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Treasurey Outsmarted? Surprise, surprise, SURPRISE......

Mark Pittman's story on Bloomberg this morning about the Treasury essentially returning shares exchanged for TARP funds to Old National Bancorp at a ridiculously low price is the perfect example of why Gov is almost always going to find itself in over its head when it tries to participate in the private sector.  Link to story is here.

I don't know if the decision makers at Treasury are just getting outfoxed by their counterparts at the bank, or if there is a more ominous, lobby-influenced aspect to these seemingly ridiculous deals that are being struck on my behalf?  I'm guessing it's a little bit of both.

I'm not an expert on options modeling.  And I understand that no model will satisfy all critics.  But Black-Scholes has enough credibility to it that all of us should raise a collective eyebrow when Old National Bankcorp was able to strike a deal that was SO FAR OUTSIDE OF THE RANGE of even the most conservative volatility assumption's.

We all need to start writing some big IOU's on red construction paper, put them in a safety deposit box, and pass them along to our kids in 20 years so they'll at least have something to show for this recklessness.

Disclosure: no positions