Posted on 02/04/2009 8:36:47 AM PST by TigerLikesRooster
Banksters in DC: “The King is Dead, Long Live the King”
Kafkaesque tragic-comedy continues to pervade Washington as sources tell us that Citi Chairman Richard Parsons met with Secretary of Treasury Geithner on Friday. Sources suggest Parson’s trip appears not to have been previously scheduled and, wile the subject of their meeting is not known, several sources advise us that his name is likely on the short list for the yet to be announced economic recovery board.
We hear Treasury, FDIC, OCC and Fed principals and staff worked together all weekend on the question of aggregator (“bad bank”) versus “insurance wrap”. It seems that positions remain fairly close to where they were before CNBC wrongly reported that the “bad bank” discussions were dead. Sources suggest those false rumors emanated from bank executives with either implicit or explicit support from Treasury.
Senior Hill sources tell us Treasury officials continue to argue the market is not correctly valuing ‘troubled’ assets and that banks current ‘marks’ continue to price these securities closer to their real underlying value. It is thus apparently Treasury favors a solution that does not require banks to recognize the current market price, a result that would be required by the sale of these assets into a “bad bank”. This seems consistent in intent, even if different in approach, with the original Paulson Treasury and Bernanke TARP testimony pitch (‘we need the taxpayers to overpay for bad assets’).
Sources inform us that Treasury continues to argue that an insurance wrap approach is preferable than a bad bank approach. They argue it would be less costly to the taxpayer. Senior regulatory and Hill sources tell us Treasury also prefers the idea of stretching losses over a long period rather than accepting the reality of an immediate recognition of losses.
(Excerpt) Read more at ritholtz.com ...
As a Kafkaesque tragic-comedy, nothing tops the spectacle of Greenspan once lauded as a maestro.
Ping!
They say bad bank will cost 4 trillion...not worth it. Let them go!
Phooey! Write off the bad debt...sell the crap/junk to someone with balls and move on.
Exactly why this country is in so much trouble...no one considers building for the future...just move on from one disaster to the next disaster.
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