Plus, since the bailout is "limited" to companies headquartered in the US, they'll also make out by cleaning the bad stuff off foreign banks books. So Credit Suisse can sell their bad stuff to Goldman for $.40 on the dollar and then Goldman can resell it to Paulson for $.45 pocketing the difference. I think this will happen since the markets are so global it might not be enough to just clean up the US firms balance sheets. They have to clean up everyones.
Also, I keep reading people saying that it's not going to cost $700 billion because most of what is bought will be worth something, and so we'll get that money back. You even hear some people suggest maybe we'll make a profit since we can buy low, stabilize the market, and then sell once prices have risen. Yeah right. If you read Paulson's plan it says that the $700 billion is a cap on investments held at any one time. So it's a revolving door of credit.
He's going to buy $500 billion and then sell it for $380 billion. Then buy another $500 billion and sell it for $300 billion. Then buy $400 billion and maybe sell for $420 billion - but even in this case where a miracle slice of profit might creep in, he'll just use the revenue to buy more bad debt. No profits will be returned to the tax payer. And he can just keep going and going and going. No body knows what's out there but it's very common to hear estimates in the 5 to 10 trillion dollar range. And Paulson can wash it all away, he just has to do it in $700 billion dollar increments. Right now he'll run into the debt ceiling after he's burned through the first 1.5 trillion, but then we'll be in so deep that congress will just raise the ceiling again.
And I'm trying to find the quote - can't locate it now - but Paulson's already said that wiping out executives would be a "poison pill" he refuses to swallow. That's his line in the sand. Nice.
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Also, I keep reading people saying that it's not going to cost $700 billion because most of what is bought will be worth something, and so we'll get that money back. You even hear some people suggest maybe we'll make a profit since we can buy low, stabilize the market, and then sell once prices have risen. Yeah right. If you read Paulson's plan it says that the $700 billion is a cap on investments held at any one time. So it's a revolving door of credit.
He's going to buy $500 billion and then sell it for $380 billion. Then buy another $500 billion and sell it for $300 billion. Then buy $400 billion and maybe sell for $420 billion - but even in this case where a miracle slice of profit might creep in, he'll just use the revenue to buy more bad debt. No profits will be returned to the tax payer. And he can just keep going and going and going. No body knows what's out there but it's very common to hear estimates in the 5 to 10 trillion dollar range. And Paulson can wash it all away, he just has to do it in $700 billion dollar increments. Right now he'll run into the debt ceiling after he's burned through the first 1.5 trillion, but then we'll be in so deep that congress will just raise the ceiling again.
And I'm trying to find the quote - can't locate it now - but Paulson's already said that wiping out executives would be a "poison pill" he refuses to swallow. That's his line in the sand. Nice.
- jim 9-21-2008 5:07 pm