Geithner Update: Grab Yer Ankles and Say “Uncle Sam”

[Crewleader]

by Mike Whitney / March 25th, 2009


Timothy Geithner refuses to take underwater banks into receivership and resolve them, but has no problem turning the FDIC into a hedge fund. That’s right; under Geithner’s “Public Private Investment Partnership” (PPIP) FDIC chief Sheila Bair will assume the mantle of Bernie Madoff and oversee the establishment of Hedge Fund USA, a behemoth government-owned operation that will enlist the talents of five or six Wall Street managers to conduct auctions for toxic home loans and other repellent securities. The new program, which will provide lavish subsidies to investors, marks the first time that a standing government has transformed itself into a financial institution for the sake of its primary constituents, the banks. The PPIP creates a state-funded clearinghouse for overpriced junk derivatives and then passes the windfall on to over-leveraged Wall Street speculators. Go figure?

Here’s what everyone needs to know: The US government (you) will provide up to 94 percent of the financing (low interest, of course) for dodgy mortgage-backed assets that no one in their right mind would ever buy so that wealthy and politically-connected banksters can scrub up to $1 trillion of red ink from their balance sheets. Ugh!

The so-called “private partners” in this confidence scam will get non recourse loans, which means that if the plan backfires and they lose their skimpy six percent investment, they can call it quits and leave the taxpayer holding the bag. ($1 trillion in potential losses!) Here’s how Paul Krugman sums it up:

“The Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt. This isn’t really about letting markets work. It’s just an indirect, disguised way to subsidize purchases of bad assets.”

http://www.dissidentvoice.org/2009/03/geithner-update-grab-yer-ankles-and-say-%E2%80%9Cuncle-sam%E2%80%9D/

[truedelphi]

1. Another analysis from someone smarter than me

And making me that much less happy about the future.

I am envious of the first sentence
Timothy Geithner refuses to take underwater banks into receivership and resolve them, but has no problem turning the FDIC into a hedge fund.

Nails the scenario exactly

[Crewleader]

2. here's another interesting discovery

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=125x238197