Where is the outrage?!?!?

Tuesday, March 31, 2009

The blogosphere has been following the bailout and various other programs from Obama et al. I readily concede that on many issues, it is possible to make reasoned arguments on both sides. I am having a harder time with the current economic policies understanding why people think they are a good idea, are fair, or will ultimately be helpful. I am having an ever harder time understanding why most of the media isn't that interested in asking hard questions or being critical of these policies. I know that some are doing this, but it just doesn't seem to have gathered much steam.

It does seem that some non-traditional outlets are doing the hard work. Matt Taibbi (h/t to Mr. F and Mike) has had a few really good, well researched articles on the subject. Comedian, Jon Stewart has been willing to ask some hard questions of Jim Cramer (I'd love to see him interview Geithner). Hell, even Cracked Magazine gets it. The article is a week old, but still good. I love how he breaks it down:

Anyway, many of these banks own toxic mortgage-backed assets (for brevity I’m going to refer to these as ‘horseshit’ from here on). This horseshit is, amazingly, still considered an asset, although if anyone tried to sell it right now, they wouldn’t get a very good price for it, on account of its horseshitty attributes. The central problem here is that some banks own so much of this horseshit that if they valued it at what they could actually sell it for, they would effectively be bankrupt. In short, getting this horseshit off the banks’ books without making them bankrupt is our ultimate goal.


The government will provide loans for private investors to buy up the aforementioned horseshit from the banks. This would give these banks enough money so they could go about their business and not collapse like an old woman getting out of the bathtub. After that, if the horseshit goes up in price the government gets back their money and splits the profit with the private investors. If the horseshit goes down in price, the private investor takes a small loss, and the government takes a small to enormous loss, depending on various properties of the horseshit (taste? grittiness?)


There’s three problems with this plan. One, this involves buying horseshit from the banks for more than it’s probably worth, and keeping each bank’s current management intact, despite growing evidence that they’re colossal fuckers. Two, it involves the private investors taking a chunk of any potential profit while risking only a tiny portion of their own money–effectively another subsidy for wealthy jerks. And the third problem is that this plan may not be big enough. The private investors, even playing mostly with the government’s money, might not be willing to pay enough for this horseshit to keep the banks from going bankrupt. So the banks won’t sell, and we’ll all sit around picking at each other’s asses for a bit longer.


I am not suggesting that the revolution start now, but I would like to some serious questions coming from the MSM and some accountability demanded from the people.

11 comments:

Bob 4:51 PM  

I am too tired of being outraged, to be outraged.

I wish I were blissfully stupid.

steves 5:33 PM  

I am too tired of being outraged, to be outraged.

I'd settle for curiously concerned.

Applesaucer,  5:52 PM  

I still feel the outrage.

By the way, the plan might be even more "sinister" than the Cracked post suggests.

In fact, the buyers of the banks' shitty assets could end up being...

...drum roll, please...

...ahem...

the banks themselves!

That's right. The banks form special purpose entities to overbid on this stuff, but 85% of the purchase price is from the government in one form or another via non-recourse loans.

This short video explains how it is done (the video predates the official release of the plan, I believe, so it gets some details wrong -- like ascribing the FDIC's gurantor role to the Fed as a lender role, but it doesn't change the scams' mechanics appreciably):

http://www.youtube.com/watch?v=n-arbfLTCtI&feature=player_embedded

Sheila Bair at the FDIC is open to the idea:

http://www.businessinsider.com/sheila-bair-open-to-allowing-banks-to-launder-trash-assets-2009-3

And Citi and BofA have already started aggressively adding to their "toxic position:"

http://www.ritholtz.com/blog/2009/03/buying-toxic-assets-with-bailout-money/

So, let's say Cit has a Toxic Asset that it bought for $100, but is now getting bids of $30 (if it's getting any bids, at all). It capitalizes Citi-Gov-SPV with $15, the government capitalizes Citi-Gov-SPV with $15 and the FDIC gurantees $70 of the rest of the purchase price of $100. Citi sells the Toxic Asset to Citi-Gov-SPV for $100 and pockets $85.

Let's say the Toxic Asset is only worth $30. Citi only loses the $15 it put into the Citi-Gov-SPV. The government loses the other $55.

This is a slam dunk, no brainer for Citi.

Applesaucer

steves 6:59 PM  

Applesaucer, I have no doubt that it will happen that way.

Smitty 9:40 PM  

Applesaucer, your description is exactly why I am still vastly outraged, and even more mind-blowingly mad when you compare it to what is happening with the autos.

I started writing to Stabenow and Levin about it, but stopped. Too many "fuck" references in it. But seriously...all I want is for them to hold some townhall meetings about this. Hear from us. Face our wrath, or show us they have a different idea. But...nothing.

Mr Furious 10:56 PM  

I know this won't be consolation to most of you guys, but about the only thing I'm feeling good about these days is the fact that I sold my house and got out of Michigan LAST year...

That said, Asheville sucks compared to Ann Arbor, and the rest of the South is worse.

Mr Furious 10:58 PM  

Smitty, my fingers are physically incapable of typing the word "Stabenow" without the word "Fucking".

Wait. That didn't come out the way I wanted, did it?

Mike 5:25 AM  

I would like to some serious questions coming from the MSM and some accountability demanded from the people.

The latter HAS to come first. The MSM is a business. Until its readers (i.e., the purchasers of its advertising) outweigh the advertisers and gladhandlers, they'll cover what they feel like and nothing more.

Keep making noise. There's a lot more discussion of this today than there was two months ago.

Bob 7:39 AM  

"The MSM is a business. Until its readers (i.e., the purchasers of its advertising) outweigh the advertisers and gladhandlers, they'll cover what they feel like and nothing more."

The newspapers never figured it out and look at what is happening to them.

Mike 5:40 AM  

The newspapers never figured it out and look at what is happening to them.

That's more about the ease of use of the particular medium. The MSM will bust into the internet for good soon enough. They'll cave their niche, load it up with advertising, and peddle the same old swill that the majority of readers follow.

TV and radio were far more wild west at one time than they are now. And never underestimate the power of the FCC and other governmental bodies to raise the barriers to entry at convenient times and places. The news will be monopolized again soon enough.

Anonymous,  5:52 PM  

The news doesn't help, it encourages blissful stupidity.

http://www.xkcd.com/558/

Post a Comment

Followers

Potential Drunks

Search This Blog

  © Blogger template On The Road by Ourblogtemplates.com 2009

Back to TOP