So what has really become of TARP after today?
Follow the confusion. When Paulson sounds ambiguous and vague about the whole thing, it is either:
1. Because the Treasury has a carefully crafted and well defined plan that they intend to execute with artful precision, but which, if it's all the same to you, they would prefer not be subject to ruinous political pressures before implementation;
2. Because the Treasury intends to make major modifications to various financial instruments and does not want to telegraph their intentions to speculators who, traitorous free-market extremists that they are, would not only dream of enriching themselves on the backs of hapless government officials, but would gleefully put their plans into action even if it cost the jobs of the entire administration. (Thankless swine! Remember who repealed Glass-Steagall? 53 Republicans and 1 Democrat, baby).
3. If too many questions are asked about how overpaying for a few dozen-billion in asset backed securities will impact the market-to-market values of several trillion similar securities, the same thankless swine in #3 above would happily manipulate these auctions to profit and pay their massive bonus pools, and we can't have anyone but Goldman partaking of that kind of nefarious malfeasance.
YOW: After the jump.
Posted by guest , Nov 12, 2008 4:28PM
first
Posted by guest , Nov 12, 2008 4:31PM
Reference to above should be to #2 not #3, otherwise another good, quality post from EP (although I may miss going private more).
Posted by guest , Nov 12, 2008 4:32PM
Amazing Video Reference E.P.!!
Posted by guest , Nov 12, 2008 4:33PM
The original TARP plan was well-intentioned but it's been dwarfed by the sheer magnitude of the problems that Paulson unleashed when he opened Pandora's box and let Lehman fail. Now his precious Goldman looks to follow Fuld down the shitter.
TARP might have worked months ago when consumers were still spending and banks were still lending - take some of the illiquid but valuable assets off the books of the banks and help them reduce leverage. Not a bad idea.
But 90 days late and $9T short, that isn't going to work. Treasury can't afford to just buy up some assets - they need some multiplier - and they got that by buying equity.
The moronic thing Paulson did today was to come out and admit he's not going to buy any troubled assets. Moronic why? Because everyone holding similar assets who was waiting for that Treasury bid to come in and buoy them puked them all over the Street today. Why are the likes of C, GS, and MS all down so much today? Because that bid is gone and they are still holding all that junk.
Posted by guest , Nov 12, 2008 4:42PM
4 is exactly right. Any trade based on someone offloading crap assets on their books to the government is now busted. As is any business model.
Market reaction appropriate, although this dive is getting to be a bit much.
Posted by guest , Nov 12, 2008 4:44PM
Robert,
The only reason I confused Saturday with Sunday is because your 24 hour days have turned are 48 hour nights.
Saturday was a long time past, and so are you.
GOD
Posted by guest , Nov 12, 2008 4:44PM
It's time to get Jeff Skilling out of jail. He could solve these problems.
Posted by guest , Nov 12, 2008 4:46PM
Paulson STFU
Posted by guest , Nov 12, 2008 4:50PM
Bibmo clips
http://online.wsj.com/video/palin-on-wardrobe-gate-rumors/01A8CB1D-84C4-42BE-8295-CBEA0A554371.html
can this women speak
Posted by guest , Nov 12, 2008 4:55PM
Just when you thought the current administration couldn't possibly F'up one more thing. They surprise everyone.
Posted by guest , Nov 12, 2008 4:57PM
The reason Paulson sounds as if he doesn't know what is going on is probably because the new administration is already taking over and they're not telling him much of anything.
Ultimately taxpayers will never get any money back from this scheme but if Paulson was in charge there was a tiny possibility the government might have made money because he was going to sell the toxic assets through auctions.
Also Paulson initially didn't want the bailout - Bernanke pressured him by telling him the World Was Going To End if they didn't ask congress to approve it. People are blaming Paulson for everything because he is a convenient target. I can't wait until the new administration is in place and they continue to blame Bush and Paulson for everything.
Posted by guest , Nov 12, 2008 4:58PM
What do AMEX and Goldman have in common?
Warren Buffett
Wrigleys 2-2-2 bank holding companies in 1
Posted by Anal_yst , Nov 12, 2008 5:00PM
Wardrobe-gate? Sigh...
Posted by guest , Nov 12, 2008 5:03PM
Not sure you can blame the G/S repeal on one party.
The final Graham Leach Bliley bill, which repealed Glass-Steagall, passed rather overwhelmingly by a vote of 90-8 in the Senate, including the yea vote of 84% of Senate Dems. It was also signed into law (and not symbolically vetoed) by the Dem president.
