The most puzzling fact of yesterday’s hearing was that Bernanke and Paulson had no clue what they were talking about and were contradicting each other at crucial points in their statements.
Paulson used the phrase “they needed to experiment with the process” - shame on you - is that all the former CEO of Goldman can offer in the expertise of the smartest people on earth? What happened to the “Masters of the Universe” - seems to be a one-way road. But most off all he is 2 years in office and has repeated constantly that things were under control - how about admitting to have made mistakes and humbling down?
Why are they saying this is the best plan in their opinion? So far, their opinions have only produced harm, why should it be now any better?
They have no idea how to do this but they want to pay higher prices and call it hold to maturity price. There is no such thing in asset-backed securities with 10k foreclosures on a daily basis. The underlying momentum is steep negative. To point out that the taxpayer may even make money on that is a statement the chairman of the FED should not make. That’s a salesman's approach to stress the profit potential. He since he claimed that he solely has the interest of taxpayers in mind, his actions are purely and obviously on a bailout attempt for Wall Street. Higher prices for their assets will raise their equity value but that will not lead to cheaper credits or credits at all for Main Street. The bankruptcy of banks will be avoided on the back of taxpayers.
It is strange how they try to sell their plan anyway:
• the first thing they need to tell the public is the amount of toxic assets in the system. That’s a figure they should and must have – but there is no mention of that;
• secondly, they should know to what degree the toxic assets have been marked down (that’s what Bernanke calls the fire sale price);
• finally, they should declare the premium they want to pay on those assets, which should be clear by this moment.
They make it look more confusing then it is for a good reason. They still try to cover up the mess they and the CEO's brought us into. Alone Citigroup has toxic stuff in the magnitude of $500 bil. and they have only marked down $50 bil/ so far. If they had marked it down properly, we would have the biggest bankruptcy in the history, dragging down all others with them. That has to be avoided but not the way these gentlemen try to do it and definitely not by rewarding any of this reckless thieves.
I am glad the FBI has (although astonishingly late) started an investigation.
Excerpt from CNBC:
The FBI is investigating four major U.S. financial institutions whose collapse…
But that’s more a cover up action, since if they dig too deep the implications of the results would cause huge trouble in a huge magnitude.
The train has left the station and a bailout needs to be done, but in case of LEH they had a particular strong opinion it was wrong to put taxpayers money at risk. That was 2 weeks ago. These people cannot be trusted by any means, including their so-called experts in the background, they have a 100% negative track record. Part of the bailout is to change the team to get credibility back and maximum transparency. As I said yesterday, no toxic paper from GOLDMAN at PREMIUMS, they only showed write downs of $5 bil. so far but have at least $50 bil. in tier 3 capital on the balance sheet. It has to made clear that no conflict of interest may play into the decisions of the Treasury.