$700 Billion

September 20th, 2008 1:55 pm | by John Jansen |

That is not exactly an odd lot transaction but it is the amount that the Associated Press is reporting  the Administration will be seeking to fund the taxpayer sponsored purchase of illiquid assets from debilitated balance sheets around the country. (Not around the world. The foreigners who provide the marginal dollars to fund our various deficits are left twisting in the wind.)

The same story also continues with the same theme as other stories which I have posted here in that the Democrats will seek to embroider the bill with some legislative lace of their own such as protection for homeowners from foreclosure and possibly another stimulus package.

It will be quite interesting as the parties to the process play chicken with themselves and the markets next week.

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  1. 15 Responses to “$700 Billion”

  2. By a nonie mouse on Sep 20, 2008 | Reply

    http://sec.edgar-online.com/2008/01/29/0000950123-08-000857/Section57.asp

    what about these non-US institutions? anyone been monitoring the transfer of junk lately?

  3. By jill on Sep 20, 2008 | Reply

    From the proposal:

    “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”

    Absolutely scary.

  4. By sasso on Sep 20, 2008 | Reply

    Absolutely scary indeed. Also stuffing cmbs into the deal I see and the 700bln is outstanding at any given time. Who knows how much they’ll purchase for us before it’s all said and done.

  5. By alex on Sep 20, 2008 | Reply

    Do you think that a bank selling distressed assets at a steep discount
    to the treasury will result in enough transparency to attract new capital to the bank?

  6. By SS on Sep 20, 2008 | Reply

    They’re not going to sell at a steep discount. Paulson has said he wants to pay a premium as he thinks market values are too low. Add in the lack of review and you have a formula for the rape of the US treasury Wall Street style.

  7. By fredw on Sep 20, 2008 | Reply

    First things first , this plan by Paulson is blatantly unconstitutional. Paulson has not been appointed as the economic decider , above any and all purview . Nor has he been determined to be above review by the Supreme Court. So , forget that passing muster.. even our brain dead Congress hopefully will see that as a problem. Second , even if this plan was to go forward , there is an assumption foreign investors such as China , Japan and the GCC will willingly transfer multiple trillions to bailout our financial system. Why would a rational person assume that would occur ? As most have noted , SWFs have stepped back after losing bigtime in their prior imprudent investments. Stated another way , would the US do that for another country that made patently reckless financial choices and failed to address said mistakes ? Generally , that’s when the IMF goes in and doles out bitter medicine for said reckless country to accept. I think it’s naive to assume things play out differently here…the true reckoning occurs when the FCBs say ” No Mas . “

  8. By Adan Lerma on Sep 20, 2008 | Reply

    constitutionality doesn’t seem to matter anymore; and is this the same supreme court that decided the first bush election?

    and who in congress or the president’s office would even say this is unconstitutional (other than ron paul)?

    and why is direct aid to taxpayers dirty socialism, but direct aid to bankers et al not?

    and nice point re paulson wanting to pay a premium for these “assets” (since the market value’s wrong); then when our new collective asset rep, the fed and treasury try to unload them, it’ll be “opps, sorry, all we can get for them….”

  9. By SS on Sep 20, 2008 | Reply

    The way to handle valuations is to establish a claw back position for both sides. That way if the banks are right they get a return less a financing — punitive preferably — charge. If the Treasury is right then the banks get diluted by the additional amount. My fear is the banks are actually insolvent and even this approach won’t mitigate losses for the taxpayer.

    What really scares me is that Paulson is clearly revealed in this plan’s terms as not acting in the interests of the taxpayers. Who is representing the taxpayer here? Certainly not the Bush administration and unfortunately it doesn’t appear that Congress is either.

    Finally, there have been some statements out of China indicating extreme displeasure with the bailout idea as it will dilute their holdings. No matter who the fall guy is in the eventual plan China may start withdrawing from the dollar. We can all guess where that leads.

  10. By John Jansen on Sep 20, 2008 | Reply

    I was away from blogging today. Great comments and I thank you.

  11. By Adan Lerma on Sep 20, 2008 | Reply

    re (see SS comment above): “…statements out of China indicating extreme displeasure with the bailout idea…”

    it would be extreme irony if the “bailout” bombed ’cause of chinese displeasure

    the movie iousa showed how power ultimately showed it’d shifted when the u.s. was able to economically pressure the u.k. and france to leave the area around egypt without firing a shot

    the world’s power base had shifted – is it about to shift once again? for all to see?

  12. By SS on Sep 20, 2008 | Reply

    Reuters has an update that says the Treasury can purchase paper from foreign institutions at the discretion of the Secretary…

    http://www.reuters.com/article/topNews/idUSN2053279320080920

    Obviously, the overseas phone lines burned a bit there.

  13. By Dr.Dan on Sep 21, 2008 | Reply

    How abt Russia trying to play some games with USA in this bailout ?

  14. By Dr.Dan on Sep 21, 2008 | Reply

    How about Russia announcing that it would go to Gold Standard ? (electronic gold at RTS etc)

  15. By home made wind generators on Jun 27, 2009 | Reply

    Smart writing. will definitely come back again.

  16. By home made wind generators on Jun 27, 2009 | Reply

    Intelligent post. Will definitely visit soon=D

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