So I think that, if we wanted to get rich, you and I would have to cash out whatever is left in the IRA and put it into one of those NRA innovative financial instruments-–something large caliber that will impress the folks in the gated communities during “naked” foreclosures and car repossessions (if you are wondering, remember that a naked CDS lets you insure and collect on property that you don’t own). Now that the banks are where the money isn’t, we’d need to diversify.

The value of these “assets” when offered for sale is zero (or as close to it as does not matter). But the assets have been insured for lots more than zero using unregulated CDSs. As long as the assets aren’t fairly valued, the counterparties can collect on the insurance in the event of loss. So far we have a classic insurance fraud.

Only in this case the insurers have no actual reserves to cover the CDSs (if I understood the revelations about AIG’s offshore reinsurance scam). So the idea is to get the taxpayers to pay hedge funds to buy the “assets” at the price on the insurance policies, thus sustaining the imaginary value of the asset and the imaginary solvency of the banks.

The insurance scam is doubly good because the Treasury appears to be paying off the insurance without proof of its loss, much less proof of its value. Everybody Who Matters wins: the insured/counterparty gets paid and the asset still gets sold at an inflated price so that the bank gets paid.

If, as rumor has it, CDSs were bought by the same hedgefunds that are being paid to profit from the asset sales and by the same banks that got TARP bailouts and profit from what the hedge funds will pay (using taxpayer money), then we are seeing a massively compouned fraud that makes loan-shark levels of compound interest look positively anemic.

But he is acting as if he’s been put in a round room and told to sit in the corner.

Some people say the Oval office was specifically designed to avoid the President being cornered. Ole.

the idea that we should just wait and see what the looters leave behind is preposterous.

Count the silverware! LOL

Instead of loaning money to hedge funds to buy the crap why not loan the money to “the taxpayers” to buy the crap.

It’s impractical, the public wouldn’t know how to value these assets, the public couldn’t sit on them and (what with all the whining I’m reading lately) I’m guessing the public would complain they’re being required to buy a pile of shit they can’t evaluate.

The best subgroup of the public to buy these things are Wall St. firms who deal in such assets and understand better how to value these things and how much of their own assets to risk in buying them.

This is perhaps another reason the government isn’t simply buying them directly. We don’t think government is very good at business stuff, so Obama is simply saying we’ll stay away from that and let private firms do it.

Another thing is that if government bought them with treasuries that would inject a lot more debt than just underwriting the potential failures these private firms will face. Certainly that part of the results will be less than government taking it all on.

We are avoiding putting a value on these assets because the value is declining with every passing moment.

I doubt that. As time passes there are more mortgages being fixed and more walkaways (amounting to a refinancing as they buy a new house), so the bottom of the housing market is closer (with a definite value for houses) and not an infinite time away (where houses are valued at zero).

Just watched Krugman, boy are we screwed

Republicans have been in charge, so that’s no surprise.
Question is whether we can fix things and Krugman’s opinion is but one.

Institutions of all sizes will be eligible to sell assets under the Legacy Loans Program. To start the process, banks will identify to the FDIC the assets, typically a pool of loans, that they wish to sell. Assets eligible for purchase will be determined by the participating banking organizations, including the primary banking regulators, the FDIC, and the Treasury. In order to protect taxpayer dollars from credit losses, the FDIC will employ contractors to analyze the pools and will determine the level of debt to be issued by the PPIF that it is willing to guarantee.