;~P

Was the Gramm insertion of legislation into the bill Bill Clinton signed (purportedly without his or most of Congress’s knowledge) part of a plan or a separate thing? Remembering Gramm & McCain are very close.

What if ARMs are forcibly converted to fixed-rate? Would banks find another reason to refuse credit or would that solve the problem (of them not being able to properly place value on assets which aren’t actively trading in a market today)?

An asset is worth whatever price the market clears at.

He’s just trying to buy time, b/c if the bonds are bought at ridiculous low prices, then the bail out won’t work. Any of those banks (investment, commercial, whatever) COULD go sell their bonds at today’s FSP price and take a huge hit. If they did, they’d have to report it, and they’d all have to show the world they are insolvent (they are anyway, but this is a question of what they have to report).

What they want is for the gov’t to buy the bonds at some price that makes it possible for the banks to report they are not insolvent, which is not the FSP, but has no relationship to reality other than what the banks need for their reporting purposes.

So what Bernanke is saying is 1. The gov’t is going to overpay for this shit, but 2. that, magically cause there is no reality to it, over time the shit will turn to silver or gold so it’s ok to overpay. Of course, that’s alchemy and it never works.

look at the contributors to that report: Krugman, Summers, Feldstein, and Volcker are front and center today as well.

Feldstein is on drugs. He was on some british program the other night talking about regulation. First he said that bad regulation and that there was good appropriate regulation — and even Adam Smith argued that banks should be regulated. Then he went on about how Adam Smith embraced essentially what became known as Reaganomics. These guys want to put Reagan’s name on everything (including probably Sarah Palin’s uterus).

There are two prices for these assets in question, the “Fire Sale Price” and the “Mature Market Price”. The FSP is what they would fetch if they had to be sold this instant. The MMP is what they would fetch if they were held for an indefinite length of time and then sold at some optimal time.

The problem we are facing is caused by “the market” not knowing — here my eyes started to glaze over — either it was the FSP or the MMP. Alarm bells, terrible things happening, death and destruction, the end of the world as we know it.

So, the government wades in armed with huge quantities of cash and starts to buy the assets. “The market” watches. When it sees what the government is paying for the assets, it then knows what the FSP or MMP is. Problem solved. No death and destruction. We all go back about our business.

I shake my head. Did he just say that $700B is well spent in an attempt to provide “the market” with a single number? That’s IT??!! No pretense that some structural failing either exists or is going to be corrected? No admission that this may not be a terribly well designed experiment in the first place, featuring, as it does, as entirely atypical purchaser waving about entirely atypical amounts of money in an entirely atypical atmosphere?

Even presuming that “the market” can understand what it sees happening, how does anyone prevent the sellers from offloading the very worst of their assets to the government and/or the government being able to ascertain what it should rightfully pay under the best of circumstances?

Come to think of it, if the government knows how much it ought to pay for the assets, why can’t “the market” be that smart; why does “the market” need help figuring out the price? If, on the other hand, the government (practically by definition) cannot know beforehand what the assets being purchased are worth, it it being used as a rube?

Or was there something else that Bernanke said that I missed (although I watched his whole spiel)? Or is there something that Bernanke ought to have said that he didn’t?