This issue is similar to what the banks are facing with mark to market. If the loan is current (the renter is paying the rent in our above example) why should you have to write down the value of the asset. The loss should only be taken the momemnt the loan goes into default.

Now, there’s a thought. And one with a precedent. That just might not be the wrong thing to do. It bears some consideration. It wouldn’t be the worst way to go about it, while they stress test and do what they have to do, before re-opening the solvent ones.

But if wimpiness is the order of the day, will it make a difference?

Thanks. I was speaking of Conflict of Interest in the sense that typically judges and politicians used to have to reveal personal associations and recuse themselves in dealing with things involving those associations. A few years ago I think 2 Supreme Court Justices recused themselves from hearing a case involving the death penalty because they knew the father of the victim many years previous. My curiosity is why COI doesn’t come up when Haliburton was getting no bid contracts and Cheney was a former employee and more to point in yesterdays post; we have all these ex Wall Streeters as part of the administration and so forth. Ordinarily COI might not be as strong a consideration, but when the discussion turns to bailing out companies that these people used to work for and with, shouldn’t we NEED to consider the possibility at least. Paulson for instance came from Goldman Sachs having lobbied strongly against the “Net Capital Rule” and voluntary regulation in addition to any efforts to assess future risk to Wall Street investment houses. Should we really have been surprised when this guy hands Wall Street money with virtually no strings attached in the form of the initial bailout. Where finance is concerned there is clearly the academic/political track and then there is Wall Street but they share the same schools and golf courses. It is a small world and as much as Nationalization should be a part of the discussion potential Conflicts of Interest should also be on the table.

Is is possible that what is really overlooked about Geithner is his long, long time with the Federal Reserve? I mean, it’s obvious that the Federal Reserve and those who plan with the Federal Reserve have an agenda which isn’t in sync with the priorities of the American people. Perhaps someone should do a follow up to this post that explores the collaborations between Federal Reserve heads and their European counterparts and how the American banking system is being made more to look like what has been put in place by the EU in most European countries over the past 12 years.

db

Suppose the administration *did* have a bold plan.

Suppose it planned to nationalize insolvent banks, wipe out the equity, haircut unsecured creditors, remove toxic assets, and re-privatize.

Do you think they would say it just yet? Consider what would happen.

If they announced this plan *without* identifying the offending institutions, credit and equity markets would freak out, wholesale funding from all banks would get yanked, and general chaos would ensue.

So, if you’re Geithner, you need to do it in one fell swoop. So, first and foremost, you need to identify who’s on the “kill” list. Until you’ve done this, you have to keep a poker face. You have to just be vague and make reassuring noises to the markets.

Then, when you finish the stress test and have your kill list, you let the axe fall on all of them at once. You can stop the head fakes. They’re wiped out.

Shareholders and creditors of institutions not on the kill list are actually reassured: they got the implicit seal of approval!

What you can’t have is a period of uncertainty and panic.

All I’m saying is that if the Administration were planning bold action, we shouldn’t expect to know. In fact, we should expect them to be doing just about exactly what they’re doing.

This would also explain a few of the puzzling developments: the weirdly half-baked Capital Assistance Program (it’s not the real plan!); Citi’s odd desire to convert preferred to TCE (maybe they caught wind of what’s coming and hope to make themselves solvent on a TCE basis); and above all, the stress tests.

I’m just saying. Maybe we should give the Administration more credit. Maybe they’re doing the right thing.

Officials of the adminsitration pursuing the erroneous policy should be reminded of RICO.

Summers, Geithner, Geithner’s chief assistant (from Goldman-Sachs) and other advisers of Obama are simultaneously judges, jury, instigators, and perpetrators of the present crisis. It is a nightmare.
The Racketeer Influenced and Corrupt Organizations Act covers several of the activities that seem in plain sight. People can be convicted under RICO, not for specific acts, but for a pattern of behavior. There are 35 of those patterns. One of them is bankruptcy. Another is securities fraud. Others are obstruction of justice, money laundering, theft, fraud…

Patrice Ayme

Any opinions most welcome.

http://www.washingtonpost.com/wp-dyn/content/article/2009/02/25/AR2009022503389.html?wpisrc=newsletter&wpisrc=newsletter&wpisrc=newsletter

With all the BILLIONS of dollars that seem to have gone to pay off the PLAYERS in the game that have given us this CRISIS, it seems to me that this is a threat to our national security…why doesn’t anyone but the folks making comments on this blog seem to understand this. Who can put the puzzle together to JOG the public out of the complacency that the stimulus spending is NOT the critical issue, it is that the US government has already been robbed and the doors to the US coffers are still open for the robbers to take all they want?

Conflict of interest!

The only way to show that a conflict of interest was acted upon is if someone somehow accomplishes one of two things:

1) Gettting the list (which is not avail. now) of who got every penny of the 185Billion that went in the front door and out the back of AIG. Surely, whoever accomplishes this needs to be aware that affiliations need to be carefully considered. If money went to Goldman or Morgan or both, then this looks like a conflict of interest.

2) the other way to do it is to demand a retroactive accounting for all banks and now bank holding comppanies as of Sept. 14, 2008 so that it could be clear who benefited from Lehman failing and the subsequent payment of bets through AIG via we the people.

Morgan and Goldman became bank holding companies shortly after Lehman went down just in time for TARAP 1. America has been brainwashed into being members of the American GROUPTHINKTHINKTANK that requires all members to believe that the there was no way to save Lehman , but the world would come to an end if we didnt immediately give AIG 85 Billion dollars (now up to 185B, and yesterday AIG needs another 60 BILLION). Still the GROUPTHINKTHINKTANK mantra somehow is requiring all of us to believe we don’t need to worry about it because if we hadn’t done that the world would have ended already.

There aren’t any investigative reporters even pushing the point. Only press releases that only 5 million net was spent on settling lehman CDS’s. But, whether it is Lehman or other CDS’s shouldn’t the public know which companies directly survived as a result of the free government money that flowed through AIG?

Shoulds and oughts as far as this subject is concerned, seem to be fantasy land.