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Today's Nuze

"Every government interference in the economy consists of giving an unearned benefit, extorted by force, to some men at the expense of others."

Ayn Rand

Nobody's listening.

THE PLAN

By
Neal Boortz
@ March 24, 2009 8:56 AM Permalink | Comments (14) | TrackBacks (0)

Yesterday Obama released his plan to loosen up the credit markets. The Dow liked it, rallied 500 points. For those of you who really want the details, Jamie Dupree has the plan posted in its entirety.

Here's the gist .. The government in partnership with private investors will purchase bad assets from troubled financial institutions. If the value of the securities goes up, the private investors and taxpayers would share in the gains. If the values go down, the government (the taxpayers) and private investors would incur losses. The goal is to generate $500 billion in purchasing power by using $75 billion in TARP money, combined with private investment and loans from the FDIC and the Fed. And as we've already known, these toxic purchases could grow to $1 trillion.

It's wait and see time. At least Obama sees a role for the private sector. I have a fear though. What if the private sector entities who participate in this rescue end up making a lot of money? How quickly will Barney Frank et all start screaming for windfall profits? Remember, AIG has shown us that you can't trust the government to abide by a simple contract any more. Why trust the government in this?

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Jamie Dupree's Blog

If you enjoy Neal's daily chat with Jamie Dupree, you'll love Jamie's Blog! Check it out for analysis of the campaigns and goings on in Washington D.C.

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What others are saying

  • Obama's TARP better thought out
    The private element of this program is intended to allow a market-like system to determine the "true" price of the toxic assets. The problem with President Bush's TARP program was that although it set aside money to purchase troubled assets, there was no framework for pricing them. The result was the mess we inherited. The Obama program is a lot more complicated than Boortz' articulated. Please folks, know what you're talking about before you start yammering away...
    By Bill Markov @ 03/24/09 03:55:57 PMreport abuse
  • which way did it go??
    I don't think anyone in Washington can tell you where our money has gone 100% on any of the bailouts, stimulus, what ever you want to call it. Infact, 20% would be a stretch. THAT is what ticks me off the most and the fact that morons like Copy and his buds in the welfare lines are going to get more of it than I will!!!!! Whew, I got madder and madder as I typed....
    By Joyce M/Blythe @ 03/24/09 01:50:15 PMreport abuse
  • Bush's idea?
    To repeat another's post: "Wasn't this the ORIGINAL TARP plan that was passed last Fall under Bush?" Seriously, wasn't that the whole point of the first $700B? buy toxic assets, relieve the pressure, sell some that recover, and eat the losses of the rest? So what DID happen the first time 'round, and why do we expect a different result this time?
    By ctd @ 03/24/09 01:33:59 PMreport abuse
  • Moral Hazard
    What Boortz left out is that the "private sector" will be composed of hedge funds with close connections to the tax-dodger in chief. They will receive non-recourse loans from the government to buy these "troubled assets". If by some miracle, they can unload them at a profit, they get to keep the money. If, as is all to likely, they cannot make a profit, the government will not be able to collect the loans. That's what non-recourse means.

    So basically, the Obama administration is gambling with $1 trillion. If the bet pays off, these companies (politically well connected companies) will make vast fortunes. If the bet doesn't pay off, the taxpayer will take the fall.

    This is certainly a moral hazard.
    By Corbett @ 03/24/09 12:23:47 PMreport abuse
  • Market Reaction
    One has to wonder how much of the market increase was due to the bailout plan and how much to the news of the increase in housing starts?
    By Kevin @ 03/24/09 11:49:21 AMreport abuse
  • Washington, DC = "Las Vegas, East"
    Worse than mere speculation, this is leveraged speculation! What fun it must be to gamble with others' money!
    By JonT @ 03/24/09 11:42:04 AMreport abuse
  • Contracts
    But you CAN trust the government to abide by contracts in this case. Obama said explicitly that the government will not disallow the AIG executives from taking their bonuses. And Obama said that he will not use the tax code to punish these executives. And Chris Dodd did not include a provisions into the original bailout bill that would have nullified the contracts. That is the government allowing the contracts to go forward.
    By Chris @ 03/24/09 11:20:24 AMreport abuse
  • Dick Morris' take on it.
    I think that Dick Morris may have had a point last night.

    He was saying that the false indignation in Congress over the AIG bonuses (an the resulting 90% tax idea) was a ploy to ward off the private sector from participating in this program. This would set it up as a failure from the start in order for Pres. Obama to make the case for nationalization of the banking system.

    I have to say, it sounds conspiratorial, but with the track record we're working with here, it seems plausible to me.
    By Kurt P @ 03/24/09 11:07:34 AMreport abuse
  • Barney Frank
    As a play on the cartoon character 'Snaggletooth' name, we like to refer to Barney as 'Spittlepuss'. Somehow, it just seems so appropriate.
    By Keith Jones @ 03/24/09 10:56:21 AMreport abuse
  • RTC
    Didn't we have this in the 80's after the S&L "crisis"? They called it the Resolution Trust Company"
    By Chris @ 03/24/09 10:16:39 AMreport abuse
  • Obama better hurry up...
    Something that alot of US news outlets are not reporting on is that Russia, China, and the UN is now calling for the dumping of the US dollar. They are calling for the IMF to help kill it by announcing a brand new international currency. Once that happens I really don't know what could be done. Nothing probably. Hope the administration has some kind of backup plan. Perhaps a voucher program that FEMA can provide. Does anyone know exactly what could trigger the dump of the dollar? :(
    By Ivan @ 03/24/09 09:51:29 AMreport abuse
  • So now it's "Good" ?
    Er...ummmm....ehmmmm

    Isn't this "speculation"? Isn't this what libs are saying was so evil and put us in the mess we are in? Private investors speculating on investments? Buying low and selling high to make a lot of money?
    By Steve @ 03/24/09 09:45:02 AMreport abuse
  • Why bring up AIG?
    AIG should have long since gone bankrupt. They owe their life to the government, so it's too bad for them. Next time, they should just say they would rather go bankrupt and then just talk to a judge and creditors instead. I'm tired of hearing about a failed enterprise that the government has kept alive in a vegetative state. That's not part of the story anymore.
    By Brian Greer @ 03/24/09 09:09:52 AMreport abuse
  • The Original Plan
    Wasn't this the ORIGINAL TARP plan that was passed last Fall under Bush? That plan was URGENTLY needed to purchase the supposedly "toxic" mortgage-related securities from the financial institutions so they could get these volatile assets off their books and stabilize their balance sheets. Then the government would weed out the truly risky or non-performing loans, repackage the good stuff and sell it at a profit. Then after Congress PASSED the $700 BILLION package the Sec Treas decided that it couldn't be done because there was no way to set a fair market value on the current assets (even though the financial institutions are required under FASB and SOX to "mark to market." OK, so they took the $700B earmarked to buy these assets and eventually sell them at a profit and just handed it out to the financial institutions with no stipulations as to how it should be used - and the market has been in freefall ever since because the PROBLEM wasn't solved.

    So now some economic GENIOUS in the Obama administration says, "Hey! Let's partner with private investors to buy up these "toxic" assets, clean them up and sell them!!!

    What is the matter with these people?????
    By DG in GA @ 03/24/09 09:08:47 AMreport abuse
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