The banks are planning their next great theft of the American public. They are actually planning ways to game the PPIP so that they can buy assets from themselves using taxpayer dollars. They are going to slap you in your face, rob you at gun point and the government is going to stand there and let it happen. This is unconscionable. The FT reports:
US banks that have received government aid, including, , and , are considering buying toxic assets to be sold by rivals under the Treasury’s $1,000bn (£680bn) plan to revive the financial system.
The plans proved controversial, with critics charging that the government’s public-private partnership – which provide generous loans to investors – are intended to help banks sell, rather than acquire, troubled securities and loans.
Ironically, the Republicans are the only ones who seem to have had a sane idea in the last few weeks after 8 years of intelligence block:
Spencer Bachus, the top Republican on the House financial services committee, vowed after being told of the plans by the FT to introduce legislation to stop financial institutions ”gaming the system to reap taxpayer-subsidised windfalls”.
Mr Bachus added it would mark ”a new level of absurdity” if financial institutions were ”colluding to swap assets at inflated prices using taxpayers’ dollars.”
The M2M change clearly throws a wrench in the PPIP. No private buyer in their right mind would buy a substantial amount of these assets because the banks now have no incentive to sell them at distressed levels. But, if the banks can saddle the taxpayer with the losses while taking marginal mark-downs it’s basically a win-win for them and a lose-lose for the taxpayer.
I’m not one for anarchy, but someone might want to tell Home Depot to stock up on pitchforks because this is not going to be pretty when it all goes down.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.