Asia Times: US on reverse socialism path

[marmar]

SPEAKING FREELY
US on reverse socialism path
By Ronald Solberg


Speaking Freely is an Asia Times Online feature that allows guest writers to have their say. Please click here if you are interested in contributing.

It has been an historic week, with the news coming fast, furious and certainly profound. The blow-by-blow carnage has caught the headlines, yet we have seen effectively a mooted policy response to what has been a series of events that has probably changed the landscape of American finance forever. The proposed US Treasury bailout plan that Treasury Secretary Henry Paulson is urging congress to hastily approve raises as many questions as it answers.

Let us first focus on the questions relating to the US Treasury proposal itself.

Is US$700 billion enough? Certainly the use of these monies will create a short-term pop as hitherto shunned securities will receive a "bid". However, whether this amount is enough will be affected by a number of current uncertainties that will impact the ultimate magnitude of the deadweight loss of the impaired securities.

Current estimates vary from Paulson's view that predicts taxpayers will make money, to others that believe ultimate losses will be counted in the hundreds of billions or even a trillion and more.

Recent events have revealed that the methodology of Wall Street's financial models used for valuing securitized assets is entirely broken. Furthermore, the credibility of rating companies on assigning ratings that assess ultimate payouts for mortgage-backed and asset-backed securities is also bankrupt. ......(more)

The complete piece is at: http://www.atimes.com/atimes/Global_Economy/JI25Dj02.html

[rpannier]

1. Interesting Article

Thanks for sharing