The partisan vote on the original bill, which you note, differed substantially from the one that passed in the house (by 241-132) because it did not include provisions to boost the Community Reinvestment Act, which was added to the final version.
Posted by guest , Nov 12, 2008 5:09PM
http://www.theonion.com/content/video/in_the_know_should_the_government?utm_source=onion_rss_daily
"Should the government stop dumping money into a giant hole?"
Posted by guest , Nov 12, 2008 5:09PM
@11 - you are exactly right - Paulson's resistance to the bailout is exactly why we are in this nightmare. Bernanke was right - once they let Lehman go, the entire financial system was on the brink.
I'm in favor of free markets and I think bad firms should be allowed to fail, but not at the expense of the entire system. If AIG had been allowed to fail in the wake of Lehman, there would have been a cascade of failures in the banking system (as counterparties couldn't pay each other) that would have eventually hit the non-financial sector. Pick a solvent company - Walmart? What would they have done when their receivables all defaulted and the $5B they hold in cash was depleted? Can't go to the bank and get a loan - gotta lay off employees.
In Lehman's case they should have wiped out the equity and all of the management bonuses, but sweetened a marriage with a healthier bank so the counterparties and clients would be made whole.
That would at least have left confidence in the banking system as we worked off the leverage. Now, we're screwed - no one can borrow money.
It's kind of a binary outcome at this point. Either the government keeps the financial firms afloat - thus all of those AIG CDS's don't have to be paid off and AIG can pay back that $100B they borrowed - or the economy collapses and the US repudiates its debts.
Posted by guest , Nov 12, 2008 5:22PM
Is it too much to ask for Paulson to concentrate on one thing at a time?
Posted by TALUFA , Nov 12, 2008 5:40PM
This is the Bush legacy to the Obama presidency. One huge FU of a going away present!
The real question is: If McCain had won, would Paulson have done something different?
WOT! WOT!
Posted by guest , Nov 12, 2008 6:31PM
Just more unpatriotic negativity from liberals who hate America, and the troops.
Remember: Question the party? Question Jesus!
Posted by guest , Nov 12, 2008 6:44PM
I think Paulson is doing this either because they have been looking at the assets at banks and they realized this has all been a scam and many of those assets are worthless or he is doing what the new administration is telling him to.
But I would rather have him in charge than someone from the new administration. Someone who does business with a criminal just so he can get a better deal on his fancy home when he knows he is going to be in an election doesn't show good judgement, especially when that business associate has Auchi wire him the money.
Posted by guest , Nov 12, 2008 8:19PM
EP, are you still [allegedly] working in PE? If you say yes, I'm calling bullshit, b/c there is no one in PE (regardless of the crisis we're facing) that has as much time to post articles as you do.
Posted by guest , Nov 12, 2008 9:37PM
@21 - You've obviously never experimented with the Bolivian marching powder aka Dama blanca! Not to suggest EP's into the yeyo, but I've pulled my share of 72-hour drafting sessions with the help of my white lady.
Posted by guest , Nov 12, 2008 11:16PM
EP never worked in PE. He or she is just a sophomore at Hunter College who has been blogging for years.
Posted by guest , Nov 12, 2008 11:47PM
Wow comments were good for a change right up until #21+ got out of the bar.
EP keep it up
Posted by guest , Nov 13, 2008 12:34AM
Glad to see EP firing on all cylinders again except for the obvious misnumbering in a three point post, and of course, the wrong historical facts.
Oh well, it was concise and genuinely funny.
And the comments (omitting 20 - 23)! It was a hard day and I really needed the laughs.
I couldn't believe that someone (20) actually managed to bring Obama into this farce. You, sir or madam, score points for dogged but idiotic ideological commitment.
Has no one noticed that Andrew Ross Sorkin called on us all not to vilify Henry Paulson for changing his mind? Isn't there anyone high-minded in this crowd? I certainly hope not.
Posted by guest , Nov 13, 2008 2:58AM
EP was at Kaupthing, no? 'nuff said (?)
Posted by guest , Nov 13, 2008 3:27AM
@10 - Don't be such an ignorant douche, Congress passed the TARP bill (as they did with the Iraq war, and the Patriot Act, to name just two other politicized bills).
Posted by guest , Nov 13, 2008 3:29AM
@18 - see 27.