Why Was the PPIP Extended Today?

The more important question is not being asked about today's announcement by the Treasury to extend the PPIP to 4/24/09 as found on the Treasury website.

That question is, why extend for something that is so critical and time sensitive?

As has been the case with our new super transparent administration, one needs to read behavior rather than their words for a clue.

My belief: Because participation was weak.

They say they wanted to allow more time and loosen the rules to "better accommodate increased participation". They had every opportunity to talk about the very strong participation they have already seen if in fact this was the case, but not a word on this front. So one is left with the most logical conclusion that participation was too weak to pull the program off so they need to lower the qualification bar and add more time.

Wow - this is really bad. It's like making a critical call to 911 for an ambulance and the driver calls you back in 30 minutes saying they had to fill-up the gas tank and decided to change the oil to better accommodate long term engine performance.

Oh, and to put some perfume on this announcement while obscuring the real reason for the extension, they said they wanted more small businesses and minority and women business to participate.

Disclosure: The author is short financials

Comments

[Jason Rines...:]

Isn't the capital requirement $10 B? How would small business or women led businesses qualify for PPIP?

Apr 06 02:28 PM

[Carousel:]

The San Francisco Chronicle had an article on Sunday about the lack of prosecutions and an assertion that this credit crisis is not real. The writer said that it's a deep recession from too much debt and too much debt-financed consumption but that the idea that it's because consumers and businesses can't borrow more is a lie devised by the banks to justify handing them a lot of money that they aren't going to lend to consumers and businesses anyway.

Check it out: www.sfgate.com/cgi-bin...

Apr 06 02:40 PM

[Lonestar1:]

AS FASB has revised MTM accounting rule, the seller side (banks) has no incentive to sell those toxic assets any more. Perhaps hedge funds know this, and thus do not want to participate. But the funniest thing is that big banks are very interested in setting up PPIP funds. I guess the end result is these guys can swap toxic assets at much higher prices ?

Apr 06 02:51 PM

[Trading Alpha:]

One of the loopholes in the PPIP is the bank's buy each other's toxic assets through PPIP and the government underwrites the risk - it is like taking your toxic assets through the car wash. Just another example of a Treasury led taxpayer funded giveaway.


On Apr 06 02:51 PM Lonestar1 wrote:

> AS FASB has revised MTM accounting rule, the seller side (banks)
> has no incentive to sell those toxic assets any more. Perhaps hedge
> funds know this, and thus do not want to participate. But the funniest
> thing is that big banks are very interested in setting up PPIP funds.
> I guess the end result is these guys can swap toxic assets at much
> higher prices ?

Apr 06 03:00 PM

[William Cowie:]

The whole PPIP thing is appalling. The only people who like it are the banks. We've come to government by the banks (Geithner) for the banks.

Apr 06 03:33 PM

[Socialism c...:]

The entire involvement of the government in ALL of these various plans can be summed up thus: making We The People pay for the mistakes of others, while re-fattening their wallets. And those "others" aren't just bankers -- they are also the Big Government politicians who foisted the whole sub-prime mortgage business on America to begin with.

Apr 06 06:30 PM

[DinNYC:]

The current administration is so desperate to appear credible on the topic of economic recovery (their main platform for the election, aside from a promise to placate terrorists and state-sponsors) that they are going to make PPIP a success at the expense of tax dollars. The markets will "get moving" because banks will be getting toxic assets off their books and selling them to other banks with toxic assets who will be buying them, all with the support of taxpayer dollars. They will in-turn sell their toxic assets to another bank, who will do the same. And then Geithner will come out and say it was all a great big success, but yet banks will still have MBS's on the books for the houses of deadbeat losers who bought homes they couldn't afford.

But our ire should not be directed at the government alone. It was these banks that chose to take the cop-out root and go after government money, and they only decided it was a bank thing when their salaries started to get regulated. Now, the wallstreet who foolishly financed the Tsunami that was Obama's campaign are now suffering under his authoritarian fist, preventing them from paying back these funds so they can control their institutions. This is what Wall Street gets for backing a candidate just because they were sure he was going to win. THEN going after our tax dollars?

I told a good friend of mine that there was definitely a free market solution to this crisis, and I said there was one fundamental reason for this position: rich people like being rich. If there was no government trough to go to, do you think the wealthy people at these banks would just shrug and say "welp, i guess we're going under and we have to be regular 50k/year schmoes" Really? Bush started this gravy train and Obama is the mack-daddy of turkey gravy!

My advice: Don't Pay Your Taxes in 09.

Apr 06 08:14 PM

[bbowen7:]

If there were no PPIP, would there be a private solution? If Bill Gross started a fund, open to individual investors or institutions, to buy toxic assets that he thought were below fair value, how much demand would there be? What is needed is someone who is honest, knowledgeable, well-known, and inclined to pay true "fair value" less a little. That would create a market, and there would be plenty of takers.

Apr 07 11:16 AM