How is this not a formula for looting the U. S. Treasury?

[carlsbadworker]

Basically, we know there are a lot of people in US now who can’t sell their houses, because they’ve leveraged themselves for more than the house will sell for on the open market. They have negative networth and selected not to honor their liability, but our government decides that they need a bailout.

So it only makes sense to extend it to the banks, which too leverage themsevles for more than their assets will sell for on the open market. They too will have negative networth and contemplate not honoring their liability(i.e. declare bankrupcy) so they too need a bailout. Only in this case, the government marks up their asset but in the home owner’s case, the government lowers their liability.

My point wasn’t that it’s right. My point was the government has been doing all the nonsense for a while already, it is unlikely the law makers will repent now, given the banks have more lobbying power than the FBs who got the loan remodification.

[Diego Mamani]

Let’s see an example. “Bank” has a mortgage-backed security (MBS) with original par (nominal) value of $100. In 2008 Bank “marked-to-market” and now values the MBS at $95 in its books. But we all know that this MBS is worth a lot less, maybe less than $60, but Bank won’t acknowledge reality.

In 2009 we have the new Treasury plan, whereby “Peter” buys this MBS, for say, $90. That’s because the bank won’t take anything less. If it did, Bank would be shown to be insolvent and would be out of business.

Peter puts only $6 out of pocket. Uncle Sam puts another $6, and the remainder $78 is a nonrecourse loan from Uncle Sam to Peter. (Total, $90).

Then Peter turns around and sells the MBS to his pal “Paul” for $48. Paul pays $48 b/c he thinks the MBS is actually worth $58 as justified by what the homeowners will actually pay in monthly mortgage payments.

Peter’s $6 investment is wiped out. So is the govt’s $6. And the $48 Peter gets from Paul goes to pay back the govt loan of $78. So now, Peter lost $6 but Uncle Sam lost $36 ($84-$48).

Since Peter and Paul are buddies (co-conspirators), the latter can compensate Peter. Say, Paul gives Peter his $6 plus another $2 for his troubles. Paul pays $48 for something worth $58, but because he gave $8 to Peter, his profit is only $2. And the banks get fully $90 for paper that is worth actually $58.

Summary:
Peter puts in $6, makes $2 profit
Paul puts in $48, makes $2 profit
U.S. puts in $84, makes a $36 LOSS
Bank had paper that was really worth $58 but got $90 for it, makes a $32 profit

Yes, I agree with the OP, this is wholesale looting of the US Treasury. Us taxpayers foot the bill and will pay for it in a combination of higher inflation and higher taxes. The important thing is that the Wall Street types who caused this crisis will get to keep their Ferraris and juicy bonuses, and won’t have to fly coach or go without their manicures, god forbid.

[Diego Mamani]

Let’s see an example. “Bank” has a mortgage-backed security (MBS) with original par (nominal) value of $100. In 2008 Bank “marked-to-market” and now values the MBS at $95 in its books. But we all know that this MBS is worth a lot less, maybe less than $60, but Bank won’t acknowledge reality.

In 2009 we have the new Treasury plan, whereby “Peter” buys this MBS, for say, $90. That’s because the bank won’t take anything less. If it did, Bank would be shown to be insolvent and would be out of business.

Peter puts only $6 out of pocket. Uncle Sam puts another $6, and the remainder $78 is a nonrecourse loan from Uncle Sam to Peter. (Total, $90).

Then Peter turns around and sells the MBS to his pal “Paul” for $48. Paul pays $48 b/c he thinks the MBS is actually worth $58 as justified by what the homeowners will actually pay in monthly mortgage payments.

Peter’s $6 investment is wiped out. So is the govt’s $6. And the $48 Peter gets from Paul goes to pay back the govt loan of $78. So now, Peter lost $6 but Uncle Sam lost $36 ($84-$48).

Since Peter and Paul are buddies (co-conspirators), the latter can compensate Peter. Say, Paul gives Peter his $6 plus another $2 for his troubles. Paul pays $48 for something worth $58, but because he gave $8 to Peter, his profit is only $2. And the banks get fully $90 for paper that is worth actually $58.

Summary:
Peter puts in $6, makes $2 profit
Paul puts in $48, makes $2 profit
U.S. puts in $84, makes a $36 LOSS
Bank had paper that was really worth $58 but got $90 for it, makes a $32 profit

Yes, I agree with the OP, this is wholesale looting of the US Treasury. Us taxpayers foot the bill and will pay for it in a combination of higher inflation and higher taxes. The important thing is that the Wall Street types who caused this crisis will get to keep their Ferraris and juicy bonuses, and won’t have to fly coach or go without their manicures, god forbid.

