Comments on: The Geithner plan vs the Brady plan A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: Nick Thu, 09 Apr 2009 18:30:24 +0000 “The PPIP, by contrast — or at least the Legacy Securities Program — works the other way around. The banks have liquid bonds on their balance sheet, which they can sell in the secondary market if they want, but only at very low prices.”

Ummm, the bonds aren’t “liquid” if the bid/ask spread is so wide that buyers and sellers are at an impasse.

Imagine that a bank is carrying a AA-rated senior CDO tranche at 30 cents on the dollar, but there are still no buyers to be found. If I offer to buy the tranche for 1 cent on the dollar, that doesn’t make the tranche “liquid.”

By: Don the libertarian Democrat Thu, 09 Apr 2009 14:19:42 +0000 “with both the ability and the intention to hold the bonds to maturity.”

Yes, and that’s a part of the plan. The point is to have the TAs be seen as investments. If hedge fund buyers, Pimco,etc., do buy these TAs, since they’re well know investors, it will help the government transform the TAs into long term investments in the eyes of the public. It’s a forward looking plan, showing confidence in our future, intended to attack the fear and aversion to risk. In that sense, it’s like infrastructure investment in the stimulus. It shows confidence in the future, and helps attack the notion of toxicity. That’s also why it’s going to be offered to average investors through mutual funds. By the way, if John Paulson is buying them, then they are investments. It’s simply a question of whether they are good or bad investments.

Also, the subsidy part of the PPIP, which is inherent in any hybrid plan, is inflationary, and will also help with QE, since the government will be perceived as having to print money if this all goes sideways.

Since I’m saying a lot of crap to most people, and partly to myself as well, I think that the FDIC is saying that the banks are going to have to pay for the PPIP in the end. They’ll raise their fees, and seize them, just to piss of Hempton, proactively, if they have to going forward. Since the PPIP is intended to save the banking system, as Caballero seems to believe, then they banks are going to have to pay for the plan in the end. It’s starting to sound damned clever.

By: Kombo Thu, 09 Apr 2009 13:07:29 +0000 I feel like I’m getting mugged by men in black suits.

By: YR Thu, 09 Apr 2009 13:02:25 +0000 What would be the proof that the Geithner plan actually worked? And if it failed, what would be the proof?
When will the US taxpayers know what they actually got for their dollars?