How the Geithner´s plan is supposed to work (PPIP)

The plan does, indeed, put more taxpayer money at risk. Geithner plans to use $75 billion to $100 billion in the existing Troubled Assets Recovery Program as seed money for a new private/public partnership that would buy up, through auctions, any bad loans banks wanted to dump off their books. The auctions, theoretically, would help set reasonable prices for the loans; right now, many banks are still accounting for them at face value, even if they represent foreclosed mortgages, but no one believes they’re actually worth what they once were. Private investors would lend the public/private fund money, backed by the Federal Deposit Insurance Corp., to buy the loans, and the government would put up half of the actual cash in the deals.

In an example Treasury officials used, a bank decides it wants to sell off a pool of bad mortgages with a face value of $100. The government auctions the mortgages, and the highest bid is $84 (which means the bank loses $16, instead of the whole $100 on the line now). The FDIC backs $72 worth of loans for the public/private fund to buy the mortgages, meaning the public/private fund has to come up with $12. Treasury kicks in $6 and private investors kick in $6. If the mortgage can eventually be sold for more than $100, everyone wins — the private investors get a big gain after risking only $6 of their own money, the Treasury gets the same gain, and the FDIC never has to take on the $72 in loans it guaranteed because they’re repaid once the mortgages are resold for a profit. But if the mortgage winds up losing money, the private investors are only on the hook for $6. The FDIC has to repay the $72 in loans regardless.

Obama has already proved himself to be the best salesman for his administration’s policies, and conveniently enough — but certainly not coincidentally — he’ll hold another prime-time news conference Tuesday night. Asked by a reporter after his photo op with Geithner Monday how he could reassure skeptical taxpayers, Obama said to wait. “You know,” the president demurred, “I’ll have a full press conference tomorrow night, and you guys are going to be able to go at it.” Geithner’s plan may not have won over everyone yet, but if nothing else, it bought the administration time to let the boss pick up the job where the treasury secretary left off.

Financial Crisis: The government and big finance have engineered the biggest cover-up in history. The real stuff about PPIP

Timothy Geithner refuses to take underwater banks into receivership and resolve them, but has no problem turning the FDIC into a hedge fund. That’s right; under Geithner’s “Public Private Investment Partnership” (PPIP) FDIC chief Sheila Bair will assume the mantle of Bernie Madoff and oversee the establishment of Hedge Fund USA, a behemoth government-owned operation that will enlist the talents of five or six Wall Street managers to conduct auctions for toxic home loans and other repellent securities. The new program, which will provide lavish subsidies to investors, marks the first time that a standing government has transformed itself into a financial institution for the sake of its primary constituents, the banks. The PPIP creates a state-funded clearinghouse for overpriced junk derivatives and then passes the windfall on to over-leveraged Wall Street speculators. Go figure?

Here’s what everyone needs to know: The US government (you) will provide up to 94 percent of the financing (low interest, of course) for dodgy mortgage-backed assets that no one in their right mind would ever buy so that wealthy and politically-connected banksters can scrub up to $1 trillion of red ink from their balance sheets. Ugh!

The so-called “private partners” in this confidence scam will get non recourse loans, which means that if the plan backfires and they lose their skimpy six percent investment, they can call it quits and leave the taxpayer holding the bag. ($1 trillion in potential losses!) Here’s how Paul Krugman sums it up:
“The Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt. This isn’t really about letting markets work. It’s just an indirect, disguised way to subsidize purchases of bad assets.”

Geithner’s emergency triage (PPIP) is not going to work and it is robbery.

Timothy Geithner refuses to take underwater banks into receivership and resolve them, but has no problem turning the FDIC into a hedge fund. That’s right; under Geithner’s “Public Private Investment Partnership” (PPIP) FDIC chief Sheila Bair will assume the mantle of Bernie Madoff and oversee the establishment of Hedge Fund USA, a behemoth government-owned operation that will enlist the talents of five or six Wall Street managers to conduct auctions for toxic home loans and other repellent securities. The new program, which will provide lavish subsidies to investors, marks the first time that a standing government has transformed itself into a financial institution for the sake of its primary constituents, the banks. The PPIP creates a state-funded clearinghouse for overpriced junk derivatives and then passes the windfall on to over-leveraged Wall Street speculators. Go figure?

Here’s what everyone needs to know: The US government (you) will provide up to 94 percent of the financing (low interest, of course) for dodgy mortgage-backed assets that no one in their right mind would ever buy so that wealthy and politically-connected banksters can scrub up to $1 trillion of red ink from their balance sheets. Ugh!

Joe Six-Packs Doesn’t Understand how much a Trillion US$ is and that The Count Down has started.

The numbers that have been bandied about is beyond the comprehension of the average Joe Six-Packs. I cannot even figure out $500 billion, what more $500 trillion. Ninety per cent of government leaders are also unable to figure out the enormity of the global debt sink-hole.

So, I have accepted the fact that 97 per cent of Americans will just accept whatever explanations and excuses thrown at them by President Obama, Fed Bernanke and Treasury Geithner for bailing out the banks and failing to prevent the implosion of the economy by summer of 2009.

Obama inherited the mess created by war criminal Bush, aided and abetted by Alan Greenspan, Bernanke and Geithner, so he can be excused for there is nothing that he can do at this late hour to change the outcome. But the rest should be lynched!

