[quote=jpinpb][quote=patientrenter]I won’t attempt to steal SDR’s thunder, but I think PPIP is a taste of what’s to come. If banks can’t sell REOs at inflated prices on the open market, then govt subsidies will be created to allow them to sell to some investors at inflated prices. It’s the PPIP model for MBSs translated to REOs.[/quote]
Forgive my lack of knowledge here. The PPIP needs to do something w/the properties, wouldn’t they? Are they going to rent them all? If they attempt to sell and can’t get an inflated price, they can sell for less, b/c aren’t the taxpayers footing the bill if they have a loss?
I thought the PPIP also has little skin in the game. Aren’t we just pretty much still just playing hot potato. Tag! the PPIP are it and not the banks. Now they get to deal w/it and if they make money, cool. If not, the taxpayers got you covered.
And in this market, w/tightening credit still in effect, they might be a little challenged selling high. They may have to take a loss, b/c it won’t really be a loss b/c aren’t they covered?
Maybe I have it all wrong. It’s a little complicated for me to understand it all. Trying to make sense of it.
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jpnpb, the PPIP introduced govt subsidies for buyers of mortgage-backed securities, to help boost their prices. It doesn’t apply to the underlying real estate, just the loans. It was done in a way that allowed the general public to be led into believing that it was almost a fair market transaction.
All I’m saying is that if the banks experience too much pain from having to sell REOs at a loss, then Tim and Ben will create a similar program that covers REOs. So investors will “buy” REOs from banks at inflated prices, backed by govt money and guarantees.
For those who think it’s not possible to inflate entire markets merely by offering unlimited amounts of cheap and easy borrowed money for overpriced purchases… Oh, right, that was the bubble… it did happen… it can happen again
