Fed: No basis for 700B, just wanted 'A really big number'.

[SirNitram]

Link

Lawmakers on Capitol Hill seem determined to work together to pass a bill that will get the credit markets churning again. But will they do it this week, as some had hoped just a few days ago? Don't count on it.

"Do I expect to pass something this week?" Senate Majority Leader Harry Reid, D-Nev., mused to reporters Tuesday. "I expect to pass something as soon as we can. I think it's important that we get it done right, not get it done fast."

Sen. Sherrod Brown, D-Ohio, says his office has gotten "close to zero" calls in support of the $700 billion plan proposed by the administration. He doubts it'll happen immediately either. "I don't think it has to be a week" he says. "If we do it right, then we need to take as long as it needs."

The more Congress examines the Bush administration's bailout plan, the hazier its outcome gets. At a Senate Banking Committee hearing Tuesday, lawmakers on both sides of the aisle complained of being rushed to pass legislation or else risk financial meltdown.

"The secretary and the administration need to know that what they have sent to us is not acceptable," says Committee Chairman Chris Dodd, D-Conn. The committee's top Republican, Alabama Sen. Richard Shelby, says he's concerned about its cost and whether it will even work.

In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."

Wow. If it wants to see a bailout bill passed soon, the administration's going to have to come up with some hard answers to hard questions. Public support for it already seems to be waning. According to a Rasmussen Reports poll released Tuesday, 44% of those surveyed oppose the administration's plan, up from 37% Monday.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, who testified before the Senate committee Tuesday, will get a chance to fine tune their answers Wednesday afternoon, when they appear before the House Financial Services Committee.

A spokesman for House Speaker Nancy Pelosi, D-Calif., says she is optimistic that the House will pass a bill this week. But that doesn't mean the Senate, which is by nature more sluggish than its larger counterpart on the other side of Capitol Hill, will be so quick to act.

"They will act first," says Sen. Minority Leader, Mitch McConnell, R-Ky. "Many of our members today were just beginning to have interaction with Secretary Paulson."

Dodd proposed his own counter-proposal to Paulson's plan earlier this week. Among other things, it calls for limits on executive compensation at troubled firms and for the Treasury to take a contingent equity stake in those firms. On Tuesday, Paulson rebuffed both ideas, as it might discourage firms from participating in the bailout program.

Those things aside, lawmakers have plenty of other concerns with Treasury's proposal. Sen. Charles Schumer, D-N.Y., suggested the bailout be doled out perhaps $150 billion at a time, instead of $700 billion all at once. Sen. Mike Enzi, R-Wyo., says it has an initial cost of $2,300 for every man, woman and child in the country. Sen. Jim Bunning, R-Ky., calls it a "financial socialism and it's un-American."

Dodd says that in speaking with his Senate colleagues, all are agreed on three issues: that a bailout bill include some oversight accountability for the Treasury, protection for taxpayers and that it address the continuing foreclosure problem.

He also points to one other concern: Paulson, the bill's chief architect, is scheduled to leave office in just four months.

"I'm not about to give a $700 billion appropriation to a secretary I don't know yet," says Dodd.

Schumer had gotten Paulson to say he'd only be using 50B a month, so he said 'Okay. 150B, you come back, we see if it's working.' Paulson refuses to answer. And now we see why.

Conservative economics, wee!

[Stormbringer]

Well, not like that scenario is ominous or anything.

Any one else getting the feeling that they do indeed have some figures in mind and that they just don't want to release them? Either because they're expecting worse and don't want to admit or because they just want a slush fund to give away to corporations? Admittedly both of those are speculations but I can't imagine them being so insane as to ask for those amounts of money without a reason.

[Pablo Sanchez]

Admittedly both of those are speculations but I can't imagine them being so insane as to ask for those amounts of money without a reason.

