Smarty_Pants

Fed Watch: Policy Totally Adrift; Be Afraid, Be Very Afraid

"For example, the Treasury purchases mortgage assets at a high price, thereby recapitalizing the financial firm. In return, the Treasury receives an equity stake that dilutes that of existing shareholders to zero. ... Treasury then auctions off the troubled assets into the financial markets ... The taxpayer eats the difference"


The only difference between this and Chapter 7 is who takes the losses. In theory the 'bailed out' financial firms can buy the exact same assets back at pennies on the dollar using taxpayer money, leaving them exactly as before but with "free" capital to use and a new gub'mint shareholder.

Why not let them go bankrupt and have the entire business sold at auction to a private party (including the toxic assets), thereby letting the taxpayer off the hook and letting the private party risk their own capital on the potential reward of receiving most of the payments on the toxic assets?

Couldn't be because ol' Hank wants to divert public monies to his crony banker pals, could it? Can't let a private party turn a profit on this if there's some way for bankers to line their pockets instead.

When you're trying to steal from the public trough there is apparently no lie ... errrr ... rationalization that won't be tried to sway the public into letting you rob them blind.