[Diego Mamani]

Let’s see an example. “Bank” has a mortgage-backed security (MBS) with original par (nominal) value of $100. In 2008 Bank “marked-to-market” and now values the MBS at $95 in its books. But we all know that this MBS is worth a lot less, maybe less than $60, but Bank won’t acknowledge reality.

In 2009 we have the new Treasury plan, whereby “Peter” buys this MBS, for say, $90. That’s because the bank won’t take anything less. If it did, Bank would be shown to be insolvent and would be out of business.

Peter puts only $6 out of pocket. Uncle Sam puts another $6, and the remainder $78 is a nonrecourse loan from Uncle Sam to Peter. (Total, $90).

Then Peter turns around and sells the MBS to his pal “Paul” for $48. Paul pays $48 b/c he thinks the MBS is actually worth $58 as justified by what the homeowners will actually pay in monthly mortgage payments.

Peter’s $6 investment is wiped out. So is the govt’s $6. And the $48 Peter gets from Paul goes to pay back the govt loan of $78. So now, Peter lost $6 but Uncle Sam lost $36 ($84-$48).

Since Peter and Paul are buddies (co-conspirators), the latter can compensate Peter. Say, Paul gives Peter his $6 plus another $2 for his troubles. Paul pays $48 for something worth $58, but because he gave $8 to Peter, his profit is only $2. And the banks get fully $90 for paper that is worth actually $58.

Summary:
Peter puts in $6, makes $2 profit
Paul puts in $48, makes $2 profit
U.S. puts in $84, makes a $36 LOSS
Bank had paper that was really worth $58 but got $90 for it, makes a $32 profit

Yes, I agree with the OP, this is wholesale looting of the US Treasury. Us taxpayers foot the bill and will pay for it in a combination of higher inflation and higher taxes. The important thing is that the Wall Street types who caused this crisis will get to keep their Ferraris and juicy bonuses, and won’t have to fly coach or go without their manicures, god forbid.

[Diego Mamani]

Let’s see an example. “Bank” has a mortgage-backed security (MBS) with original par (nominal) value of $100. In 2008 Bank “marked-to-market” and now values the MBS at $95 in its books. But we all know that this MBS is worth a lot less, maybe less than $60, but Bank won’t acknowledge reality.

In 2009 we have the new Treasury plan, whereby “Peter” buys this MBS, for say, $90. That’s because the bank won’t take anything less. If it did, Bank would be shown to be insolvent and would be out of business.

Peter puts only $6 out of pocket. Uncle Sam puts another $6, and the remainder $78 is a nonrecourse loan from Uncle Sam to Peter. (Total, $90).

Then Peter turns around and sells the MBS to his pal “Paul” for $48. Paul pays $48 b/c he thinks the MBS is actually worth $58 as justified by what the homeowners will actually pay in monthly mortgage payments.

Peter’s $6 investment is wiped out. So is the govt’s $6. And the $48 Peter gets from Paul goes to pay back the govt loan of $78. So now, Peter lost $6 but Uncle Sam lost $36 ($84-$48).

Since Peter and Paul are buddies (co-conspirators), the latter can compensate Peter. Say, Paul gives Peter his $6 plus another $2 for his troubles. Paul pays $48 for something worth $58, but because he gave $8 to Peter, his profit is only $2. And the banks get fully $90 for paper that is worth actually $58.

Summary:
Peter puts in $6, makes $2 profit
Paul puts in $48, makes $2 profit
U.S. puts in $84, makes a $36 LOSS
Bank had paper that was really worth $58 but got $90 for it, makes a $32 profit

Yes, I agree with the OP, this is wholesale looting of the US Treasury. Us taxpayers foot the bill and will pay for it in a combination of higher inflation and higher taxes. The important thing is that the Wall Street types who caused this crisis will get to keep their Ferraris and juicy bonuses, and won’t have to fly coach or go without their manicures, god forbid.

[Diego Mamani]

Let’s see an example. “Bank” has a mortgage-backed security (MBS) with original par (nominal) value of $100. In 2008 Bank “marked-to-market” and now values the MBS at $95 in its books. But we all know that this MBS is worth a lot less, maybe less than $60, but Bank won’t acknowledge reality.

In 2009 we have the new Treasury plan, whereby “Peter” buys this MBS, for say, $90. That’s because the bank won’t take anything less. If it did, Bank would be shown to be insolvent and would be out of business.

Peter puts only $6 out of pocket. Uncle Sam puts another $6, and the remainder $78 is a nonrecourse loan from Uncle Sam to Peter. (Total, $90).