Given their concurrent attempt to make the distribution of the money completely oversight-free, I think it's just the same thing that the Bush administration has had a record of doing; using a present crisis to advocate for an aggressive power-grabbing policy with little or nothing to do with the said crisis. e.g. when Katrina hit and they started trying to roll back Clean Air as an "emergency measure." There's an economic crisis going on, a bailout of some kind looks inevitable, so why not demand that Congress give you $700 billion and also surrender the right to ask what you did with it?

I mean, the question immediately presents itself--why would Paulson need to be completely shielded from the judicial system? I can see a clause that would protect him somewhat from congress, because he would need to be able to make decisions without worrying that the winds would shift and he'd get hung out to dry by congress. But what would he fear from judges? The answer is that they probably intended for Paulson to do something with that money that would normally get him and others sent to prison.

[SirNitram]

Paulson has shown he will freely edit who he'll lend to(First adding foreign institutions, either those with 'noticable stake' or which he, alone, unregulated, unquestionable, and unprosecutable, decides should get some of the money, then adding hedge funds), then it's just a 'Really big number', when he throws out 'Oh, I'll likely only use 50B a month, no worries!' Schumer offers, 'Okay, 150B, you come back, we see if it works.' And Paulson doesn't answer.

Take all this down. Remember Paulson has CEO experience. Remember this is the end of the term for Bush and his. Remember they had this in the work for months.

It sounds like Paulson would immediately, irrevocably, designate a place to dump the money, launder it a bit, and make off like a bandit with a chunk of US cash on Jan 20th, 2009, with the benefit to his conservative masters that Obama's now under pressure to scale back his initiatives that are likely to work.

Conspiracy theorist, yes, except of course that all it takes is to believe Paulson is greedy and unethical.

[K. A. Pital]

...except of course that all it takes is to believe Paulson is greedy and unethical

I think him being the CEO of Goldmine Sachs is pretty much solid proof that he's both greedy and un-ethical. It's impossible to roam within the brewing financial insanity and junk assets and know nothing about it.

Saying Paulson didn't know or didn't actively participate in the financial implosion, that's like saying Himmler didn't know of the Holocaust.

[J]

This could be the usual panicked incompetent bumbling we've all come to know & love, but I'm beginning to suspect it's an orchestrated plan as Pablo Sanchez has alluded to; I'm starting to see more & more things which just don't add up.

Today for instance we had the Hank & Ben show in Congress, both claimed we have a serious liquidity problem among other things which is why they need the bailout. So why then, did Treasury, which is under the sole control of Hank Paulson drain $125 billion of liquidity out of the system in the last 3 days by way of the New York Fed's Temporary Open Market Operations? Seems to me they're causing a liquidity problem here. If I were prone to tinfoil hattery I'd be inclined to think they're attempting to initiate a banking system failure so they can ram their bailout bill through Congress and loot the funds for their personal gain.

[The Kernel]

I have a slightly less conspiracy theorist theory on the $700 Billion figure. I think that Paulson figures that $700 Billion would be sufficient to pick up the worst of the worst of these CDOs, thereby allowing Wall Street to coast on the rest of these semi-junk assets.

Of course the problem with this is that all this talk about the taxpayers actually making money on these shit assets is total bunk. We the taxpayers are going to get stuck with $700 billion worth of totally worthless loans which will end up with us having to eat the entire bundle.

This is to say nothing of the danger of Paulson overpaying for these assets over their worthless value.

[K. A. Pital]

This is to say nothing of the danger of Paulson overpaying for these assets over their worthless value.

I thought they were pretty determined to overpay. Otherwise the plan "won't work".

[The Kernel]

This is to say nothing of the danger of Paulson overpaying for these assets over their worthless value.

I thought they were pretty determined to overpay. Otherwise the plan "won't work".

Which brings up another problem. Even if you assume no favoritism based on reasons like cronyism, you just know that they will overpay for assets for firms that are teetering on the brink to the level that is just sufficient to prop them up again.

