This morning, the Obama administration announced its plans to finance as much as $1 trillion in purchases of illiquid real-estate assets, using $75 billion to $100 billion of the Treasury’s remaining bank-rescue funds.
The Public-Private Investment Program will also rely on Federal Reserve financing and Federal Deposit Insurance Corp. debt guarantees, the Treasury said in a statement in Washington. One of the challenge would be to hand-pick the appropriate banks and private assets managers that will be the beneficiaries of this program.
The news drove the stocks higher. Dow was up 313.65 to stand at 7,592.03. The market will take any good news it can take and this program implies wonderful promise. However, I would remain cautious till they announce the beneficiaries of the program.
If all works well, the program will stabilize the shaken financial system and free up credit lending in an important first step. Then foreclosures will subsequently reduce helping the real estate market recover. With the promise that certain vital companies will not be allowed to fail, job security and public confidence will slowly return.
Indeed, the outlook is promising. Looking deeper, drawing upon debt to buy debt means increasing the money supply and increasing the risk of hyper-inflation. But that is a possibility that we do not have the luxury to be concerned about at the moment.
Nearly 18 months into the crisis and trillions more in debt, the tax-payers have to wonder how much more they have to be saddled for this crisis to be over. Companies that took irresponsible gambles for profit are being bailed out at the expense of tax-payers. Till this day, I still find myself struggling to accept the immorality and unfairness of present.
The Public-Private Investment Program will also rely on Federal Reserve financing and Federal Deposit Insurance Corp. debt guarantees, the Treasury said in a statement in Washington. One of the challenge would be to hand-pick the appropriate banks and private assets managers that will be the beneficiaries of this program.
The news drove the stocks higher. Dow was up 313.65 to stand at 7,592.03. The market will take any good news it can take and this program implies wonderful promise. However, I would remain cautious till they announce the beneficiaries of the program.
If all works well, the program will stabilize the shaken financial system and free up credit lending in an important first step. Then foreclosures will subsequently reduce helping the real estate market recover. With the promise that certain vital companies will not be allowed to fail, job security and public confidence will slowly return.
Indeed, the outlook is promising. Looking deeper, drawing upon debt to buy debt means increasing the money supply and increasing the risk of hyper-inflation. But that is a possibility that we do not have the luxury to be concerned about at the moment.
Nearly 18 months into the crisis and trillions more in debt, the tax-payers have to wonder how much more they have to be saddled for this crisis to be over. Companies that took irresponsible gambles for profit are being bailed out at the expense of tax-payers. Till this day, I still find myself struggling to accept the immorality and unfairness of present.
We'll deal with the bill when it comes. We always have. We'll buy what we can't afford, and borrow what we can't return up to the point when we are faced with the reality of our downfall, then we will buy our way out with more debt. It is a flawless system. Because hope is priceless and this is the land of hope and dreams.
Human nature. It keeps coming back.
1 comment:
So now after going through the plan in more detail:
1. Plan still needs US Congress's approval.
2. Plan proposes to set up a 5% stake in the toxic assets for the government and the other 5% for private investors. The remaining 90% will be supplied by FDIC(Federal Deposit Insurance Corporation).
3. If the borrower forfeits, he will lose the 10% borrowed from the government and private investors but he will not need to repay the 90% from FDIC.
4. How do you set the value of the toxic assets? And doesn't this remind you of the buy what you can't afford American philosophy using 10% to gamble for ten-fold?
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