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Obama's Latest No Banker Left Behind Scheme
By Stephen Lendman (about the author) Page 2 of 7 page(s)
-- $200 billion for Fannie, Freddie, and Federal Home Loan Bank bonds;
-- way more than the announced $300 billion for longer-term Treasuries (mostly with 7 - 10 year maturities); the Fed's been buying billions of them since last year;
-- Fed-expanded overnight lending to $2.4 trillion - free money at 0% interest;
-- a reported $750 billion for banks in the FY 2010 budget - yet to be voted on and appropriated;
-- a proposed $470 billion increase for the FDIC to borrow from the Treasury;
-- perhaps hundreds of billions more in unannounced or hidden handouts in amounts and to whom the Fed and Treasury won't say; on March 14, AIG named its big counterparties for the first time with firms like Goldman Sachs, Societe Generale, Deutsche Bank, and Barclays showing up prominently; and now
-- PPIP - the latest gift to Wall Street courtesy of taxpayers getting none of the gain and all the pain.
A Treasury Fact Sheet explains it on its web site. In "gov-speak," it cites the "challenge of legacy assets" comprised of (distressed commercial and household) "loans"/mortgages and (toxic) "securities" (mortgage-backed and others) with a new Public-Private Investment Program (PPIP) in conjunction with the FDIC and Fed to finance and guarantee it. The idea is to "repair balance sheets," encourage banks to lend, and "help drive us toward recovery." It expands TALF "to bring private investors back into the market" by offering deals too sweet to pass up:
-- a public-private (open-ended) trillion dollar partnership with Washington contributing up to 95-97% of the cash and investors the other 3-5%;
-- the Fed and FDIC (through low-cost loans and guarantees) acting as middlemen to transfer "legacy asset" losses to the public while buyers get government financing and guarantees (for no-risk investments) to purchase them on the cheap for themselves and well above fair value for the banks;
-- PPIP particulars are for $100 billion in mostly TARP and some private capital with Fed and FDIC $500 billion in leverage financing to expand it to $1 trillion or more in purchasing power.
In a March 23 Wall Street Journal op-ed, Geithner called it "My Plan for Bad Bank Assets (to) increase the flow of credit and expand liquidity (and do it by) shar(ing) risk with the private sector (to) rid banks of legacy assets." These "policies will work," says Geithner, even though everything tried to date failed, and the only achievement is what they planned - the greatest ever wealth transfer in the shortest span of time, now increased by another trillion or more through PPIP and whatever else the masters of the universe have in mind.
"Toxic-Asset Plan Lifts Stocks," headlined the Wall Street Journal, after surging around 7% on March 23 with banks and other financials in the lead, buoyed by the prospect of more free money, hundreds of billions for the taking, and plenty more where that came from.
If It Works, A Win-Win for the Money Trust
Here's how economist Jeffrey Sachs explains it:
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