DaveSeidel

The Truth in Advertising: $700B Means $700B (and Maybe More)

This article is disingenuous. First, neither Bill Gross nor Hank Paulson has indicated any certainty that the tax payers will make money in this program. They have said there is a chance there will, and given some examples of how that might work.

What they have said, is that we can expect to get a large share back, perhaps with a profit. The fact that many of these mortgages are not worth anything near face value is not relevant. Paulson will not try to buy them for face value. He will try to buy them for fair value, which will be a lot less than par.

The purpose of using taxpayers' dollars here is to free up liquidity. Using them to buy stock in banks would be irrelevant, since there is already liquidity in those markets. If we demand that, it just means we would be paying more than we need to create liquidity in the mortgages. Buffet bought stock in GS because he thinks the stock is a good investment.