But then you’ve got Obama with Bob Rubin and he doesn’t have any problem with the hedge fund types… So I don’t exactly see Obama as this fellow riding in on a horse who represents all kinds of reformism. It’s an important thing probably to have to change from the Republicans but I don’t see that he is free of the ties to finance and Democratic Party financial types. . .

[T]he Democrats are the party right at this point that’s getting most of the financial money. When Franklin D. Roosevelt won in 1932, we know he wasn’t … [t]he Democrats think it’s going to be another 1933, they get in there, they can do all the New Deal stuff. My feeling is that they’re coming in halfway and they’re going to have to make hard decisions that are going to eat the Democratic coalition like a bologna sandwich. They’re going to start civil wars…

[I]f you’re going to bail out Wall Street while you’re saying oh, the Social Security recipients, maybe they don’t even need that money. A lot of people in the financial community basically want to push Social Security on some sort of voluntary basis and needs test it and get rid of it. Now, a lot of Democrats in the labor movement are very nervous about Obama. They put out press releases talking about Rubin-nomics because they see that the flesh of the Democratic Party carries a lunchbox. But the new soul of the Democratic Party wears a pinstripe suit…

If [Obama] were to start talking about [how we’ve let this Las Vegas version of banks go berserk] I’d take him seriously. But I think half of Washington would have a problem … Cause you don’t rock that boat. You pretend that it’s a sound economy. And if it’s not sound, it’s nothing that the old Democratic elixir can’t fix… I don’t expect him to level.
But the stakes are much higher now and not “leveling” or going “halfway,” much riskier. As Krugman put it: “This administration, elected on the promise of change, has already managed… to create the impression that it’s owned by the wheeler-dealers. And that leaves it with no ability to counter crude populism.”

Jane Hamsher March 23rd, 2009 at 8:57 am
41
In response to Aeolus @ 5 (show text)

You read my mind — just working on Bill Gross. Will link you up.

Thanks,

The OC’s been leading America in right-wing crazy and financial fraud for decades now, almost always the wrong way. County government figured out how to use leverage and Wall Street to bankrupt ourselves in 1994.

Third, the Obama/Geithner plan is brilliantly crafted to obfuscate the transfer of real loss from the investment banks to the taxpayers, simultaneously creating profit opportunities for hedge funds:

now so brilliant since it’s been transparent at the very conception that the plan would give our money to those who destroyed the economy in the first place.

not brilliant at all, simply depraved

“In fact, it’s off-the-charts good,” he told Mr. Kurland

I Just Bagged the Elephant !

Or at least have someone ask Obama to explain why he’s certain Krugman and Galbraith are wrong, and Geithner and Summers are right.

great question there, I would add for good measure and why he thinks bush was right while krugman and galbraith are wrong

The Geithner Plan is a trillion-dollar operation by which the U.S. acts as the world’s largest hedge fund investor, committing its money to funds to buy up risky and distressed but probably fundamentally undervalued assets and, as patient capital, holding them either until maturity or until markets recover so that risk discounts are normal and it can sell them off–in either case at an immense profit.

[…]

Q: Why is the government making hedge and pension fund managers kick in $30 billion?

A: So that they have skin in the game, and so do not take excessive risks with the taxpayers’ money because their own money is on the line as well.

(Krugman replies here.)

IIUC, the toxic assets to be bought up are CDOs that are backed by home mortgages, in which case I have a few problems with Professor DeLong’s analysis.

First, what does it mean to hold such a CDO to “maturity”?

Second, for the market for such CDOs to “recover,” the value of their collateral has to “recover,” i.e., the mortgage bubble has to re-inflate, and busted bubbles simply don’t re-inflate.

Third, the Obama/Geithner plan is brilliantly crafted to obfuscate the transfer of real loss from the investment banks to the taxpayers, simultaneously creating profit opportunities for hedge funds:

– Helicopter Ben has recently printed up another trillion BenBucks.
– My Hedge Fund (MHF) will gladly borrow $97M BenBucks to purchase $100M of misunderstood assets (worth $50M at market) from Citi.
– MHF will insist, however, on a $10M CDS to cover the risk.
– MHF will eventually default, forfeiting its $3M.
– MHF will then file a CDS claim and collect $10M and its pocket $7M.
– Citi will write off that $10M of its real $50M loss.
– The government will seize the assets, and sell them for $50M.
– The government will eventually have to tax those other $47M BenBucks out of circulation lest they contribute to inflationary pressures.

The point here is that Citi gets to name the price. MHF will pay whatever Citi asks, so long as they’ll sell MHF a swap to cover its 3% plus a generous fee. In no case will MHF have skin in the game.