"We Will Make Mistakes."
By Robert Romano
“Without credit, economies cannot grow at their potential.”—Treasury Secretary Timothy Geithner, February 10th, 2009.
Treasury Secretary Timothy Geithner has most certainly made his share of mistakes. And his latest one's a doozy.
In an ill-conceived effort to “restore confidence” to markets, Mr. Geithner yesterday unveiled the next installment of the Troubled Asset Relief Program (TARP), promising to “fundamentally reshape” the national framework for economic “recovery.”
Really, it's more of the same—the outright theft of the American taxpayer's hard-earned money—just on an ever grander scale. And this time, there may be no turning back from the brink of disaster.
Once again, government is urging “comprehensive and forceful” policy as opposed to what Mr. Geithner yesterday termed as “gradualism” to “rescue” the financial system. This, not so coincidentally, sounds a lot like what billionaire George Soros recently advocated for in the pages of the Financial Times. What he really means is that Congress, the Treasury and the Fed need to act even more hastily than they already have—before this pure thuggery and thievery, which will be to a degree never seen, becomes fully apparent to the American people.
Mr. Geithner's latest plan entails a price in the range of $1.25 trillion to $2.75 trillion, and will result in the nationalization of the banking system. And with the current composition of Congress, a functional supermajority as ALG News noted yesterday, it should be no trouble at all for the Obama Administration to get everything it wants to rack up the national debt, now $10.7 trillion, ever further.
After all, this is the same Congress that is currently finishing up work on its own $1.2 trillion debt plan—they call it “stimulus”—intended to “spend” our way to “prosperity.” As President Obama assures us, “That's the point!” Indeed.
Of course, he actually means not to “spend,” but to borrow, the nation's way to serfdom. In this doozy of a proposal, the way for Americans to get out of debts is to plunge yet further into debt the likes of which has never been seen.
The new and improved TARP—this time with what Mr. Geithner promises to be “strong” terms and conditions for financial institutions receiving funds—will get a world record for government debt. And the truth is, America has just entered the depths of the Abyss.
Mr. Geithner outlined six tiers for his plan, and from FinancialStability.gov: 1) what he termed as a “comprehensive stress test” for financial institutions receiving TARP funds; 2) a $500 billion-$1 trillion “public-private investment fund” to value so-called “troubled” assets; 3) $100 billion of Treasury funds leveraged through the Fed for up to $1 trillion in loans to consumers and businesses; 4) requiring firms to lend money the way and to the extent regulators tell them to; 5) $600 billion to purchase GSE—Fannie Mae and Freddie Mac—mortgage-backed securities and debt, plus another $50 billion for foreclosure “prevention” through modifications; and finally, 6) an expansion of Small Business Administration loans.
All told, if fully implemented, this would cost $2.75 trillion: $1 trillion for the “public-private investment fund”; $1.1 trillion—$100 billion allocated and $1 trillion lent-printed from the Fed—for consumer and business lending; $600 billion for purchasing bad paper from Fannie and Freddie; and another $50 billion to give homes away to those facing foreclosure.
But wait, they're not through yet. Here's how this scam would work:
First, the TARP-recipient banks will be forced to open up the mortgage-backed securities—essentially with a gun to their heads by the Treasury and Fed. Those securities will then be sold. How? And to whom? That may be the worst news of all.
They'll be sold through an Obama-administered “public-private investment fund.” In short, powerful millionaires and billionaires will get to pick and choose from a grab-bag of whatever securities they want that are most certainly currently undervalued. They will be bought up for cents on the dollar, and once the market begins the process of valuation, those investments will appreciate dramatically.
And to whose benefit? Well, undoubtedly by FOB (Friends of Barack). George Soros? Arthur Blank? Warren Buffett? Michael Eisner? Other wealthy contributors to the Democratic Party? To foreign powers or entities, perhaps?
The bottom line is that this “fund” will be used to make billionaires—or to make billionaires into trillionaires. The lucky FOB's selected to be partners in the “public-private investment fund” could see as much as a 900 percent return on their investments if, for example, good, foreclosure-free securities are purchased for ten cents on the dollar and subsequently appreciate to their real value.
And then, whatever's left over—the worst classes of assets—will be owned by the taxpayers, which will be paid for at inflated values, as ALG News reported yesterday. That is the price for keeping the delinquent borrowers in their homes. Isn't this grand?
In sum, the plan for returning “stability” to markets by valuating these securities is to sell for too little the good securities (which is most of them), and to buy for too much the bad securities so that those who took out unaffordable loans in the first place get to keep the houses at modified terms—you guessed it: at taxpayer expense.
To call this a mere mistake, one would really have to change the meaning of the word. This is a catastrophe. And the worst part is: it's an entirely contrived pay-to-play scam.
Robert Romano is the Editor of ALG News Bureau.