visual stylings by phoenix woman

The biggest question in the quest to create a "bad bank," as the government moves to buy up "toxic assets" with taxpayer dollars and leave all the profitable ones to banks and their shareholders, is valuation:

Under the emerging plan, the government will buy toxic assets below the banks "carrying value," which is basically market value, but not at fire sale levels, the source said.

That approach will likely placate both taxpayer and Congressional concerns about the government over-paying for the assets. But, the source noted, it could "trigger an accounting problem for the banks," presumably because the institutions will have to report a loss on the transactions.

The Obama administration is now working on ideas to address that, which might entail a temporary suspension of certain accounting rules.

The current plan is expected to be smaller in that it will be paid for out of the remaining money in the original TARP plan, which is about $350 billion. Some of that money, however, will remain earmarked for home foreclosure relief.

Experts estimate there are some $1.5-$2.0 trillion in such bad assets, either of the non-performing or illiquid variety.

The hope seems to be that if the banks get these assets off their books and are reimbursed at rates higher than they are worth, the banks will be profitable.  Their stocks will rise, and their shareholders will make money.

You, the taxpayer, will be left with a steaming pile of shit, thank you Larry Summers.  And I don’t think that’s going to "placate" my concerns.

It’s reasonable to expect that if the banks make money, that the taxpayers should get to share in that for having made a very high risk investment.  They ought to be able to spend that money on things they need like roads and bridges and healthcare for old people and public transit and green energy.  

Taxpayers deserve the deal that Warren Buffett got for his money, but that would mean taking on entrenched Wall Street interests, and nobody seems to have an appetite for that fight.

(h/t Atrios)

Jane Hamsher

Jane Hamsher

Jane is the founder of Firedoglake.com. Her work has also appeared on the Huffington Post, Alternet and The American Prospect. She’s the author of the best selling book Killer Instinct and has produced such films Natural Born Killers and Permanent Midnight. She lives in Washington DC.
Subscribe in a reader

41 Comments