting, let's revert to the dark ages.
So somehow Obama - and in fact most countries across the globe - have to figure out how to take these shit institutions and turn them into real banks again. They can nationalize them permanently, they can nationalize them temporarily - in both cases, they still have to take over that bad debt. They can just give them money. They can buy the bad debt up. Or they can subsidize other people to buy the bad debt. Maybe there's another way. Who knows. But if you look through that list, basically we're paying huge amounts of money no matter what.
Helped my work out some of my angst with that post and put it into a better, more nuanced context.
I'm just superstitious enough to hedge my bets.
Very logical. Wonder how they're going to do it.
Since the dim-bulbs still see Alan Greenspan as some kind of guru maybe the shilling networks should replay Greenspan's statement that we must nationalize the banks over and over and over.
We live in scary times.
I still want to see major frog-marching. It's a must.
Never gonna happen though, I'll wager.
Forget rage. We need BBQ recipes so we can eat the rich when the time comes. And, I think it's coming sooner than most people think.
Personally, I like the French Revolution as a working model.
mention the dead people who received $500k loans. Yeah, they defaulted, but with the housing prices going up and up the banks just resold the properties for a profit. Win-win! Oh wait... damn bubble.
As for this plan, if Wall Street likes it, we are all $%^&*(. Anyone else notice that good policy decisions result in the market plummeting, while truly odious plans (like this) see huge gains in the market?
Krugman, please be our Treasury Secretary! This guy is literally gifting money to his old friends in staggering amounts.
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