BB doesn’t come right out and say it (this is the MSM after all), but the implication is there in black and white:
“Compare that with Treasury Secretary Timothy Geithner’s latest proposal to help financial institutions remove unwanted loans and mortgage-backed securities from their balance sheets.
“Under the Treasury’s Public-Private Investment Program, the size of which could hit $1 trillion, the government plans to invest side-by-side with private investors who place bids on toxic assets that have plummeted in value. Those buyers, lured by federal loans and guarantees, might include affiliates of the same struggling banks and insurance companies the program is designed to assist.”
“As with an old-fashioned pool, one of the public-private program’s biggest vulnerabilities is that it invites collusion. That was one of the points made in a report this week by the Troubled Asset Relief Program’s inspector general.”
Dark pools of mattter
“The Treasury program’s goal is to drive up prices and stimulate trading, so the financial institutions can minimize their losses and replenish their capital. Should the prices later collapse, taxpayers could end up with the vast majority of any losses.
As with an old-fashioned pool, one of the public-private program’s biggest vulnerabilities is that it invites collusion. That was one of the points made in a report this week by the Troubled Asset Relief Program’s inspector general.”
““In both the Legacy Loans Program and the Legacy Securities Program, the significant government-financed leverage presents a great incentive for collusion between the buyer and seller of the asset, or the buyer and other buyers, whereby, once again, the taxpayer takes a significant loss while others profit,” the report said.”
Turbo Taxcheat Timmeh looking out for his cronies friends. Expect him to be amply compensated.
“Similar collusion could occur in the program for mortgage- backed securities. Fund managers might agree to overpay for each other’s holdings, leaving taxpayers to bear the losses. So far, the report said, the Treasury Department hasn’t set up the systems it needs to ensure proper oversight, such as basic conflict-of-interest rules or disclosure requirements for the private-equity firms’ owners.”
In Turbo Tim’s world, every asset always appreciates. Always.
“The main premise of Geithner’s plan is that the banks’ toxic assets are now priced at artificially low levels. As the federal bailout program’s Congressional Oversight Panel wrote in an April 7 report, “Treasury has not explained its assumption that the proper values for these assets are their book values,” rather than the prices unsubsidized investors would pay for them.
” ‘If Treasury’s premise proves false, we may end up looking back on the Public-Private Investment Program as an elaborate pump-and-dump game. Only this time, unlike with the pools that sucked in gullible investors during the 1920s, the big losers would be taxpayers — who never had the choice of not playing.’ ”
“It’s hard to imagine that Pecora would think any of this is a good idea.”
1 : sleight of hand
2 : a display of skill or adroitness