Will Taxpayers Profit from Newest Bailout Plan?

Good news, Taxpayers. I have it on the highest authority that the plan to set up partnerships with private investors to buy the banks’ toxic assets is a lock to make us money.

None other than Sheila Bair, the Chairwoman of the FDIC, said today that happy days are closer than we think.

A U.S. government plan for a public-private investment fund to buy distressed assets to help clean up banks’ balance sheets is likely to generate a “healthy” profit” for taxpayers and investors, the head of the Federal Deposit Insurance Corp said on Wednesday.

“We think that that is absolutely true that the assets are worth more than the current market conditions assigned to them and so that yes, over time, there will be significant profits from these,” FDIC Chairman Sheila Bair said in an interview with American Public Media’s “Marketplace” radio program.

Feels good doesn’t it? Sticking it to the banks that got us into this mess and making some money for ourselves for a change. If this works we might even take it overseas. With our checkbook and the smarts of our hedge fund and private equity guys we could pick the Euros pockets and they’ll probably thank us. Good old American ingenuity comes through again.

If you think this is too good to be true, it’s not. Just so you’ll know it’s on the up and up, the government is going to be totally transparent with this one. Yes, you heard that right. No fudging the numbers, there even going to tell us who partners with us in this grand caper.

Word is that some of our partners are a little uncomfortable with that but I hear that Geithner, Bair and Bernanke have given them assurances that Barney Frank and Maxine Waters will play ball. Since we’re going to be filthy rich they say they will overlook the jets, helicopters, salaries and bonuses. Of course, all campaign contributions will be thankfully accepted.

So, fellow citizens, get ready to party. Details of how we get our money will be forthcoming shortly.

Comments

[market ace:]

This is great news! Just what I have been waiting for and so today I am off to spend my profits, but cannot decide whether to buy a mansion or just a regular house, one new vehicle or two or whether to invest in one of two great deals I just heard about. One is a bridge in Brooklyn that should really increase in value and the other is water front property in a place called the Everglades in FL.

Seriously this is such a joke, because if they buy the toxic (Note this describes the assets pretty well) assets at fair value it will break the banks and if they pay too much it will break the taxpayers. A lot of good spin, but little reality here.

Mar 12 01:41 PM

[DW:]

Even if they somehow manage to make money on this NO WAY taxpayers ever see a dime of it.

Mar 12 04:09 PM

[J. D. Swampfox:]

When the government owns 100% of an asset, that asset has no "market value". The asset is not traded and, so, its "price" does not vary. Similarly, whenever the government takes PARTIAL ownership of an asset, its price will vary LESS than without government participation. Before government partial ownership in the financials, when the market was at new lows (November), the VIX was very high. But recently, the market saw new lows, yet the VIX and other volatility did not spike --- probably due to the government's participation.

The bottom line is that with partial government ownership, volatility comes down, but so does total value.

Mar 12 05:29 PM

[Robert Mcdo...:]

Sheila Bair is as sharp and clever as any. And guess what, sure she's exactly right, taxpayers (and non-taxpayers too) are going to make out of this. Check out the Federal Budget - see any $trillions of tax-dollars being given to the banks except maybe some piddly TARP stuff - no! The $trillions in federal, Fed and Treasury financing are off-budget, not using up your tax dollars, not even adding to the national debt! Government financing for US banks (and in UK and other countries too) is double-entry book-keeping swap deals, financial assets and fees for treasury-bills and insurance guarantees - with a wide margin (writedown discount ceilings) so that Government is guaranteed (as good as can be) to make $mega-billions back over next 3 years. How? In effect Government is stepping into a profitable role (that was a private sector monopoly of funding banks 'funding gaps' vacated by jittery private funding sources who decided they'd prefer to wait for fire-sale deals) and government is getting 600-900bps coupon, that's $90-120bn on $1.5tn plus fees. I estimate before we're through the Government stake will hit closer to $6 trillions, enough to pay for (when brought on-budget) at least half of annual Federal deficits. On top of that there should be some equity gains by 2010 or 2011, and of course the indirect boost to the general economy by stopping big banks deleveraging on loans to households and businesses by say 10% is oing to speed up recovery and generate more tax than otherwise without higher tax rates. If we think too much cynically that banks and big corporates via government always get one over on everyone then we're still in the Bush years. These are now Obama years and there's a bit more, maybe a lot more, ethics at work here!

Mar 12 05:53 PM

[PainfullyAware:]

Wow !!!

If what you suppose is plausible, then why should we pay taxes or tariffs since the Government does not need us as a revenue stream?

All Hail The Great OZ !!!

When Government starts using industry accounting standards instead of their "Enron Cook Book" I will feel better.


On Mar 12 05:53 PM Robert Mcdowell wrote:

> Sheila Bair is as sharp and clever as any. And guess what, sure she's
> exactly right, taxpayers (and non-taxpayers too) are going to make
> out of this. Check out the Federal Budget - see any $trillions of
> tax-dollars being given to the banks except maybe some piddly TARP
> stuff - no! The $trillions in federal, Fed and Treasury financing
> are off-budget, not using up your tax dollars, not even adding to
> the national debt! Government financing for US banks (and in UK
> and other countries too) is double-entry book-keeping swap deals,
> financial assets and fees for treasury-bills and insurance guarantees
> - with a wide margin (writedown discount ceilings) so that Government
> is guaranteed (as good as can be) to make $mega-billions back over
> next 3 years. How? In effect Government is stepping into a profitable
> role (that was a private sector monopoly of funding banks 'funding
> gaps' vacated by jittery private funding sources who decided they'd
> prefer to wait for fire-sale deals) and government is getting 600-900bps
> coupon, that's $90-120bn on $1.5tn plus fees. I estimate before we're
> through the Government stake will hit closer to $6 trillions, enough
> to pay for (when brought on-budget) at least half of annual Federal
> deficits. On top of that there should be some equity gains by 2010
> or 2011, and of course the indirect boost to the general economy
> by stopping big banks deleveraging on loans to households and businesses
> by say 10% is oing to speed up recovery and generate more tax than
> otherwise without higher tax rates. If we think too much cynically
> that banks and big corporates via government always get one over
> on everyone then we're still in the Bush years. These are now Obama
> years and there's a bit more, maybe a lot more, ethics at work here!

Mar 12 06:32 PM