Here we go, once again trying to get something for worthless assets at the U.S. taxpayers expense. This time since Obama and Geithner know there is no way Congress is going to give them more money....so, they are going to raid the FDIC.
The plan, which will not be released until next week is now leaked all over the press.
In order to get $1 trillion of the estimated $2 trillion of "toxic assets" off of the banks books, now the plan is to offer private investors huge subsidies and loans and then auction off these various assets to these same investors. These "toxic assets" are assuredly really toxic for the banks get to choose which ones they will sell.
The New York Times:
The plan is likely to offer generous subsidies, in the form of low-interest loans, to coax investors to form partnerships with the government to buy toxic assets from banks.
To help protect taxpayers, who would pay for the bulk of the purchases, the plan calls for auctioning assets to the highest bidders.
The plan is in three pieces:
- FDIC manages "private" partnerships with 85% of the money loaned to these "private" partnerships from the FDIC.
outsources topartners with investment management firms, with a 100% dollar match that each of these firms offers. These are the private-public partnerships. (but 50-50 fund match is contradicted later)
- Expanding the Federal Reserve TALF program.
and of these three components it appears they will deal with:
- FDIC buys Pools of Bad Mortgages
- Treasury "private" partnership auctions/buys Mortgage Backed Securities (read CDS, derivatives).
- Federal Reserve through TALF buy even more toxic Consumer Debt from 2005/2006
Although the details of the F.D.I.C. part were still being completed on Friday, it is expected that the government will provide the overwhelming bulk of the money — possibly more than 95 percent — through loans or direct investments of taxpayer money.
The hope is that such a generous taxpayer subsidy will attract private investors into the market and accelerate the recovery of the country’s banks.
The key protection for taxpayers, according to people briefed on the plan, is that the private investors will bid in auctions against each other for the assets. As a result, administration officials contend, the government will be buying the troubled loans of the banks at a deep discount to their original face value.
Because the government can hold those mortgages as long as it wants, officials are betting the government will be repaid and that taxpayers may even earn a profit if the market value of the loans climbs in the years to come.
Anybody make heads or tails out of this yet? If the U.S. is loaning all of this money in order to buy assets, precisely how is the U.S. taxpayer not getting the shaft and precisely how are the investors or taxpayers going to make any profit out of this to get any money back? And we're going to basically pay for the highest bidder? Sure seems the banks are getting a free and easy dumping for their (ahem) assets in a rigged auction where the U.S. taxpayer is paying for it! Check this section out:
To entice private investors like hedge funds and private equity firms to take part, the F.D.I.C. will provide nonrecourse loans — that is, loans that are secured only by the value of the mortgage assets being bought — worth up to 85 percent of the value of a portfolio of troubled assets.
The remaining 15 percent will come from the government and the private investors. The Treasury would put up as much as 80 percent of that, while private investors would put up as little as 20 percent of the money, according to industry officials. Private investors, then, would be contributing as little as 3 percent of the equity, and the government as much as 97 percent.
The government would receive interest payments on the money it lent to a partnership and it would share profits and losses on the equity portion of the investment with the private investors.
Who keeps the profit if there is any long term? Who also believes that a bunch of private hedge fund investors are going to do this and what would be the consequences if they did? Anybody believe private hedge funds would do this out of the goodness of their hearts?
Anybody see a 50-50 split in these details? It's like one sentence says one thing and then the details are contradictory and state another.
Who here believes that as long as houses are out of alignment with actual wages and income stability in the United States, prices will simply be artificially inflated?
Isn't the same fatal flaw built into these assumptions, that the value of houses will go up? That was the base assumption of the entire deck of cards.
People, Americans are flat broke and we need houses to live in not as a global poker chip.
I am fed up with this entire Ponzi nation, super elite, financial jack ass ripoff machine. Nationalize these bad banks plus AIG and write off these losses in receivership. You know, the banks had a great offer at 30% of book value and they won't take it. Screw them. Move it into receivership and let's get on with this! Make the investors pay, the bond holders pay and clean up the banking system.
Please post a link in case by some fog brain confusion this layperson misread this hogwash and it actually makes sense somewhere and isn't bleeding this entire country dry. So far I can only believe it makes sense if I smoked a whole lot of Mexico's biggest economic export.