Bend Over and Say, "Uncle Sam"

Bend Over and Say, "Uncle Sam" : Information Clearing House - ICH | By Mike Whitney

March 24, 2009 "Information Clearing House" -- -- Timothy Geithner refuses to take underwater banks into receivership and resolve them, but has no problem transforming the FDIC into a hedge fund. Go figure? Here's what everyone needs to know: The US government (you) will provide up to 94 percent of the financing (low interest, of course) for dodgy mortgage-backed assets that no one in their right mind would ever buy so that wealthy and politically-connected banksters can scrub up to $1 trillion of red ink from their balance sheets. Ugh!

The so-called "private partners" in this confidence scam, will get non recourse loans, which means that if the plan backfires and they lose their skimpy 6 percent investment they can call it quits and leave the taxpayer holding the bag. ($1 trillion in potential losses!) Here's how Paul Krugman sums it up:

"The Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt. This isn't really about letting markets work. It's just an indirect, disguised way to subsidize purchases of bad assets."

"Markets"? Who said anything about markets? This is corporate welfare, pure and simple. ...
...
"The bad assets are bad because they are worth less than the banks say they are. House prices have dropped by nearly 30% nationwide. That has created something in the neighborhood of $5+ trillion of losses in residential real estate alone (off a peak market value of housing about $20+ trillion). The banks don't want to take their share of those losses because doing so will wipe them out. So they, and Geithner, are doing everything they can to pawn the losses off on the taxpayer." ...