Which is exactly why having no selection criteria or co-committee for valuing these assets is bullshit and tantamount to a total cash giveaway to Wall Street.

[Illuminatus Primus]

Well, not like that scenario is ominous or anything.

Any one else getting the feeling that they do indeed have some figures in mind and that they just don't want to release them? Either because they're expecting worse and don't want to admit or because they just want a slush fund to give away to corporations? Admittedly both of those are speculations but I can't imagine them being so insane as to ask for those amounts of money without a reason.

What data points makes you think the default assumption should be they mean well and are sincere?

[Pablo Sanchez]

but I'm beginning to suspect it's an orchestrated plan as Pablo Sanchez has alluded to; I'm starting to see more & more things which just don't add up.

I don't think it's an orchestrated plan, I think they're just reacting to a crisis in their characteristic way. I also don't think it's targeted at fucking the next administration, because given the traditional level of self-deception at the RNC they're probably pretty sure they're going to win in '08. Rather, I think what's going on is a simple calculation--
The finance sector is in trouble
+
Some level of bailout will be necessary
=
Let's get a lot of money, deny anyone oversight on how we use it, and give it away to our pals in one-sided deals

It's not hard to see. How much of the executive branch's financial apparatus came directly out of the industry that is now in tailspin, and how many intend to move right back into it after the next inauguration? I don't see a conspiracy, exactly, just opportunism.

[Count Chocula]

The finance sector is in trouble
+
Some level of bailout will be necessary
=
Let's get a lot of money, deny anyone oversight on how we use it, and give it away to our pals in one-sided deals

I think Sr. Sanchez hit the nail on the head. And, based on the recent revelation that this plan had been in the works for months, I think that the higher-ups in the current administration saw the flameout coming and were just waiting for the crisis to occur to trot out this abortion of a proposal. It smells like one of the many many many contingency plans that Washington think tanks spend so much time and money creating.

Allow me to expand on Pablo's logic:
Lending and reserve laws are relaxed to 'create' liquidity in the financial markets (late '80s?)
+
Financial firms (Morgan Stanley, Bank of America, Chase, etc.) create new financial instruments based on game theory (derivatives) to split, sell or otherwise offload the new debt, primarily from mortgages, to pension funds and credulous investors
+
Dumbass bankers write loans to people without requiring income verification, requiring mortgage payments at or under the traditional 28%-30% of household income, and offering ARMs and interest-only loans. House prices shot up without corresponding increases in wages.
+
Dumbass, ignorant, mathematically-illiterate, rose-colored glasses Americans bought into the scam and millions of them got in over their heads (this particular dumbass American paid a little more than I should have, but at lease got a fixed rate mortgage )
=
A chain of stupid, stupid financial decisions (and mendacious executives) leads to a crisis on Wall Street. In comes Washington to the rescue!

Washington has a firm track record of waiting for crises to happen, then trotting out a ready made "solution." As Pablo said, they did it with Katrina and the Clean Air Act, they did it again with the September 11 attacks and the "Patriot Act" which was written well before the attacks, and now they seem to be doing it with this "bailout."

In 2001 the US got a Homeland Security czar. Now it looks, if this passes the Senate, we'll get a shiny new Money Czar. This just gets better and better. For Friends of the Czar, anyway.

[18-Till-I-Die]

I'm gonna' hold out hope that they're just overestimating what they need, to be safe. I mean, if you take more than you need, fine no prob, just give the excess back afterwards. If you take TOO LITTLE you're screwed.

But then i'm painfully optimistic.

[Illuminatus Primus]

In 1992, hedge-fund manager George Soros made $1 billion betting against the British pound. In 2007, John Paulson's Credit Opportunities fund correctly bet against subprime mortgages, clearing $15 billion for the year and $3.7 billion for him. Warren Buffett is now hoping to make big money on Goldman Sachs.
[Chad Crowe] Chad Crowe

But these are small-time deals. My analysis suggests that Treasury Secretary Henry Paulson (a former investment banker, no less, not a trader) may pull off the mother of all trades, which could net a trillion dollars and maybe as much as $2.2 trillion -- yes, with a "t" -- for the United States Treasury.