Then Peter turns around and sells the MBS to his pal “Paul” for $48. Paul pays $48 b/c he thinks the MBS is actually worth $58 as justified by what the homeowners will actually pay in monthly mortgage payments.

Peter’s $6 investment is wiped out. So is the govt’s $6. And the $48 Peter gets from Paul goes to pay back the govt loan of $78. So now, Peter lost $6 but Uncle Sam lost $36 ($84-$48).

Since Peter and Paul are buddies (co-conspirators), the latter can compensate Peter. Say, Paul gives Peter his $6 plus another $2 for his troubles. Paul pays $48 for something worth $58, but because he gave $8 to Peter, his profit is only $2. And the banks get fully $90 for paper that is worth actually $58.

Summary:
Peter puts in $6, makes $2 profit
Paul puts in $48, makes $2 profit
U.S. puts in $84, makes a $36 LOSS
Bank had paper that was really worth $58 but got $90 for it, makes a $32 profit

Yes, I agree with the OP, this is wholesale looting of the US Treasury. Us taxpayers foot the bill and will pay for it in a combination of higher inflation and higher taxes. The important thing is that the Wall Street types who caused this crisis will get to keep their Ferraris and juicy bonuses, and won’t have to fly coach or go without their manicures, god forbid.

[CA renter]

That about sums it up, Diego. My guess is that Peter and Paul are also somehow related to the banks in question, either directly or indirectly.

IMHO, this is absolutely designed to benefit the banks (and FBs?) at taxpayers’ expense.

Oh, and how do you like the $10 billion minimum to get involved in the gravy train? Methinks someone is trying to keep the “little people” out of their taxpayer-funded scam. How predictable…

[CA renter]

That about sums it up, Diego. My guess is that Peter and Paul are also somehow related to the banks in question, either directly or indirectly.

IMHO, this is absolutely designed to benefit the banks (and FBs?) at taxpayers’ expense.

Oh, and how do you like the $10 billion minimum to get involved in the gravy train? Methinks someone is trying to keep the “little people” out of their taxpayer-funded scam. How predictable…

[CA renter]

That about sums it up, Diego. My guess is that Peter and Paul are also somehow related to the banks in question, either directly or indirectly.

IMHO, this is absolutely designed to benefit the banks (and FBs?) at taxpayers’ expense.

Oh, and how do you like the $10 billion minimum to get involved in the gravy train? Methinks someone is trying to keep the “little people” out of their taxpayer-funded scam. How predictable…

[CA renter]

That about sums it up, Diego. My guess is that Peter and Paul are also somehow related to the banks in question, either directly or indirectly.

IMHO, this is absolutely designed to benefit the banks (and FBs?) at taxpayers’ expense.

Oh, and how do you like the $10 billion minimum to get involved in the gravy train? Methinks someone is trying to keep the “little people” out of their taxpayer-funded scam. How predictable…

[CA renter]

That about sums it up, Diego. My guess is that Peter and Paul are also somehow related to the banks in question, either directly or indirectly.

IMHO, this is absolutely designed to benefit the banks (and FBs?) at taxpayers’ expense.

Oh, and how do you like the $10 billion minimum to get involved in the gravy train? Methinks someone is trying to keep the “little people” out of their taxpayer-funded scam. How predictable…

[TheBreeze]

You guys, You guys! Calm down! Bernanke is a fighter! He’s the smartest guy in the room! Sure the guy hasn’t gotten anything right since he’s been at the Fed, but that’s all about to change.

Just joshing. Bernanke’s a fucking corrupt tool and this looting is already happening:

Has the Gaming of the Public-Private Partnership Begun?

[TheBreeze]

You guys, You guys! Calm down! Bernanke is a fighter! He’s the smartest guy in the room! Sure the guy hasn’t gotten anything right since he’s been at the Fed, but that’s all about to change.

Just joshing. Bernanke’s a fucking corrupt tool and this looting is already happening:

Has the Gaming of the Public-Private Partnership Begun?

[TheBreeze]

You guys, You guys! Calm down! Bernanke is a fighter! He’s the smartest guy in the room! Sure the guy hasn’t gotten anything right since he’s been at the Fed, but that’s all about to change.

Just joshing. Bernanke’s a fucking corrupt tool and this looting is already happening:

Has the Gaming of the Public-Private Partnership Begun?

[TheBreeze]

You guys, You guys! Calm down! Bernanke is a fighter! He’s the smartest guy in the room! Sure the guy hasn’t gotten anything right since he’s been at the Fed, but that’s all about to change.

Just joshing. Bernanke’s a fucking corrupt tool and this looting is already happening:

Has the Gaming of the Public-Private Partnership Begun?

[Author]

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