Matt Yglesias

24 Responses to “All About The Plan”

1. Why oh why Says:
   March 23rd, 2009 at 12:53 pm

   The toxicity of those assets is Bush’s legacy, the failure of this plan will be Geithner and Summers’ legacies.

   Meanwhile Obama has more important things to do than dealing with this stuff. It seems to me he approaches the financial crisis the same way Bush approached the Iraq War: delegate everything to a couple of very powerful officials then go watch TV.

2. TJ Says:
   March 23rd, 2009 at 12:55 pm

   “Legacy assets” is ironically right. They’ll probably be worth something after we’re all dead.

3. Hedley Lamarr Says:
   March 23rd, 2009 at 1:05 pm

   A middle ground would be to call them “baggage” assets.

4. Devin McCullen Says:
   March 23rd, 2009 at 1:06 pm

   So does that make this program a LARP?

5. roger Says:
   March 23rd, 2009 at 1:13 pm

   DTM, what you are writing makes no sense. If there is no”market” for these assets, how could you possibly attract private investors if, as you say, “private investors will have a lot more at stake in the riskiest funds than people were originally assuming based on the weekend reports.” Then there will not be private investors, unless some law is passed making it illegal for private investors not to bid.

   There’s a stark eiter/or here: either the government agrees to take the hit with non-recourse loans that cover most of the bidder’s bid, or it doesn’t. If it doesn’t, the bidder doesn’t bid. If it does, the gov is on the hook for those loans, just as Indymac was on the hook for its non-recourse mortgages. That’s all there is to it. No softsoaping will get around this vile plan, which tries to run around congress (terrible congress, always upsetting the elite by their “wild” populism) by using the FDIC in a way it was never set up to be used, and thus putting the credibility of one of the few working parts of the financial system up for grabs.

   The bad case scenario is that this spreads the infection through the healthy part of the system – that is, the banks that are not implicated in the bubble, but have to take the hits resulting from the lowered level of economic activity, cannot rely, any longer, on the FDIC. You think people aren’t going to realize this in five months? What happens when a bank fails, FDIC doesn’t have the money to cover insured accounts, and people look up and go, where is the insurance money for my bank account.

   All to support a failing system and the failed bets of a relative handful of rich families.

6. TJ Says:
   March 23rd, 2009 at 1:14 pm

   That would be a Legacy Asset Recovery Facility, or a big LARF. Or maybe a BARF, per Hedley.

7. Dont Trust Me Says:
   March 23rd, 2009 at 1:21 pm

   roger

   i get paid by the post to talk up plans that help PIMCO
   and criticize plans that hurt PIMCO. Most of the time I just write nonsense hoping to obscure the amount the government is giving away to my employee

8. Rob Says:
   March 23rd, 2009 at 1:24 pm

   This plan fail the Daniel Davies test: If its a good idea there is no reason to tell lies to sell it.

   They are saying this won’t cause the government to overpay for the asset but we know that is what exactly is going to happen. They are lying to us.

   An DTM is right the details before were wrong, private entities are only fronting 7% while the Treasury puts up 7% and the FDIC carries the remaining 85%.

9. Max Says:
   March 23rd, 2009 at 1:34 pm

   For all those reading this an not knowing what a toxic asset is, here’s a good video about it, http://www.newsy.com/videos/getting_to_know_toxic_assets/

10. kafka Says:
    March 23rd, 2009 at 1:44 pm

    “So, we can potentially create a market that didn’t previously exist ”

    Nope, because there’s already a market, but the banks refuse to sell into that market because the clearing price would reveal how fucked up their balance sheets really are. “Don’t ask – don’t sell” – ever heard of that?

11. Peter K. Says:
    March 23rd, 2009 at 1:54 pm

    Meanwhile Obama has more important things to do than dealing with this stuff. It seems to me he approaches the financial crisis the same way Bush approached the Iraq War: delegate everything to a couple of very powerful officials then go watch TV.

    Dumbest analogy of the day. My bet for dumbest of the week even though it’s only Monday.

    What about the stress tests? How come no one is talking about the stress tests? Krugman failed to mention them in his column.

12. Why oh why Says:
    March 23rd, 2009 at 1:57 pm

    There is a gap between supply and demand. Obama’s solution: massive government subsidies. Why save those institutions in particular is mysterious.

    But the worse is the introduction of those leeching and incomprehensible “third parties” intermediaries, that will probably take their cut and make the subvention even more inefficient.

    It seems like a dream come true for Wall Street: not only they get ever more bailout, but the government is inventing new ways for them to steal taxpayer money.

13. fraud Says:
    March 23rd, 2009 at 2:07 pm

    #16 there are not any subsidies as DTM explained above
    why do you repeat this common criticism when it is still theoretically possible that it is not the case

14. Why oh why Says:
    March 23rd, 2009 at 2:17 pm

    A subsidy is commonly defined as the transfer of government money to the private sector. The Paulson plan was a subsidy, and its heir the Geithner plan is a heavily disguised subsidy hiding behind jaw-dropping and unnecessary shenanigans.

    How can anyone read the description of those “auctions” between “competing” investors on “assets” held by themselves and their friends, and not see immediately they will be used to siphon as much money as possible?

    What’s the point of those auctions except raising the price of assets (and therefore exposure of the public, and size of the subvention)? Perhaps allow Obama to confuse people like DTM who can still believe his plan is not a subvention.

15. Nick Says:
    March 23rd, 2009 at 2:43 pm

    “Legacy asset” isn’t a new term, genius. It’s the term we use in finance to distinguish between assets trading in the secondary market and assets to be sold in the primary market. Just because you haven’t heard of it, doesn’t mean that it’s an attempt to re-brand so-called “toxic assets.”

    Maybe you should tell us more about how to value MBS, what with your deep knowledge of structured finance products and all. How about the relative value of cross-collateralization in the senior tranche? The optimal geographical distribution for jumbo mortgages vintage 2006? How you’d price the different forms of call protection?

    Or maybe you should just paddle back to the shallow end of the pool, and stop pretending like you have any clue what you’re talking about.

16. 21 Says:
    March 23rd, 2009 at 3:46 pm

    19 fails

17. Buy Viagra Online Says:
    March 23rd, 2009 at 4:42 pm

    Buy Viagra Online…

    http://url.edna.edu.au/4bbN Buy Viagra Online…

18. roger Says:
    March 23rd, 2009 at 5:26 pm

    I love your tone, Nick, from the “genius” to the idea that if the big boys use a euphemism, we should quail that we might be lefft out of the club – in the baby pool – if we don’t fall in line. Funny, the geniuses in the deepend of the pool seem to have lost 8 trillion dollars and can’t find it. But they are geniuses!

    Call it trash. Call it garbage. Call it bad assets. Or buy it at the current market price of pay me to take it off your hands. The poor shallow pool people know white elephants and bad bets when they see them. Only the geniuses can convince themselves that there losing racetrack ticket are legacy assets.

    That’s hilarious. What other stuff have the geniuses in the deep end thought of? They are so smart!!!

    I will give them this. They are smart enough to have given themselves six more months of delusion, and made the FDIC come up with the money to pay for it.

19. re-branding Says:
    March 23rd, 2009 at 6:46 pm

    douche bag isn’t a new term either