Here's what's happened so far. New technology like electronic trading meant that Wall Street's bread-and-butter business of investment banking and trading stocks stopped making much money years ago. So investment banks took their enormous capital and at first packaged yield-enhanced, subprime mortgage loans into complex derivatives such as collateralized debt obligations (CDOs). Eventually and stupidly, these institutions owned them for themselves -- lots of them, often at 30-to-1 leverage. The financial products were made "safe" by insurance products known as credit default swaps, a credit derivative from companies such as AIG. When housing turned down, the mortgages and derivatives were worth a lot less and no one would lend Wall Street money anymore.

Then the piling on started. Hedge funds could short financial stocks and then bid down the prices of CDOs stuck on Wall Street's balance sheets. This was pretty easy to do in an illiquid market. Because of the Federal Accounting Standards Board's mark-to-market 157 rule, Wall Street had to write off the lower value of these securities and raise more capital, diluting shareholders. So the stock prices would drop, which is what the shorts wanted in the first place. It was all legit.

There is a saying on Wall Street that goes, "The market can stay irrational longer than you can stay solvent." Long Term Capital Management learned this lesson 10 years ago when it got its portfolio picked off by Wall Street as its short-term financing dried up. I had thought the opposite -- hedge funds picking off Wall Street -- would happen today. But in a weird twist, it's the government that is set up to win the prize.

Here's how: As short-term financing dried up, Fannie Mae and Freddie Mac's deteriorating financials threatened to trigger some $1.4 trillion in credit default swap payments that no one, including giant insurer AIG, had the capital to make good on. So Treasury Secretary Henry Paulson put Fannie and Freddie into conservatorship. This removed any short-term financing hassle. He also put up $85 billion in loan guarantees to AIG in exchange for 80% of the company.

Taxpayers will get their money back on AIG. My models suggest that Fannie and Freddie, on the other hand, are a gold mine. For $2 billion in cash up front and some $200 billion in loan guarantees so far, the U.S. government now controls $5.4 trillion in mortgages and mortgage guarantees.

Fannie and Freddie each own around $800 million in mortgage loans, some of them already at discounted values. They also guarantee the credit-worthiness of another $2.2 trillion and $1.6 trillion in mortgage-backed securities. Held to maturity, they may be worth a lot more than Mr. Paulson paid for them. They're called distressed securities for a reason.

Now Mr. Paulson is pitching Congress for $700 billion or more to buy distressed loans and CDOs from the rest of Wall Street, injecting needed cash onto balance sheets so that normal loans for economic activity can be restored. The trick is what price he will pay. Better mortgages and CDOs are selling for 70 cents on the dollar. But many are seriously distressed (15-25 cents on the dollar) because they are the last to be paid in foreclosures. These are what Wall Street wants to unload the quickest.

Firms will haggle, but eventually cave -- they need the cash. I am figuring Mr. Paulson could wind up buying more than $2 trillion in notional value loans and home equity and CDOs for his $700 billion.

So the U.S. will be stuck with a portfolio in the trillions of dollars in bad loans and last-to-be-paid derivatives. Where is the trade in that?

Well, unlike Mr. Buffett or any hedge fund, the Treasury and the Federal Reserve get to cheat. It's not without risk, but the Feds, with lots of levers, can and will pump capital into the U.S. economy to get it moving again. Future heads of Treasury and the Federal Reserve will be growth advocates -- in effect, "talking their book." While normally this creates a threat of inflation and a run on the dollar, and we may see dollar exchange rates turn south near term, don't expect it to last.

