B.M.

Murky Objectives of the PPIP

Put Problem: I call this the Red 36 example. People who own CitiGroup shares or AIG shares are like people that put a $1 chip down on Red 36. They fully realize it's a longshot, but they also realize it pays 35:1 if they win. So if you are watching some one do this, and you offer them 50 cents to not make that bet, THEY WON'T TAKE YOUR OFFER EVEN THO IT'S A 50% RETURN. Why? Because they are not investors but speculators, looking for volatile "action". Same goes for a C or AIG investor. Tell them they can get a return on their speculation, and they turn away in disgust. They are betting for the longshot, not a small return.

Or think about it another way. If you are crazy enough to own AIG or C stock, you still aren't crazy enough to put your entire net worth into it. You invest maybe 1% of capital. If your ship comes in, you can make an "easy" 35% while the other 99% of your portfolio adds the rest of your performance. But if someone offers you $1.50 for your $1 speculation, you finish the year 50 basis points, or 0.5% better off. Who cares about that? If you cared about that, you wouldn't have invested in a risky stock like C or AIG in the first place.

So this author is dead-nuts accurate when he says the taxpayer will have to MASSIVELY overbid for the equity owners to agree to selling toxic assets.

Great article Linus Wilson.

How Treasury Favors Banks over Taxpayers in Warrant Negotiations

Forced into taking TARP? Let me remind everyone that the government tooth fairy gave out free money to GS and other banks who made bets with AIG. Those banks were aware of the counterparty risk of AIG, they chose to ignore it. Did they pay? No, the taxpayer paid. So let's not run around saying the banks took TARP against their will. Had the TARP not been there, WFC, BAC, C, AIG, FNM, FRE, and yes, GS and JPM and MS would have all gone t!ts up from a panic run on those banks.

You can't listen to people like Warren Buffett either, who say TARP and gov't bailouts were necessary. OF COURSE they were necessary according to Buffett, he's got tremendous skin in the game in the form of ownership of STI, WFC, BAC and other banks which would have gone under.

The bottom line is, this author is correct in saying the gov't is handing taxpayers money to bankers. This is a fact. Those of you in the banking industry should just shut up and be happy there isn't a lynch mob outside your door, because that is what would have happened in the old days had you ignorantly opened your mouths which are feeding on the gov't teet.

How Treasury Favors Banks over Taxpayers in Warrant Negotiations

You dissenters all assume taxpayer gets whole on all the banks who were given TARP. Do you forget that only a minority of banks will pay back the TARP?? So just because your AAA credits are paying, doesn't mean the "cost to taxpayers is nil", we are paying because the sub-prime banks are going to eat all our TARP and give nothing back.

Furthermore, when part 2 of this crises occurs, the gov't is going to have to bail out TARP-paybackers AGAIN.