Banks could bet on toxic assets with taxpayers' money

Reuters ^ | Fri, Apr 3, 2009 | Jonathan Stempel and Karey Wutkowski

[TenthAmendmentChampion]

NEW YORK/WASHINGTON (Reuters) - U.S. banks that received billions of dollars of taxpayer money to bolster their capital could place bets on the same toxic assets that got them into trouble in the first place -- and with government support.

It is unclear whether U.S. regulators will prevent banks receiving government aid from participating as buyers in the $1 trillion Public-Private Investment Program (PPIP) designed to unclog credit markets and bank balance sheets.

But the program, where the government provides much of the financing and shoulders much of the risk, leaves open the prospect that banks, as well as private investors, could buy the troubled securities and loans. This means recipients under the government's $700 billion bank bailout fund, the Troubled Asset Relief Program, might take part.

"Without very strict regulation you're potentially creating big risks by allowing banks to buy toxic assets with house money," said Wayne Shaw, a professor at Southern Methodist University's Cox School of Business. "It's a terrible risk."

[TenthAmendmentChampion]

If this is true, there is no end to the merry go round. Buy toxic assets, find the good ones, sell off the remainder, claim a loss, get taxpayer money, and go around again!

[TenthAmendmentChampion]

ping

[BillT]

I think that the

“Banks could bet on toxic assets with taxpayers’ money”

should be

“Banks are bet on toxic assets with taxpayers’ money”

[OldBullrider]

Just like a dog that returns to eat his own vomit. What makes you think these idiots in the banking industry are ever going to change. They are not punished for their crimes, they are rewarded.

[Always Right]

Considering banks already own these toxic assets, having other banks take these loans off of other banks hands at a deeply discounted price really isn’t adding risk to the overall picture.

[jveritas]

We the tax payers are paying the difference for this heavy discount. With trillions of dollars wasted on welfare and failed companies, trillions of dollars that are sucked from tax payers blood the economy is going to totally collapse there is no other way around it.

[rabscuttle385]

*Ping!*

[djf]

So they get to BUY BACK all the stuff they said they LOST ALL THAT MONEY ON.

Not only are they BUYING IT BACK, THE GUMMINTS GONNA BUY IT BACK FOR THEM!!!!

Man, we need ropes and pitchforks and tar and feathers bigtime!!

[arkady_renko]

Considering banks already own these toxic assets, having other banks take these loans off of other banks hands at a deeply discounted price really isn’t adding risk to the overall picture.

Watch this and see if you feel the same way...

They will take the toxic assets off the other bank's hands with our money for pennies on the dollar.

[wolfcreek]

Sounds VERY familiar.

[Oatka]

Sounds VERY familiar.

Indeed. From March 26.

[nw_arizona_granny]

Ping.

[jiggyboy]

Yep, this conclusion was obvious the very night the program was announced, before it even had its own alphabet-soup acronym that has become the hallmark of the Macy’s parade of ever-bigger but doomed trial balloons.

[M. Espinola]

Banks use taxpayers money since the banking CEOs, especially the banking CEOs who flooded Obama’s champion with $$$$, consider tax funds ‘free money’, thus is perfectly okay to take astronomical risks.

[Grampa Dave]

What, we are seeing now, is history re the tax and spenders doing what they did in 1934. Check the banner on the wagon saying, "Young Pinkies from Columbia and Harvard". Now, we can add Yale and basically any other left wing university. *

* Thanks to Bob the Nailer for this heads up and scary trip down one of history's insane moments.