First, with Goldman Sachs and Morgan Stanley now operating as low-leverage bank holding companies, a dollar injected into the economy will most likely turn into $10 in capital (instead of $30 when they were investment banks). This is a huge change. Plus, a stronger U.S. economy, with its financial players having clean balance sheets, will become a safe haven for capital.

Europe is threatened by an angry Russian bear. The Far East, especially China, has its own post-Olympic banking house of cards of non-performing loans to deal with. Interest rates will tick up as the economy expands -- a plus for the dollar. Finally, a stronger economy driven by industry instead of financials means more jobs, less foreclosures and higher held-to-maturity payouts on this Fed loan portfolio.

You can slice the numbers a lot of different ways. My calculations, which assume 50% impairment on subprime loans, suggest it is possible, all in, for this portfolio to generate between $1 trillion and $2.2 trillion -- the greatest trade ever. Every hedge-fund manager will be jealous. Mr. Buffett is buying a small piece of the trade via his Goldman Sachs investment.

Over 10 years this could change the budget scenario in D.C., which can also strengthen the dollar. The next president gets a heck of a windfall. In the spirit of Secretary of State William Seward's purchase of Alaska for $7 million in 1867, this week may be remembered as Paulson's Folly.

Mr. Kessler, a former hedge-fund manager, is the author of "How We Got Here" (Collins, 2005).

Please add your comments to the Opinion Journal forum.

What a bunch of complete bullshit from the banker crowd. The taxpayer will make money!!!! If this is such a great investment, why does the government have to do it?[/quote]

[weemadando]

I could have sworn I heard Shrub on the radio this morning talking about how this bailout isn't going to cost the tax-payer anything...

Did he actually say that, or was that a nightmare? HOW THE FUCK CAN A BROKE-ARSE COUNTRY FIND 700b DOLLARS WITHOUT THE TAXPAYERS MONEY BEING USED?

[J]

I'm gonna' hold out hope that they're just overestimating what they need, to be safe. I mean, if you take more than you need, fine no prob, just give the excess back afterwards. If you take TOO LITTLE you're screwed.

But then i'm painfully optimistic.

Well, the Freddie Mac & Fannie bailout was supposed to cost $25 billion. That has since ballooned to over $200 billion, and counting. I have little reason to believe this latest bailout will be any different.

I could have sworn I heard Shrub on the radio this morning talking about how this bailout isn't going to cost the tax-payer anything...

Did he actually say that, or was that a nightmare? HOW THE FUCK CAN A BROKE-ARSE COUNTRY FIND 700b DOLLARS WITHOUT THE TAXPAYERS MONEY BEING USED?

Like this:

First, the plan is big enough to solve a serious problem. Under our proposal, the federal government would put up to $700 billion taxpayer dollars on the line to purchase troubled assets that are clogging the financial system.

In the short term, this will free up banks to resume the flow of credit to American families and businesses, and this will help our economy grow.

Second, as markets have lost confidence in mortgage-backed securities, their prices have dropped sharply, yet the value of many of these assets will likely be higher than their current price, because the vast majority of Americans will ultimately pay off their mortgages.

The government is the one institution with the patience and resources to buy these assets at their current low prices and hold them until markets return to normal.

And when that happens, money will flow back to the Treasury as these assets are sold, and we expect that much, if not all, of the tax dollars we invest will be paid back.

Which sounds great, except of course it's never going to happen that way. Those assets will never be worth what the Treasury is paying for them unless the housing bubble can be reinflated to peak levels seen in 2005 to 2007. Anyone who tells you those garbage papers will be worth anything near full value is either a liar or an idiot.

[weemadando]

I also really appreciated the fact that during his big speech about it all he had a completely blank look on his face as if (shockingly) he had no fucking clue what he was actually saying.

[Admiral Valdemar]

Not yet. It's not over yet.

[Stormbringer]

What data points makes you think the default assumption should be they mean well and are sincere?

None.

