lance sjogren

TARP: The World's Largest Sovereign Wealth Fund

Great, the government is getting a 16% return on TARP funds.

Who believes there is any credibility in that number? Nobody knows what all that crap is worth, so how is it possible to have any idea whatsoever what gain or loss the government will have on those "assets".

Indeed, how can one possibly know what mortgage backed securities are worth. It depends greatly on the depth of the economic downturn, which will determine the unemployment rate, which will have a huge impact on the foreclosure rate.

Plus, with direct government intervention in renegotiating individual mortgages, something likely to be much more prevalent under the new administration, the government itself is manipulating the mortgage market directly.

Does that mean that the government will salvage value in a lot of underwater mortgages, or will it renegotiate mortgages downward to the point where the homeowner can now hang on, but the creditor has to write down the mortgage to a much lower asset value?


Bottom line is, with all the screwups that the Treasury and Fed have made, it is absolutely absurd to take at face value any claim regarding a return on investment for the TARP funds.

The strongest case the author could make is that with the system so screwed up, it is presumptous for the gold bugs to think they have any better handle on the situation than those who believe in the tooth fairy or Santa Claus or the Treasury Department or the Fed.