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Old 2008-09-23, 20:40   #529
ewmayer
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Sep 2002
República de Califo

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Default Bernanke: Treasury should pay "above market" price

As the crooked banksters and their cronies in Washington like to tell us, unprecedented times call for unprecedented measures. In that spirit, I am awarding a second Moron of the Week [hell, I may have to award one each day this week] to "Uncle" Ben Bernanke:

Treasury Should Avoid Paying `Fire Sale' Prices for Assets, Bernanke Says
Quote:
Federal Reserve Chairman Ben S. Bernanke signaled that the government should buy devalued assets at above-market values to make its proposed $700 billion rescue package most effective in combating the financial crisis.

``Accounting rules require banks to value many assets at something close to a very low fire-sale price rather than the hold-to-maturity price,'' Bernanke said in testimony to the Senate Banking Committee today. ``If the Treasury bids for and then buys assets at a price close to the hold-to-maturity price, there will be substantial benefits.''
"Substantial benefits" to whom, exactly? Certainly not the taxpayer.
Quote:
Bernanke's remarks, an unusual departure from his prepared testimony, come as lawmakers and the Bush administration negotiate a rescue plan aimed at easing the worst financial crisis since the Great Depression. The Fed chief said paying prices higher than the bad assets would fetch in the open market would help ``unfreeze'' credit markets and aid the economy.

Analysts said Bernanke is essentially advocating that government use a pricing model that assumes that the debt will be paid in full over a long period of time. That is different from the mark-to-market model used by investment banks that prices assets at what they are worth on a given day.
If that pricing model were remotely appropriate for the kind of debt we`re talking about, WE WOULDN`T BE IN THIS MESS TO BEGIN WITH. Hey Ben, you clueless fool [or complete "Tool of Wall Street" - take your pick], remember the other "pricing model" you and your mentor Greenspan were advocating for most of the past decade? The one about "historically speaking, housing prices will always go up"?
Quote:
The risk is that the model does not provide transparent pricing of the assets taxpayers are taking on, said Ann Rutledge, partner at R&R Consulting in New York, a firm that specializes in structured finance. Many of the securities ``are not going to pay at maturity,'' Rutledge said.
In slightly less politic language than used by Mr. Rutledge: Are you frickin' out of your mind?

Der Spiegel | The World Shouldn't Have to Bear the Burden for America's Lapses: The US government is buying bad debt for $700 billion. Now Washington is asking other countries to jump in and help, too, but the Germans are bowing out. Believing that the rescue package sends the wrong signal, experts from the country's leading economics think tanks argue it's the right call.

Last fiddled with by ewmayer on 2008-09-23 at 20:43
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