Sunday, March 22, 2009

ANOTHER BITE OF THE APPLE

Treasury Presses Ahead With Plan For Toxic Assets New Body to Work With Private Investors By David Cho Washington Post Staff Writer Sunday, March 22, 2009; A01 The Treasury Department will unveil the next step in its financial rescue efforts tomorrow, announcing that it intends to create a government body, called the Public Investment Corp., to finance the purchase of as much as $1 trillion in soured loans and toxic assets from ailing banks, according to sources. The plan calls for the new entity to combine its resources with the Federal Deposit Insurance Corp., the Federal Reserve and private investors to buy those loans and other assets. But the government will put far more money into the deals and take on more risk than the investors, which could include hedge funds, private-equity firms, pension funds and foreign investors with U.S. headquarters, the sources said. The corporation will be funded with $75 billion to $100 billion from the $700 billion financial rescue package.
--read entire article--
_______________________________________________________ So the American taxpayer, those stalwarts who lost 550,000 jobs in January and another 650,000 in February, are to be made 2nd class stockholders. We hold the bag on the majority of risk, while hedge funds, private-equity firms, pension funds and foreign investors stand to profit.
God--or the Devil--is in the details and we are as yet given precious little of those. They are not likely to become widely public before Congress gets their meddling and very sticky fingers in the pie. But it amazes me that we are still calling these financial viruses by the misnomer "toxic asset," as if by only removing the toxicity, they would be reborn, good as gold and actually worth something. They are not toxic assets at all. They are toxic liabilities and will remain liabilities even if and when the toxicity is bleached away by a taxpaying public bleached white. None other than Warren Buffet, the Oracle of Omaha and a pleader for this government intervention said; "In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal." Derivatives and so-called toxic assets are indistinguishable and cut of the same cloth. Would Buffet now have us taxpayers stuck with the bill for Wall Street's very expensive dinner and then, between burps and cigars, have us tagged for the price of cognac and dessert? Failure is the price of risk. Let the fraudsters fail. Time for the banksters to ante up with investor capital, rather than looking to extend your and my already limitless horizon of debt. Where is it written in the oracle business that prophets profit even when their prognostications go to hell?

* For more in-depth articles by Jim on Current Affairs, check out Opinion-Columns.com