Posted on 03/26/2009 8:58:54 PM PDT by Tailgunner Joe
The Obama administration’s long-awaited proposal to remove so-called “toxic” mortgage-backed assets from U.S. banks has finally been unveiled, to huzzahs across the globe. Stocks from Tokyo to New York rallied as investors expressed relief that finally, somehow, the U.S. government was going to take care of the problem. But just what does Treasury Secretary Timothy Geithner intend to do, precisely?
According to details of the plan, the government will form public-private partnerships to buy up the assets, putting up $7 in cash and $86 in government loans for every $7 spent by private capitol pools like hedge funds. The expectation is that, once the markets begin to rise and these mortgaged-backed assets recover their value, both taxpayers and private investors stand to gain. Should the assets lose further value, of course, both investors and taxpayers will be on the hook.
The federal government will tap the Troubled Asset Relief Program for up to $100 billion, and rely on private investments, the FDIC, and (of course) the Federal Reserve for a total of $500 billion. However, Geithner has indicated that the amount of purchases may eventually rise to $1 trillion, or roughly half of the estimated $2 trillion in toxic assets on the books. The plan will start banks lending, enthused President Obama, so that “families can get basic consumer loans, auto loans, student loans, [and so] that small businesses are able to finance themselves, and we can start getting this economy moving again.”
For the moment — if the stock rally is any indication — investors appear to be dwelling in a fool’s paradise. This plan is but the latest attempt by the Obama administration to re-inflate the bubble — that is, to once again lift valuations (in this case, mortgage values) far beyond what normal, rational market conditions would warrant. “Toxic” assets are not worthless, nor even undervalued, except in relation to the bubble market that assigned them their previous inflated book values. The mere act of government-backed purchases will doubtless bid prices up somewhat but, as with all other such socialist flapdoodle, will not be sustainable in the long run. To the degree that mortgage values can be re-inflated, a much larger crash will be guaranteed in the future.
Public-private partnerships are the very essence of what used to be called fascism, before the latter term became tangled up with the racist ideology of Nazism and diluted to refer to any police-state apparatus. In point of fact, fascism as an economic program involved government control — but not outright ownership of — private capital, so that industry could be channeled to serve the priorities of the state. This, journalist John Flynn pointed out more than 60 years ago in his book As We Go Marching, is precisely what the FDR tried to accomplish in the United States during the 1930s and 40s.
Unfortunately, the fascist legacy of FDR’s New Deal is very much alive and well, as manifested by this latest proposal to marry the public and private sector to serve the interests of the power elites.
As for the loyal GOP opposition, House Republican Whip Eric Cantor correctly called the Obama proposal a “shell game,” a plan that “seems to offer little incentive for private investors to participate unless the subsidy is made so rich that it comes at the expense of the taxpayer.”
But what is the Republican answer to the Obama administration’s “shell game” of public-private partnering? According to Tom Raum of the Associated Press, Cantor said “he hoped the administration would consider instead an earlier Republican proposal to set up a government-sponsored insurance program for mortgage-related securities.”
We are thus left with two alternatives, both of them squaring perfectly with the fascists’ old program: a government-sponsored buyout, or government-sponsored insurance. Either would prove horrendously costly, not only in economic terms, but also in terms of our all-but-forsaken Constitution, which makes no allowance for such public-private enterprises in the first place.
Somewhere, Mussolini must be smiling.
He’s a Communist, our country is undergoing a takeover by parts of our own government. Accept it, there will probably be another revolution. I pray for peace, but I see no peaceful ending to this.
This plan will be the death knell of Citigroup, Bank of America, and probably a couple other banks. The reason these banks still own their toxic assets is that they have them marked at prices much higher than where they could actually sell them. Under mark-to-market accounting, if some of these assets really start trading, then these banks will have to take more massive writedowns. And they do not have the capital to survive these hits. Plus, layer on top of this more naked short selling from Soros and his friends, and our banking industry is toast. This plan will be one of those things that future economists will look back on and remark, “How could they have been so stupid?”
Maybe they do, but what they are doing is in fact classic Fascism, i.e., national socialism.
Truth is, that's what the libs are. They want to have fat lives, live high, control everything...they just want the government to guarantee their lifestyle.
One reason why so many Wall St. banker types are Democrats. Fascists always want the government to hand them cash and markets.
Geithner is TATUS: Toxic Asset Treasurer of the United State
Ein Reich, ein Volck(er), ein Geithner.
FDR and the New Deal were basically ‘Friendly Fascism’...
It seems they are doing well since members of both parties take their bribes.
What happens to people who have credit cards with these companies if the company goes bankrupt?
They’ll still have to pay their debts on those cards.
Someone else will buy up the paper and the cardholder will just pay them.
The card may not be good any longer, but the outstanding debt will still be payable.. to someone.
Another tactic straight out of the Nazi playbook.
German business was statist from the very beginning under the Kaiser. The relationship with the Nazis was one of continuity and government programs to build roads and infrastructure and then weapons. It has nothing to do with fascism as an ideology. Don't people look up the definition of words before they start typing?
The Nazis were socialists. They condemned capitalism as a Jewish invention.
Anti-individualistic, the Fascist conception of life stresses the importance of the State and accepts the individual only in so far as his interests coincide with those of the State, which stands for the conscience and the universal, will of man as a historic entity. ....
Fascism is likewise opposed to trade unionism as a class weapon. But when brought within the orbit of the State, Fascism recognizes the real needs which gave rise to socialism and trade unionism, giving them due weight in the guild or corporative system in which divergent interests are coordinated and harmonized in the unity of the State. ....
Since 1929 economic and political development have everywhere emphasized these truths. The importance of the State is rapidly growing. The so-called crisis can only be settled by State action and within the orbit of the State. ...
The Fascist State lays claim to rule in the economic field no less than in others; it makes its action felt throughout the length and breadth of the country by means of its corporative, social, and educational institutions, and all the political, economic, and spiritual forces of the nation, organized in their respective associations, circulate within the State. - Benito Mussolini - The Doctrine of Fascism, 1932
I am not sure you are right.
I understand the CURRENT rule is mark-to-market, which is the problem.
And personally, as someone who has made a lot of money investing in packaged sub-prime mortgages (albeit in non-bubble parts of the country, and in small properties in rural areas -— none more than $50K), I understand.
The securities have a market value of bumpkis, but produces a consistent 14% return on investment -— so it would be aburd to sell them.
Banks, however, have certain institutional rules that force them to sell and mark down — which further depresses the market price, regardless of the income produced.
-— It’s an interesting connundrum -— there are some great buys out there with an artificially depressed value because of bubble areas like CA, FL, NV.
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