TARP … PPIP … TALF … Government programs … just what we need more government programs to help get us out of the mess we’re in, right? Well, yeah, according to Timmy Geithner and Benny Bernarke because that’s what they’re doing.
Okay, we all agree that the problem is that we are underwater with trillions of dollars worth of toxic Mortgage Backed Securities and credit derivative junk, mainly student loans, car loans and credit card debt. How we got here is no mystery; people owing these loans defaulted on them. And, as to why they defaulted on them, that is also no mystery; the underwriters of these loans made them very easy to obtain and the loan originators; paid nothing unless the loan closed, were more than happy to oblige those underwriting guidelines; guidelines that included no-doc loans, a.k.a. liar loans because your credit score alone was “awarded” the loan and mortgage brokers armed with desktop underwriter, a system that allowed them to “approve” their own loans.
And so they introduced the Troubled Asset Relief Program, TARP, and poured a trillion dollars into these bankrupted banks and lending institutions and now Geithner and Bernarke are using everything they can, the treasury, the fed, FDIC, and doing more of the same thing with the Public-Private-Investment-Program, PPIP to throw more money at the same toxic asset problem and he is guaranteeing the investors that they can’t lose, as he is putting up 50% of the money and then using FDIC money to pay back the investors loss if the toxic assets are worth less than 50% of the original note and they’re also buying up legacy debt, in other words future debt that may hurt the banks’ chance of raising capital and making loans. Gee guys, how about buying up my future debt?
Ah, but here’s a real kicker, Benny-Boy Bernanke is buying more toxic derivatives, car loans, student loans and credit card debt with Term Asset-Backed Securities Loan Facility, TALF, money and selling them to investors. Ah, but no problem because they’ve already got a buyer, the Federal Reserve Bank of New York, will create a Special Purpose Vehicle, SPV, and buy these “asset” backed securities, a trillion dollars worth and then what? Try to sell them, of course but to who? China, who else already owns this country.
The same cycle that got us into this mess is NOW supposed to get us out and "save" Capitalism by throwing more money at the banks and investors and "guaranteeing" that they can't lose by giving them privatized profits and socialized losses, so the moneychangers, again, can’t lose. Great day in a banker's life but, ah, where is the help to the guy who made his monthly payment for 10 years but now is out on the street after a short sale that made money for everybody but him? I'll answer my own question; he’s still out on the street.
They have now thrown down 3 trillion dollars at these ‘toxic assets,” a misnomer in itself for if it’s toxic how can it be an asset? They’ve spent three trillion dollars in three “different” government programs, three differently named programs but with the same exact plans; get rid of the banks toxic debt and “save Capitalism.” The clinical definition of insanity is someone who does the same thing over and over but expects different results. Timmy Geithner and Benny Bernanke ah … are you listening?