In the last two years, in several articles, I drew your attention to the fraudulent securities that have been peddled by the global banks and how they have caused the present grid-lock in the global financial system. In essence, these securities – MBS, CDOs, CLOs, etc. were all fraudulent papers. Whatever mortgages underlying these papers, were over-valued and now they have shown to be worth at the most 10 to 20 cents on the dollar.

Obama will sooner or later be forced by the market to cut down Medicare, Social Security and rise taxes to defend the position of the dollar

The market is beginning to consider the consequences of the huge deficit spending and money-printing operations that the Obama administration is using to fund its bailouts of Wall Street and major banks. As these policies increasingly raise questions about the value of the US dollar, commentators are in particular pondering the desirability and implications of a diminished international role for the American currency.

At his March 24 press conference, President Obama made his first public comment on recent Chinese proposals for an international currency overseen by the International Monetary Fund. Obama said: “As far as confidence in the US economy or the dollar, I would just point out that the dollar is extraordinarily strong right now. And the reason the dollar is strong right now is because investors consider the United States the strongest economy in the world, with the most stable political system in the world. So you don’t have to take my word for it.” READ MORE

What’s good for Wall Street is good for America

To love Geithner’s plan, you have to embrace his philosophy that what’s good for Wall Street is good for America. Under it, bad banks and the bad bankers who run them will get bailed out, bonused up and bankrolled for another roll of the dice at the high-stakes table in what’s called the “legacy securities” program.

Different Casino
This casino differs from those in Las Vegas in that the bank plays with Other People’s Money and if anyone loses, it’s on the house. And oh yes, dear taxpayer, we’re the house. Without even the momentary thrill of placing chips on the table, the taxpayer picks up the tab.
The individual investor can’t play at that table called legacy securities, where toxic assets are rebundled into megamillion-dollar chunks, unless he has a brother-in-law who works at Goldman Sachs Group Inc. or a hedge fund, and maybe not then. You can’t go up to the teller’s window or call a broker and spin the wheel. Easy credit, huge upside and limited downside are for high-flyers only.

The big worry of Krugman, et al., is that the government is kicking the can down the road on pricing these toxic assets for fear of finding too many insolvent banks they will have to take over. That day will come in spite of Geithner’s plan.

Some Nobel Prize economists do not believe in Timothy Geithner´s plan

I feel like Rush Limbaugh now, because I really want certain people to fail: George W. Bush’s former economic adviser, Lawrence Lindsey, Nobel Prize-winning economists Paul Krugman and Columbia University Professor Joseph Stiglitz. All of them say the U.S. Treasury’s plan to buy troubled bank assets will lead to wrack and ruin. And when the trillion dollars to pay for it is gone, we won’t be able to afford the printing press to make more.
These are smart people who must be proved abject failures at economic forecasting or else the future is as bleak as that tent city of unemployed men and women pitched atop a landfill in Sacramento, California. The once-Golden State, the world’s seventh-largest economy, governed by a movie star who’s married to a Kennedy, has more than 10 percent unemployment. Bankruptcy isn’t out of the question. There’s an old saying that everything that happens, happens first in California.

You can’t use debt to solve the problem of too much debt

Doom and gloom is everywhere. We now see what happens when the productive capacity of a nation is propelled by ever widening wheels of debt, tied not to strength of assets but to derivatives of debt.
Now comes the question, what to do. First, be realistic. Second, be bold.
Here is the problem with fiscal stimulus: if not applied to rebuilding the nation’s productive capacity, it is money down a black hole. For certain, it is important to provide some floor under this free-fall. But government spending on infrastructure serves a temporary purpose. a limited purpose. Fiscal stimulus that fails to provide for new productive capacity—jobs making products that people need—will bleed out the economy like a slow suicide.

Across the nation, thousands of counties and municipalities have shovel-ready lists to paper over egregious mistakes by public officials who failed to account for, fund and pay the costs of growth when and where they occurred.

Roubini, a professor at Stern School of Business, says:U.S. stocks will fall and the government will nationalize more banks

U.S. stocks will fall and the government will nationalize more banks as the economy contracts through the end of 2009, said Nouriel Roubini, the New York University professor who predicted last year’s economic crisis.
“The stock market is a bit ahead of the real macroeconomic and financial news,” Roubini, a professor at NYU’s Stern School of Business and the chairman of consulting firm Roubini Global Economics, said in an interview with Bloomberg Television in London today. “We’ll have some major banks going belly up that will need to be taken over.”

The global equity rebound in March that sent the Standard & Poor’s 500 Index to its best monthly advance in 17 years is a “bear-market rally” and U.S. Treasury yields will “remain relatively low” as investors flock to the safest assets, Roubini said. Treasury Secretary Timothy Geithner’s new plan to remove toxic debt from financial companies won’t be enough for insolvent banks, he said.

The Charade is still going on: The PPIP (PPIF) uncovered

President Obama figures out the key to selling his economic policies: Hide Tim Geithner.

Maybe the secret to fixing the economy is as simple as this: Don’t let Tim Geithner appear on TV.

Geithner, the beleaguered treasury secretary, briefed reporters Monday morning on the details of the Obama administration’s plan to get bad loans out of the financial system, which — if it all works the way it’s supposed to — could get banks back into the business of lending money. The plan would have the government team up with private investors to buy bad mortgages and other loans from banks through an auction, then sell them off later at a profit if they recover some value. In theory, taxpayers win (though that remains to be seen), the private investors win (ditto) and the banks get some money for assets that are now worthless because there’s no market for buying or selling them — which means everyone wins, because the credit freeze that’s slowly strangling the economy might begin to lift (the biggest unanswered question in the bunch). READ MORE