The Price of Liberty is Eternal Vigilance
Shrimp 'n Grits
“Every Body’s got skin in the game” – ‘fraid not Tiger!Lee Walton
What a ridiculous comment for the President of the United States to make about his solution to the nation’s current financial crises. This isn’t some Chicago back-street pick-up basketball game. The survival of our nation’s private banking system hangs in the balance, and the Obama Administration is making some flip, street-smart comment about an obscure solution requiring new, massive private sector investment in a banking sector that’s still in a flaming tail-spin toward a possible federalized crash-and-burn finale. The Administration’s solution would require the unqualified participation of the few remaining private sector financial investors that had enough savvy and reserve to stand aside and watch through the smoke and mirrors as the greedy - some are saying fraudulent - nation-wide financial institutions and Wall Street bond brokerages created the mess that caused the current toxic loan nightmare. From what little dribbles we’ve been fed to date, Treasury Secretary, I’ll pay my taxes when I’m caught Geithner hasn’t got a clue about how he’s going to handle the toxic portion of real property “legacy loans” that are choking the loan portfolios of bank’s balance sheets across the nation. One thing for certain, it won’t come out of his taxes; he’s too smart to pay them like the rest of us unwashed commoners.
Notwithstanding the fact that it would take the brilliance of one with Harvard MBA to understand the nuances of the current financial crises (those same greedy little deviants that cooked the books in the first place), there are a few aspects that we more simpleminded folks need to know. All those homes and condos we see with the “Bank Owned” and “Bank Repo” For Sale signs are now owned by the banks or lending institutions that wrote the original mortgages in the first place. Their chickens have come home to roost. Guess who now has to pay the property taxes, insurance, regime fees, and even cut the lawns? If you happen to be a stockholder in one of these institutions, you already know the answer as a reflection of your investment’s tumble into a black hole. If you happen to live in a neighborhood. or condominium regime where several properties have been foreclosed upon, your home has also depreciated, as its value has been drug down with the decreasing value of unsold, repossessed properties around yours.
The most chilling aspects of the Administration’s banking “legacy loan” buy-out proposal is a poorly understood accounting rule called “mark-to-market”; basically, the loans in a bank’s portfolio are not to be valued at their book value or the value of the remaining unpaid principle, but what the plunging value of these assets are actually worth on today’s devalued real estate market. That’s the crux of the problem, and that’s also what makes them toxic loans – they’re not worth either what the banks loaned for them or what they can be sold for today. Three guesses which taxpayers are going to be stuck for the difference between the bank’s loan portfolio value and what they’re worth on today’s severely, glutted real estate market.
Geithner’s reported solution is to create guaranteed public-private investment funds to purchase these troubled, non-performing bank assets and package them with government - matching capital into government-backed securities in order to entice private purchase for potential profit. But this sounds amazingly like the toxic real estate loan-backed bond hedge funds that got our private financial institutions in the mess they’re in now. It seems that Geithner wants the Federal Deposit Insurance Corporation, the same FDIC that currently insures our bank deposits and investments, to create a parallel financial universe for a Ponzi Scheme that didn’t work out all too well recently in the private sector.
Hopefully, the private sector investors that Geithner and Obama are trying to scam this time weren’t born at night, at least not last night.