Party Pooping Free Market Rebels Still Fighting The Entity

Author:
Updated:
Original:

We’re totally surprised that there has been so much negative reaction to the plan by the Treasury Department, Citigroup, JP Morgan Chase and Bank of America to create a $100 billion fund to buy bad credit products that no-one else wants with money from investors who wouldn’t buy those credit products directly. Doesn’t everybody understand that the solution to debt problems is always more credit? If you don’t invest in the Entity, somebody bad wins!
One group that doesn’t get it is the editorial board of the Wall Street Journal. Listen to this unabashed MLEC bashing: “The announced vehicle, dubbed the Master-Liquidity Enhancement Conduit, will only buy highly-rated paper, to ensure investor confidence. The trouble with this theory is that investor confidence has been shaken because people no longer feel they can trust the ratings. This in turn has resulted from the fact that much of the now-dubious debt was rated not on the value of the collateral, but on the strength of the bank (such as Citibank) that issued it,” the Journal editors moan.
And they don’t stop their bitching there. Check this out: “So we're left to wonder whether Citibank isn't trying, in effect, to pull off the same trick twice. The conduit would issue debt and use the proceeds to buy otherwise illiquid commercial paper. But why would anyone buy the conduit's debt? Because J.P. Morgan, Citibank and Bank of America stand behind it! And, for good measure, Hank Paulson says the consortium is doing the right thing. That's not exactly the same as telling people the new paper is safe, but it's not exactly a federal disclaimer, either.”
Rupert Murdoch probably made them write that. Who can you trust if you can’t trust the Wall Street Journal to back Hank Paulson’s plan to bail out Citigroup? Hey guys, Hank was appointed by George Bush. If you don’t back Hank, Hillary wins! Someone get Larry Kudlow on the phone.
What’s that? Even Larry’s a skeptic? Say it ain’t so. “Now let me get this right. Here’s my reading. At the urging of the Treasury, the big banks that couldn’t sell asset-backed commercial paper, have decided to pool their resources and create a new vehicle to do what? Sell more asset-backed commercial paper. The markets aren’t buying it. They gave it a big Bronx cheer,” he writes. Oh, how the mighty have fallen.
You know what these people aren’t noticing? That the proper name of the Entity is Master-Liquidity Enhancement Conduit. Got that? “Master.” You know what that means? That’s right. It means that it’s in charge. Get with the program. They wouldn't call it that if it weren't going to totally run things. The Master is all up in the credit marketz enhancing ur liquidity.
For reals.
House of Paulson? [Wall Street Journal]
More Shoes to Fall [Kudlow's Money Blog]

Related