Which is not to say that I think the default assumption should swing totally the other way either. The burden of proof should lie with the administration, especially in a case like this. There needs to be a healthy debate not a stampede reaction.

[Elfdart]

I'm dead set against the Paulson Heist, but I saw this article and would like to know from board members in Sweden if it rings true:

International Herald Tribune

Can the U.S. learn any lessons from Sweden's banking rescue?
By Carter Dougherty
Monday, September 22, 2008

A banking system in crisis after the collapse of a housing bubble. An economy hemorrhaging jobs. A market-oriented government struggling to stem the panic. Sound familiar?

It does to Sweden, which was so far in the hole in 1992 - after years of imprudent regulation, shortsighted macroeconomic policy and the end of its property boom - that its banking system was, for all practical purposes, insolvent.

But unlike the United States, whose Treasury has made a proposal to deal with a similar situation, Sweden did not just bail out its financial institutions by having the government take over the bad debts. It also clawed its way back by pugnaciously extracting equity from bank shareholders before the state started writing checks.

That strategy kept banks on the hook while returning profits to taxpayers from the sale of distressed assets by granting warrants that turned the government into an owner. Even the chairman of Sweden's largest bank got a stern answer to the question of whether the state would really nationalize his bank: Yes, we will.

"If I go into a bank," Bo Lundgren, Sweden's finance minister at the time, said, "I'd rather get equity so that there is some upside for the taxpayer."

The tumultuous events of the last few weeks have produced a lot of tight-lipped nods in Stockholm. And for all the differences between Sweden and the United States, Swedish officials say there are lessons to be learned from their own nightmare that Washington may be missing. Lundgren even made the rounds in New York in early September, explaining what the country did in the early 1990s.

A few American commentators have proposed that the U.S. government extract equity from banks as a price for the bailout they are likely to receive, as Sweden did. But it does not seem to be under serious consideration yet in the Bush administration or in Congress.

That's despite the fact that the U.S. government has already swapped its sovereign guarantee for equity in Fannie Mae and Freddie Mac, the mortgage finance institutions, and American International Group, the insurance giant.

Putting taxpayers on the hook without offering anything in return could be a mistake, said Urban Backstrom, a senior Swedish Finance Ministry official at the time. "The public will not support a plan," he said, "if you leave the former shareholders with anything."

The Swedish crisis had strikingly similar origins to the American one. Norway and Finland went through related experiences, and they also turned to a government bailout to escape the morass that bad policy had created.

Financial deregulation in the 1980s fed a frenzy of real estate lending by Swedish banks, which spent too little time worrying whether the value of collateral might evaporate in tougher times. Property prices exploded.

The bubble deflated fast in 1991 and 1992. A vain effort to defend Sweden's currency, the krona, resulted in an incredible spike in overnight interest rates at one point to 500 percent. The Swedish economy contracted for two years straight after a long expansion, and unemployment, at 3 percent in 1990, quadrupled in three years.

After a series of bank failures led to ad hoc solutions, the moment of truth arrived in September 1992, when the government of Prime Minister Carl Bildt opted for a clear-the-decks solution.

With the full support of the opposition center-left, Bildt's conservative government announced that the Swedish state would guarantee all bank deposits and creditors of the nation's 114 banks. Sweden formed an agency to supervise institutions that needed recapitalization, and another that sold off the assets, mainly real estate, that the banks held as collateral.

Sweden told its banks to write down their losses promptly before coming to the state for recapitalization. In a similar situation later in the decade, Japan made the mistake of dragging the process out, officials in Sweden and elsewhere note, delaying a solution for years.

Then came the imperative to bleed shareholders first.

Lundgren, the former finance minister, recalls a conversation with Peter Wallenberg, at the time chairman of SEB, Sweden's largest bank. Wallenberg, the scion of the country's most famous family and steward of large chunks of its economy, heard from the finance minister that there would be no sacred cows.

