I didn't think it would happen this quickly:
http://www.nypost.com/seven/03252009/business/double_dippers_161157.htm
Wednesday, March 25, 2009
Tuesday, March 24, 2009
Geithner TARP TRAP TRICK -- One example on how to flush 100B of Toxic Waste 101
Consider two banks A and B. Each with 50 Billion dollars of Toxic Waste (aka stupid bets placed by their bookie (CDS dept.) or real estate broker) and 5 Billion of TARP money.
On Monday, Bank A either directly as an investment or indirectly through a ETF, hedge fund or other vehicle pays 100 Billion dollars for bank "B"s TW . They pay 100 Billion because they believe that they are undervalued and it is a fair price and hence they don't want too lose this opportunity. As luck would have it, bank "B" thinks the same about "A"s TW. Hence it pays 100 Billion dollars for bank "A"s TW .
By the middle of the week, both bank A and B figure out what they just bought was garbage and really only worth $0. Since 95 Billion in each case was borrowed according to Geithner wonderful plan, both banks only need to record a loss of 5 Billion dollars along with a gain of 100 Billion for the TW that they each just sold.
On Friday, both banks now have recorded net profits of 95 Billion dollars, which they promptly decide to invest in something safe like Chinese MBS. On the other hand, I and my family now can look forward to an additional 190 Billion dollars of debt so that the finance division banks A and B can party like there is no tomorrow (for America).
Please tell me why something like the above cannot happen. If it can happen, please tell me why I as a citizen have any interest in supporting this.
Would it not be better to let bank A and B go bankrupt. Move their current deposit accounts to smaller banks that acted prudently during good times, and stuff half of the above amount ( at 0% interest rates) into their coffers to grease the wheels of the transition.
On Monday, Bank A either directly as an investment or indirectly through a ETF, hedge fund or other vehicle pays 100 Billion dollars for bank "B"s TW . They pay 100 Billion because they believe that they are undervalued and it is a fair price and hence they don't want too lose this opportunity. As luck would have it, bank "B" thinks the same about "A"s TW. Hence it pays 100 Billion dollars for bank "A"s TW .
By the middle of the week, both bank A and B figure out what they just bought was garbage and really only worth $0. Since 95 Billion in each case was borrowed according to Geithner wonderful plan, both banks only need to record a loss of 5 Billion dollars along with a gain of 100 Billion for the TW that they each just sold.
On Friday, both banks now have recorded net profits of 95 Billion dollars, which they promptly decide to invest in something safe like Chinese MBS. On the other hand, I and my family now can look forward to an additional 190 Billion dollars of debt so that the finance division banks A and B can party like there is no tomorrow (for America).
Please tell me why something like the above cannot happen. If it can happen, please tell me why I as a citizen have any interest in supporting this.
Would it not be better to let bank A and B go bankrupt. Move their current deposit accounts to smaller banks that acted prudently during good times, and stuff half of the above amount ( at 0% interest rates) into their coffers to grease the wheels of the transition.
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