The Wallenbergs turned around and arranged a private recapitalization, obviating the need for a bailout at all. SEB turned a profit the next year, 1993.

"For every krona we put into the bank, we wanted the same influence," Lundgren said. "That ensured that we did not have to go into certain banks at all."

By the end of the crisis, the Swedish government had seized vast swaths of the banking sector, and the agency had mostly fulfilled its tough mandate to drain share capital before injecting cash. When markets stabilized, the Swedish state then reaped the benefits by taking the banks public again.

Indeed, more money may come into official coffers. The government still owns 19.9 percent of Nordea, a Stockholm bank that was fully nationalized and is now a highly regarded giant in Scandinavia and the Baltic Sea region.

The politics of Sweden's crisis management were similarly tough-minded, though much quieter.

Soon after the plan was announced, the Swedish government found that international confidence returned more quickly than expected, easing pressure on its currency and bringing money back into the country. A serious credit crunch was avoided. So the center-left opposition, though wary that the government might yet let the banks off the hook, made its points about penalizing shareholders privately.

"The only thing that held back an avalanche was the hope that the system was holding," said Leif Pagrotzky, a senior member of the opposition at the time. "In public we stuck together 100 percent but we fought behind the scenes."

Sweden eventually shelled out 4 percent of its gross domestic product, 65 billion krona, or $10 billion, to rescue ailing banks. That is slightly less, in terms of the national economy, than the minimum of $700 billion, or about 5 percent of GDP, that the Bush administration estimates a similar move would cost in the United States.

But enough was recouped through sales of distressed assets and bank shares that were sold later, that the cost ended up being less than 2 percent of GDP. Some officials believe it was closer to zero, depending on how certain rates of return are calculated.

Looking back, Swedish official say the tough approach toward the banks paved the way for success. It eliminated "moral hazard," the problem of relieving investors of bad decisions. And, much as it might be a shock in the United States, the demise of shareholders also underpinned the political consensus that help restore stability to financial markets even before the bailout was truly under way.

While government ownership of banks goes against the American grain, Lundgren worries that if the U.S. bailout rests on a thin reed, politically speaking, then it could fail.

The U.S. Treasury is now planning to purchase the distressed assets outright, without demanding equity. If it wants to restore the banking system's creditworthiness, it would have to err on the side of paying too much money to the banks that caused the crisis, Lundgren said.

"If the valuation is bad, from the taxpayer's point of view, you lose," he said. "And that decreases the legitimacy of the plan."

[SirNitram]

I agree, it's why I think the Dodd plan is sensible: If the asset fails, the government gets 125% of what it paid for the asset back.. In equity in the firm.

[Edi]

Elfdart, I'm not from Sweden, but that's all true. We had a similar shitty situation and used similar methods to get out of it. That's what the US needs to do and quickly.

Fuck the shareholders.

[K. A. Pital]

Equity is a good plan, but it's not the one Wall Street likes. Dodd and others so far didn't manage to press equity alterations to the "plan", right?

The Paulson plan, even with minor polish like capping CEO compensations, on the other hand, is a mafiosi nightmare with no return guarantees... and if it does not include stakeholding proposals and ultimately is "torpedoed", so be it.

[SirNitram]

Equity is a good plan, but it's not the one Wall Street likes. Dodd and others so far didn't manage to press equity alterations to the "plan", right?

The Paulson plan, even with minor polish like capping CEO compensations, on the other hand, is a mafiosi nightmare with no return guarantees... and if it does not include stakeholding proposals and ultimately is "torpedoed", so be it.

The Dodd bill contained it. Then the House Republicans used McCain's stunt as fodder to snarl it all up before a vote.

[Illuminatus Primus]

Equity is a good plan, but it's not the one Wall Street likes. Dodd and others so far didn't manage to press equity alterations to the "plan", right?

Of course they don't like it, because they know they packaged fraudulent securities and paid off the rating agencies to call the shit gold.